Breaking Down Evolent Health, Inc. (EVH) Financial Health: Key Insights for Investors

You've been watching Evolent Health, Inc. (EVH), a key player in value-based care, try to balance aggressive growth with the tricky profitability of its Performance Suite, and honestly, the Q3 2025 results give us a complex picture. The company's most recent full-year 2025 revenue guidance was revised to a range of approximately $1.87 billion to $1.88 billion, which is a solid top-line number, but it reflects a downward adjustment from earlier forecasts as they navigate contract conversions and timing issues. Still, management is guiding for 2025 Adjusted EBITDA between approximately $144 million and $154 million, showing their efforts to restore margin, but the Q3 adjusted earnings per share (EPS) of just $0.05 missed the consensus estimate by over 50%, which is defintely a red flag on execution. Plus, you can't ignore the $910 million in net debt looming over their growth story, even with the promising announcement of over $500 million in new annualized revenue launching in 2026. This mixed bag-growth potential versus near-term profitability pressure and leverage-is exactly why we need to dig into the financials, beyond the headlines.

Revenue Analysis

You're looking at Evolent Health, Inc. (EVH) and seeing a mixed picture on the top line, and honestly, you need to understand the moving pieces before making a call. My direct takeaway is this: Evolent Health, Inc. is managing a major shift in its business mix, which is masking underlying organic growth in its core specialty care business, but the headline year-over-year revenue drop is a serious data point to consider.

For the full fiscal year 2025, Evolent Health, Inc. is guiding for total revenue between approximately $1.87 billion and $1.88 billion. This projection includes the impact of a significant business divestiture, which is why the historical comparisons look so jarring. The company's revenue for the trailing twelve months (TTM) ending September 30, 2025, was $2.05 billion, which represents a year-over-year decline of around 16.65%. This decline is largely due to the sale of its primary care unit, Evolent Care Partners, for $100 million, which is expected to close by the end of 2025. That's a big chunk of revenue that just isn't there anymore, but it's a strategic move to reduce debt.

The core of Evolent Health, Inc.'s business is its suite of value-based care solutions, which breaks down into a few key segments. The most significant is the Performance Suite, which accounted for approximately 60% of total revenue in Q3 2025, down from 70% in Q3 2024. This segment is where the company takes on more risk for managing the total cost of care for complex conditions, like oncology. Other revenue comes from the Specialty Technology and Services Suite, Administrative Services, and Cases.

Here's the quick math on where the revenue is coming from, based on the Q3 2025 results, which is the latest data we have from November 2025:

• Medicaid revenue is up to 47% of total revenue, a substantial jump from 35% in Q3 2024.
• Medicare revenue has fallen to 27% of total revenue, down from 38% in the prior-year quarter.

This shift from Medicare to Medicaid is a crucial trend. It reflects broader market challenges in the Medicare Advantage space, which Evolent Health, Inc. is actively navigating. The company is leaning into its Medicaid contracts, which now represent the largest portion of its revenue base. This is a defintely a sign of them adapting to industry headwinds, but it also means a change in risk profile.

The quarterly revenue numbers show the volatility. Q3 2025 revenue was $479.5 million, which beat Wall Street estimates, but it was still a 22.8% decline year-over-year. Still, the company is securing new business, announcing over $500 million in newly-contracted annualized revenue that's set to launch in 2026. That's a clear sign of future growth potential, even with the near-term revenue contraction. You can read more about their strategy in their Mission Statement, Vision, & Core Values of Evolent Health, Inc. (EVH).

To summarize the composition of Evolent Health, Inc.'s revenue streams in Q3 2025:

What this estimate hides is the true organic growth rate of the core business, which management has suggested is stronger once you strip out the divested unit and the contract conversions. The key action for you is to monitor the Q4 2025 revenue, which is projected to be between $462 million and $472 million, to see if the revenue decline stabilizes as the business mix settles.

Profitability Metrics

You need to know where Evolent Health, Inc. (EVH) stands on the core profitability metrics-Gross Profit, Operating Profit, and Net Profit-because they tell the real story of its business model and cost control. The short answer is that while the company is not yet net profitable, its operational efficiency is defintely improving, which is the crucial near-term signal for investors.

Based on the latest trailing twelve months (TTM) data, Evolent Health, Inc.'s profitability ratios show the pressure of its value-based care model, but also a clear path toward operational break-even. Here's the quick math on the TTM figures, which provide the clearest picture of the full 2025 fiscal year performance:

• Gross Profit Margin: 18.4%
• Operating Profit Margin: -0.7%
• Net Profit Margin: -5.94%

This translates to a TTM Gross Profit of approximately $404.8 million on revenue of about $2.2 billion, but an Operating Loss of about $15.4 million and a Net Loss of roughly $130.7 million. The company is trading profitability for growth and market share, a common but risky strategy.

Trends in Operational Efficiency and Margins

The trend in profitability is more important than the absolute number right now. Evolent Health, Inc.'s operational efficiency (how well it manages costs relative to sales) is showing a positive inflection point. For the third quarter of 2025, the Operating Margin improved to a positive 0.2%, a significant jump from the -2.6% reported in the same quarter last year. That's a powerful move toward breaking even on core operations.

Also, the management's strategic moves are starting to pay off. The renegotiation of three key Performance Suite contracts is expected to improve 2025 profits by a substantial $115 million, which is a concrete step in mitigating the rising costs of specialty care, particularly oncology. This focus on cost management is what will drive the margin expansion analysts are projecting for 2026.

For a deeper dive into the company's full financial picture, you can check out Breaking Down Evolent Health, Inc. (EVH) Financial Health: Key Insights for Investors.

Comparison with Industry Averages

To put Evolent Health, Inc.'s margins into context, we need to compare them to the broader healthcare sector, keeping in mind that the company's model-part technology, part risk-bearing managed care-is unique. Here is how their TTM margins stack up against 2025 industry benchmarks:

The low Gross Margin of 18.4% is not a sign of poor efficiency but rather a structural characteristic of the business. When a company takes on medical risk (Performance Suite revenue), those medical costs are classified as Cost of Revenue, which naturally compresses the Gross Margin compared to a pure software company. The true test of efficiency lies in the Operating Margin, which, at 0.2% in Q3 2025, is approaching the median for health systems.

The full-year 2025 Adjusted EBITDA guidance is between $144 million and $154 million. That non-GAAP (Generally Accepted Accounting Principles) measure is what management is focused on, and it shows the underlying business is generating significant cash flow before non-cash charges and high interest payments. Your action item is to watch the Q4 2025 and Q1 2026 GAAP Operating Margin closely; it needs to stay positive to confirm this turnaround.

Debt vs. Equity Structure

As a financial analyst, the first place I look at a company like Evolent Health, Inc. (EVH) is the balance sheet, specifically how it funds its growth. The short takeaway is that Evolent Health, Inc. is currently leaning more heavily on debt, a common strategy for growth-focused healthcare technology firms, but one that warrants close attention right now.

Your concern should be the debt-to-equity (D/E) ratio (a measure of financial leverage), which sits at approximately 1.26 to 1.29 as of November 2025. This means the company is using more debt than shareholder equity to finance its assets. Compared to the sector, where the average D/E ratio is closer to 0.83 for Health Care Technology and 0.86 for Health Care Services, Evolent Health, Inc.'s leverage is notably higher. It's a clear signal of aggressive, debt-fueled expansion.

• Total Debt: Approximately $1.08 billion as of September 2025.
• Total Equity: Approximately $842.233 million as of September 2025.

Here's the quick math on the debt breakdown as of the second quarter of 2025 (Q2 2025):

The company is defintely working to manage its debt load. In January 2025, Evolent Health, Inc. secured $200 million in delayed draw term loan facilities, set to mature in December 2029, to be used for general corporate purposes and managing its upcoming debt. More critically, on June 19, 2025, they arranged a Commitment Letter with Ares Management Credit funds for non-dilutive debt capital specifically to retire the $172.5 million in Convertible Notes that were due in October 2025. This refinancing move is crucial; it pushes a significant near-term maturity out of the way without diluting shareholders.

What this estimate hides is the operational leverage. Lenders often focus on the Net Debt to LTM (Last Twelve Months) Adjusted EBITDA ratio. For Evolent Health, Inc., this ratio stood at 5.3x in Q2 2025. This is a high number, indicating it would take over five years of current operating cash flow (before interest, taxes, depreciation, and amortization) to pay off the net debt. While the company is actively using debt to fund its Mission Statement, Vision, & Core Values of Evolent Health, Inc. (EVH), this high leverage ratio is the primary risk factor for investors, especially if growth or profitability slows.

Next Step: Monitor the Q4 2025 and Q1 2026 earnings reports closely to confirm the successful retirement of the 2025 Convertible Notes and see if the Net Debt/EBITDA ratio starts to trend down toward the 4.0x level, which would be a more comfortable position for this industry.

Liquidity and Solvency

You need to know if Evolent Health, Inc. (EVH) has the cash on hand to cover its near-term bills, and the answer is a qualified yes. The company shows adequate short-term liquidity, but its overall financial structure points to a highly leveraged position that management is actively working to correct.

For the trailing twelve months (TTM) ending in November 2025, Evolent Health, Inc.'s Current Ratio stood at about 1.33. This means for every dollar of current liabilities (bills due within a year), the company has $1.33 in current assets (cash, receivables, etc.) to cover it. The Quick Ratio, which strips out less-liquid inventory, is also healthy at approximately 1.17. A ratio above 1.0 is the textbook sign of good short-term financial health. Honestly, that's a solid liquidity position for a technology-enabled services firm.

Working Capital and Cash Flow Trends

The working capital picture, however, is dynamic and reflects a company in transition. The Q1 2025 results showed cash and cash equivalents at $246.5 million as of March 31, 2025. Still, the company's capital structure saw a significant increase in total debt to $837.5 million in Q1 2025, up from $612.5 million a year prior. This jump in debt is why delevering-paying down debt-is the primary capital allocation priority for management.

The Cash Flow Statement overview for 2025 tells a story of strategic maneuvers:

• Operating Cash Flow (CFO): Q1 2025 generated a modest $4.6 million in cash flow from operations. The full-year 2025 CFO will be impacted by approximately $84 million in non-recurring cash items, including lease termination fees and reconciliations from 2024 performance suite losses. This means the cash flow from core operations is temporarily distorted, but management expects a return to normal cash flow conversion after 2025.
• Investing Cash Flow: The company is focused on internal investment, planning to deploy roughly $35 million in cash for capitalized software development during 2025. The divestiture of Evolent Care Partners, an investing activity, will generate proceeds to pay down debt.
• Financing Cash Flow: This is where the action is. Evolent Health, Inc. retired its 2025 convertible notes and is using the divestiture proceeds to pay down approximately $100 million of its senior term loan, lowering its cash interest burden by about $10 million annually.

Near-Term Risks and Actionable Insights

The immediate liquidity ratios look good, but you can't ignore the underlying leverage. The net debt to LTM Adjusted EBITDA ratio was a high 4.1x in Q1 2025, a significant increase from 2.3x in Q1 2024. To be fair, the planned debt paydown is a clear, positive action to address this. What this estimate hides, though, is the Altman Z-Score, a measure of bankruptcy risk, which sits at a concerning 0.54. That figure places the company in the distress zone.

Here's the quick math: the company is using asset sales and new debt to clean up its balance sheet and fund growth, a necessary but high-stakes move. The success of the delevering strategy is defintely crucial for long-term solvency.

Your next step is to monitor the Q4 2025 results closely for the actual debt reduction figures and the projected 2026 cash flow conversion, which should normalize. You can dive deeper into the full analysis of the company's financials by reading Breaking Down Evolent Health, Inc. (EVH) Financial Health: Key Insights for Investors.

Valuation Analysis

You're looking at Evolent Health, Inc. (EVH) right now, seeing a stock price near its 52-week low, and you're asking the core question: Is this a deep value play or a falling knife? Honestly, the consensus points to a significant upside, but the market is clearly waiting for proof in the numbers.

The short answer is that Evolent Health, Inc. appears undervalued based on forward-looking earnings and book value, but the volatility and negative trailing earnings are what's keeping the price suppressed. The average analyst price target sits between $11.88 and $12.86 as of November 2025, suggesting a massive potential upside of over 200% from the recent trading price near $4.00. That's a huge disconnect.

Here's the quick math on the key valuation multiples:

• Price-to-Earnings (P/E): The trailing twelve months (TTM) P/E is not a useful metric because the company reported a TTM Earnings Per Share (EPS) of approximately -$1.57 as of November 2025. But, the anticipated turnaround is priced in with a Forward P/E of just 11.80 for the 2025 fiscal year. That's defintely cheap relative to the broader healthcare technology sector.
• Price-to-Book (P/B): The P/B ratio is approximately 0.79 as of November 2025. A P/B below 1.0 suggests the stock is trading for less than the value of its net assets, which is a classic sign of undervaluation. This figure is near its 5-year low, too.
• Enterprise Value-to-EBITDA (EV/EBITDA): The TTM EV/EBITDA is around 13.05 as of late November 2025. This is a more stable measure for growth companies. When you compare this to the company's own 2025 Adjusted EBITDA guidance of between $144 million and $154 million, the valuation looks reasonable, but it's not screaming bargain, reflecting the execution risk the market is pricing in.

Stock Price Reality Check and Analyst Sentiment

The stock price trend tells a story of extreme investor caution. Over the last 12 months, the stock has traded in a wide range, from a 52-week low of about $3.50 to a high of $13.62. The current price, hovering around $4.00 in November 2025, is near the bottom of that range, driven by recent concerns over revenue shifts and membership declines in certain segments, like Medicaid, which could drag on 2026 earnings.

Still, Wall Street analysts are largely bullish. The consensus rating is a Moderate Buy, with 14 out of 16 analysts tracked in the last year recommending a 'Buy' or 'Strong Buy'. The average price target of $12.50 implies the street believes Evolent Health, Inc. will successfully navigate its near-term challenges and realize its value-based care potential. The risk is high, but the potential reward is clearly mapped out by the pros.

One simple action to take is to compare Evolent Health, Inc.'s valuation to its peers:

What this estimate hides is that Evolent Health, Inc. is a growth company focused on reinvestment, so don't expect a dividend. The dividend yield is 0.00% and the payout ratio is 0.00%, which is typical for a company aggressively pursuing market share and scale. The focus here is capital appreciation, not income. If you want to dive deeper into the institutional movements behind the stock, you can check out Exploring Evolent Health, Inc. (EVH) Investor Profile: Who's Buying and Why?

The clear next step is for you to monitor the company's Q4 2025 earnings call for any changes to the $144 million to $154 million Adjusted EBITDA guidance, as that is the critical anchor for the current valuation thesis.

Risk Factors

You need to know where Evolent Health, Inc. (EVH) is exposed before you commit capital, and honestly, the risks are clear: medical cost inflation and a high debt load are the two biggest near-term headwinds. The company is tackling them head-on, but these are material risks that impact the 2025 outlook.

The core challenge is managing specialty care costs, especially in their Performance Suite business. The biggest worry is heightened oncology cost trends, which management conservatively projected to grow at a steep 12% for the 2025 fiscal year. If that cost growth accelerates beyond that assumption, it will eat into margins quickly.

• Oncology Cost Volatility: A 12% projected cost growth is a significant headwind.
• Regulatory Headwinds: Medicaid redetermination and potential new work requirements could pressure membership and profitability, with an estimated $8 million to $10 million impact on adjusted EBITDA.
• Operational Drag: Investments in automation, while smart long-term, are causing a near-term 2025 adjusted EBITDA drag of $10 million in implementation costs.

The stock also shows high volatility, sitting at 78.93%, which is something to keep in mind if you're sensitive to price swings. That's a lot of churn for a healthcare services company.

Financial and Strategic Risks

The capital structure is where the rubber meets the road. Evolent Health, Inc. (EVH) has significant debt, and the leverage ratio has ballooned. Following Q3 2025 results, the Net Debt to Last Twelve Months (LTM) Adjusted EBITDA ratio jumped to a high 6.7x, up from 2.8x in Q3 2024. Total debt stood at approximately $1.06 billion in Q3 2025. High leverage limits financial flexibility for future growth or unexpected cost spikes.

To be fair, the Q3 2025 earnings report showed a mixed bag that spooked some investors, with Non-GAAP EPS missing the forecast by 54.5% ($0.05 reported versus $0.11 estimated). This miss, coupled with a year-over-year revenue decline of 22.8%, signals ongoing profitability challenges despite strategic shifts.

Here's the quick math on the debt issue:

Mitigation and Actionable Steps

The good news is management isn't sitting still. They've been highly proactive in addressing the oncology cost risk by renegotiating three key Performance Suite contracts. This move is expected to improve 2025 profits by a substantial $115 million. These enhanced contractual protections now cover over 75% of that Performance Suite revenue, which is a major buffer against cost volatility.

On the debt front, they've taken clear steps to manage the balance sheet and reduce the immediate pressure. They are on track to close the sale of their primary care unit, which is expected to bring in $100 million to repay senior term debt. Plus, they executed a liability management move, issuing $166.8 million of new 2031 Notes and repaying $167.4 million of the maturing 2025 Notes. These are concrete actions to de-risk the balance sheet.

You can see the company's long-term focus on value-based care in their Mission Statement, Vision, & Core Values of Evolent Health, Inc. (EVH).

Next Step: Monitor the Q4 2025 earnings call for an update on the $115 million contract renegotiation benefit and the final closing of the $100 million divestiture. That will defintely clarify the true 2025 fiscal year-end financial health.

Growth Opportunities

You're looking past the current stock price volatility and focusing on the underlying business, which is exactly the right move. Evolent Health, Inc. (EVH) is strategically positioned in the high-growth, value-based care space, but the real story is their pivot to specialty care management. Their growth strategy isn't about vague promises; it's about locking down high-value contracts and using smart technology to control costs in the most expensive areas of healthcare.

For the fiscal year 2025, the company has narrowed its full-year revenue guidance to between $1.87 billion and $1.88 billion. More importantly, the adjusted EBITDA is projected to be between $144 million and $154 million. That's a clear map for near-term operational performance, even as they manage the divestiture of their primary care business, which will help pay down $100 million of senior term loan debt.

Key Growth Drivers: Specialty Focus and AI-Enabled Products

The biggest driver for Evolent Health, Inc. is its focus on specialty care, which is a massive and largely unpenetrated market. The company estimates its Total Addressable Market (TAM) for specialty care to be around $150 billion, and they currently have less than 5% penetration with existing clients. That's a huge runway for growth.

Their product innovations are directly tackling the most complex, costly conditions: oncology, cardiology, and musculoskeletal (MSK) disorders. They are also using technology to get ahead of the cost curve.

• AI-Driven Efficiency: The acquisition of AI utilization management products from Machinify and the use of the Auth Intel tool are designed to streamline clinical reviews and reduce administrative waste.
• Oncology Leadership: New oncology solutions and a partnership with American Oncology Network (AON) aim to improve cancer care while eliminating the prior authorization burden, a major pain point for providers and patients.
• Contract Protection: They've renegotiated three key Performance Suite contracts, which is expected to improve 2025 profits by $115 million by mitigating rising cancer costs.

They are defintely moving toward a less volatile, higher-margin business model. This is smart risk management.

Future Revenue and Strategic Momentum

The near-term guidance is solid, but the long-term visibility is even stronger. The company's future revenue growth is already largely contracted for 2026, which is rare in this space.

The total revenue under contract for 2026 is already sitting at approximately $2.5 billion. This is backed by new contract wins, including a major Blue Cross plan, expected to contribute over $500 million annually.

Here's the quick math on their contract momentum:

What this estimate hides is the power of their proprietary technology, Identifi, which is the backbone for health plan administration and value-based business infrastructure. This integrated platform is a key competitive advantage, allowing them to scale their solutions across their approximately 41.4 million unique members. If you want a deeper dive into their long-term vision, you can review their Mission Statement, Vision, & Core Values of Evolent Health, Inc. (EVH).

Actionable Insight: Focus on Margin Expansion

The action for you is to monitor the margin expansion in the Performance Suite. The contract renegotiations that secured $115 million in profit improvement for 2025 are a one-time event, but they signal management's ability to execute on profitability. Look for continued positive trends in the Adjusted EBITDA margin as the new, higher-margin Technology & Services contracts go live in 2026.

Finance: Track Q4 2025 Performance Suite margin against the 8.1% adjusted EBITDA margin reported in Q3 2025.