Good afternoon, everyone. Welcome to the JPMorgan Healthcare Conference. My name is Anne Samuel, and I'm the Healthcare Technology and Distribution Analyst here at JPMorgan. We're thrilled to hear from Evolent this afternoon. They've got a lot of great news for us. Presenting will be Founder and CEO, Seth Blackley. We'll hear his presentation, and then afterwards, we'll open up the room to Q&A. With that, let me turn it over to Seth.
All right. Thank you, Anne. I'm also joined by Seth Frank, our Head of Investor Relations. Unfortunately, John Johnson, our CFO, and Dan McCarthy, our President, are home sick. Otherwise, they'd be here with us as well. Glad you were not in the Evolent offices last week. Certainly something going around. Thrilled to be with you. Thank you for joining. I'm gonna present this on behalf of our 4,000 mission-oriented employees and our credible management team. Quite an interesting presentation. I'm gonna jump right in. We also have a new exciting announcement that I'll share, so I wanna get right into the content. In terms of the agenda, I'm gonna give you a quick overview of Evolent Health.
We'll talk a little bit about the investment considerations, then we'll end with a look back at 2022 and a look ahead at 2023. For those of you who don't know us well, we help improve the quality and reduce the cost of healthcare, we have a particular focus on complex medical specialties. Our motivation in life is to help patients, better treatment, better health. Our customers are health plans, largely. You can see some examples of those on the right, higher quality and lower cost. Our users ultimately are the providers, the physicians who are really looking for less friction, more time to provide care. In terms of a little bit more detail on who we are, we serve in contracted with about 20 million patients across the United States to deliver this higher quality, lower cost care.
We work with a network of over 50 health plans and risk-bearing providers. You can see a little bit of the financial information on the right-hand side of the page. Over $1.2 billion of revenue on a trailing basis. We've had revenue CAGR for the last three years of 37%, it's been a high growth company. Our adjusted EBITDA is around $100 million. Strong EBITDA margin, cash flow generating, and we'll talk about this in a minute, but a very significant total addressable market. I mentioned a second ago, our primary focus in life is around complex specialties and serving those vulnerable patients. We do report our financials in two segments.
One is clinical segment, which is everything at the top of the page here, and our administrative segment, which is the bottom piece of the page. The top part of the page, clinical segment, is about 70% of our revenue. That portion of our business is growing very rapidly, and it's becoming a larger and larger percentage of our business today. Increasingly, we're also thinking about the specialties that we support, oncology, cardiology, musculoskeletal and the like, as including complex care. Patients with multiple comorbid conditions. Some of you may know of that as Evolent Care Partners. I'd say the last thing I just wanna note, we've obviously done a number of acquisitions over the last couple years to broaden out the number of specialties that we cover.
One of the biggest points of feedback we hear from our customers, our health plan customers, is, "Hey, if Evolent could cover more specialties, then it makes this easier for us to buy from you. It's better from an integration perspective from patients." We've been broadening out the number of specialties that we address, and this idea of more consolidation and providing more specialties in one place is a huge part of the strategic thesis of Evolent. Another question that we talk a lot about is what are the business models within Evolent. Unlike a lot of companies, we have two distinct business models that we support our customers with. The first, we call the Performance Suite. I think of that as recurring capitation fees. Another moniker for that might be risk-based business.
Our applicable solutions there include all of our specialty work, but also the work we do in Evolent Care Partners, the complex care piece. There you'll see sort of mid-teens mature EBITDA margins. Second part of our business, second business model is the Technology and Services Suite. The moniker here that you might attach to this is SaaS-based or SaaS and services-based, a more traditional software model. That is again, a business model that we apply with our specialty solutions, but also in Evolent Health Services. That business line has mature margins in the mid 50% range. The other point that we've been talking a lot to investors about is, hey, how does the business break down in terms of contribution to profits?
You can see that on the right-hand side of the page, where 75% of our profitability is coming from the Technology and Services Suite. Think of that as, again, a technology business. Growth of the company, growing very rapidly in both parts of this business model, but even more quickly in the Performance Suite. Let me turn into the investment considerations. You know, maybe a little bit of a broken record here, and starting off 2023 with the exact same investment considerations that we've had for the last few years. They're consistent, and that's part of how we run the company. One is we're gonna have compelling long-term organic growth in the core of what we do.
We're gonna stay very focused on that as an investment consideration. Second, we're very committed to strong and expanding margins. Two, three years ago, we set out to be a strong EBITDA-generating company. At that time, it was a little less in vogue. To be a strong EBITDA contributor, but we've been very consistent about being what I would call a little bit old school about delivering EBITDA. The second consideration will maintain and remain, which is strong and expanding margins. The third investment consideration is efficient capital allocation. We'll talk about that in a minute, but it really means that we're gonna be very disciplined about how we deploy capital. Let me go into each of these briefly, and I wanna save lots of time for Q&A.
First, in terms of compelling long-term organic growth, I mentioned earlier we've been growing in the 30s for several years now. You know, a lot of that is that our revenue renewal rate for our existing customers is well over 100%. Not only do we renew customers, but we've been expanding those relationships. I'll talk about in a second, we have a very significant cross-sell opportunity with our existing customers. That's been a big part of the opportunity. To go a little bit deeper on that cross-sell opportunity, I think those of you who've known Evolent over the last year, we've talked a lot about, hey, our largest customers, there's a $16 billion direct cross-sell opportunity. 25% penetration of that, $4 billion. Very big numbers just from a few customers.
I think most of you know we're pending acquisition of NIA Magellan from Centene. Those numbers then step up from $4 billion to $12.5 billion, from 16-50. Very significant cross-sell opportunity. A third of our TAM really is available to us in direct cross-sell, which we like. I'd say our approach in life is to try to do a great job for our customers, earn the right to win more business with them, and then win that business through, again, delivering our commitments. On the right-hand side of the page, I get a lot of questions about, hey, what is the level of penetration that you do have within your large customers? We decided to profile four of those customers here.
You can see that on average, the penetration of the opportunity is well less than 10%. The fourth payer here on the list, we've talked a lot about, is Molina. Over the last few years, we've gone from, you know, less than $5 million of revenue to less than $10 million to $75 million-$180 million of revenue next year with Molina. You know, we're big fans of that team, hopefully, doing a very, very good job for them, again, earning the right to grow with that partner as we've done. One of the other questions that we get a lot is that that's a great case study with Molina. We'd love to see it again. You know, where's another opportunity like that?
You know, with that, I'm thrilled today to be announcing the expansion of our Humana partnership. Humana is a long-standing partner of Evolent. We have a very close relationship with them, have worked very hard to deliver high value to them, and I think this is a culmination of a lot of that hard work. On the left-hand side of the page, you can see our footprint with Humana, which is that in 36 states, we have a technology and services relationship in oncology with Humana, supporting much of their work in cancer care across the country. That's been a great relationship, I think in both directions. We've historically done very little on the Performance Suite side with Humana.
As of today, we're announcing that we're adding Arizona and Florida for the Performance Suite with Humana. It's obviously a very significant expansion given the size of those states. At run rate, it'll be over $250 million a year of revenue for us. That'll be for 2024. It goes live in the second half of 2023. So you can get a sense that it will be a contributor to 2023, but well over $250 million of annual revenue for this new contract. Again, I think one of the exciting components of this, is that that's for two states. There's 36 others in the Humana footprint that we'll be able to support.
You know, I think it's interesting also when you look at Florida, we're doing this similar work with Florida Blue, with AvMed, and one other national payer. What happens, I think, in a state like Florida, where the snowball starts going downhill in terms of the ability to support cancer patients in a better way, it's easier for the oncologist to standardize on one model. Today, we're providing much of the cancer care in the state of Florida through our model. Again, the standardization, I think, builds on itself. There's a nice network effect, and that's certainly happening in Florida.
On the right-hand side of the page, you get some sense of if you're the customer, the types of things that you're getting, it really is about higher quality for the patient, better adherence to evidence-based medicine, and ultimately lower costs at the same time. Thrilled to have the chance to announce the new relationship with Humana. Turning to the second investment consideration around margins, I think I've touched on a lot of this already, but we had a really good end to 2022. We're not updating guidance today. We are reiterating. We will report obviously on Q4 here in a few weeks, as well as give our guidance for next year.
Very heartened by the progress we've been making on the margin front, and everything is playing out the way that we've been communicating over the last couple years with respect to margin maturation. You know, with that last comment in mind, I did wanna just spend a second on the Performance Suite, which, as a reminder is, you know, 25% of our profits today. As is the example with that Humana contract that we just announced, it's a big part of revenue growth going forward.
If you remember, the curve on the Performance Suite margins, low single digits in the first year, getting to double digits in the second year, and then that mid-teens EBITDA margin in the third year. This is what that looks like, you know, when you think about how a customer experiences that, which is they have a certain trend. In year one, we guarantee a reduction in that cost of cancer care, in this example, or cardiology or whatever the example may be. Over time, the level of savings that we're generating for the health plan grows each year. You can see 4% value in the first year, 10% in the second, 15% in the third. You see at the bottom, you can look at our margin profile also growing year to year.
This is the financial value equation that's been driving our margins for the last couple and will continue to do so next year. I did wanna kinda close this section with just a quick example of how that works. How do we create value in oncology? What do we do for patients that makes their lives better? This is an oncology example. It's the same thing we would do in other specialties, we really start on the left with evidence. What is best evidence for the patient? What is the right kind of care? We call that level one pathway. Think of that as best practice. That's the care that I would want a family member to receive or you would want a family member to receive. It's the best care.
We compare that evidence of Level 1 Pathways to what is actually happening on a case-by-case basis. In a state where you have 100,000 Medicare patients, 2,000 or 3,000 of those patients are gonna have cancer in any given year. What kind of care are we providing to those 2,000 or 3,000 patients? We compare that to our pathway. If the pathway being delivered to the patient is different from best practice, we intervene with the treating oncologist. We do that on behalf of the health plan. We're empowered by the health plan to do that. We make a number of different interventions to help change the adherence to pathways and improve them. When we enter a market, adherence to pathways might be in the mid-60s.
Within two to three years, it'll be in the 80s, 80% range, meaning much better adherence to evidence-based medicine. You can see some examples on the far right of the page, what that might look like. It's using genetics and genetic medicine to understand targeting. It's understanding efficacy of drugs. It's understanding advanced decision-making for patients that have terminal illness. Many more examples, of course, this is the value equation, how we help patients and payers at the same time. Keeping an eye on the clock here. Just moving to Page 17, around efficient capital allocation, which is, again, our third priority. You know, just highlight that our priorities around capital allocation are, you know, number one, to invest in the core part of our business, make sure our product is innovative, make sure it's market-leading.
That's the core of how we spend capital. Second thing that we do is M&A. We've done a bit of M&A the last few years, NIA and IPG just in the last year. NIA acquisition, 12x EBITDA, so very accretive from a capital allocation perspective. IPG, 15x , also very accretive. You know, we've done these acquisitions. I think we're very well set up. We don't plan any additional M&A in the, in the short, medium term. Our, our capital and our cash flow will be going to paying down debt and delevering.
To that end, just briefly, I won't dwell on this slide. You can see where our leverage ratio is at closing of NIA when that happens over the months to come, and then also what the plan is to delever based on our cash flow estimate that we've provided here, and obviously, pretty rapid delevering process. Let me end, just kinda year-end review, looking back at 2022, looking ahead at 2023. You know, if I look back at 2022, incredibly proud of the team, our leadership team. It's a very mission-oriented place. Everybody is interested in doing more for patients.
We announced 13 new partnerships last year. I think each one of those partnerships, relative to our target of six to eight , gives us a chance to run at our mission a little bit more. You see the revenue growth as a result of that. The margins expanded in the ways that I've already described. That's important for investors. It's important to fund the innovation that we're doing. Finally, just the accretive capital allocation that I just talked about. Not listed on the slide, I'm also really proud that our employee engagement score, which is our measure of our culture, how much our employees, you know, care about being at the firm doing what we do, is at an all-time high. It's the highest it's ever been over the last 12 years, and I'm thrilled about that.
It's a diverse workforce, couldn't be happier with the team we have. Just rounding out here, looking ahead. You know, in terms of outlook for 2023, I think we mentioned this to many of you in one-on-ones. We're not providing new guidance today. We'll do that in February. We ended the year in a really strong way, and we're set up well for next year. We do have a few things that we have shared that I'll just reiterate right now, one of which is a floor on revenue growth of 25% before the impact of NIA. We're gonna grow very rapidly again next year. Obviously, that 25%, just to say it again, is a floor, and we'll be at least at 25%. We'll obviously be continuing to expand EBITDA margins.
We'll give that guidance as part of our February call as well. Last thing, just because, you know, we talked about leverage a little bit today, we will generate operating cash flow in excess of $120 million in 2023 before any interest expense. We're generating a lot of cash. That number will go up, obviously, over time, but it's an important metric. I just wanted to close with what I would refer to as sort of a north star on the business and how we're managing the business, at least the financial part of it.
You know, I mentioned earlier we're around $100 million of EBITDA today. A couple years ago when I stepped into the CEO role, we talked about the core business by the end of 2024 being $150 million-$200 million, the blue box in the bottom right. If you add what we've communicated around IPG and NIA, those two acquisitions that I mentioned earlier that round out our specialties, we believe we'll be at $300 million of run rate EBITDA by the fourth quarter of 2024. $75 million in that quarter of 2024.
I think what gives me a lot of confidence is that, if you look at the components of that, NIA, as a for instance, whether it's contracted or some of the modest cost synergies there, we have a lot of line of sight to those. In, you know, the blue bar at the bottom, getting to that level of profitability really is around growth and expanding margins, all the things we talked about today, including the new customer relationship I mentioned. The future is bright for Evolent. Really happy to be here today. I know we're about on time. We'll go to Q&A.
Seth, thanks so much for that great presentation. Congratulations on the Humana expansion. That's, you know, really exciting news. I figure maybe we should start there, right? That's really incremental. You know, you kinda quantified the overall dollar amount, was hoping maybe we could talk a little bit about, you know, what the lives look like, you know, maybe the PMPM that you're kind of assuming within that, and then also what specialties they're gonna be using? Are you kind of thinking maybe that, you know, your recent acquisitions might be kind of an incremental specialty opportunity, or are you gonna be including those in that?
Great question. With Humana, you know, think of it as around 500,000 incremental lives on the Performance Suite. It's oncology only is the expansion. That's the focus. In terms of PMPM, you can kinda do the math on over $250 million number that I provided of revenue, and those number of lives, but it comes out to a place where it's significantly north of our average PMPM. That's partly due to oncology is complicated and high cost, and it's Medicare. That's what it is initially. You know, obviously, I think our approach in life is to try to do a great job on that and earn the right to go to more states, but also could be adding more specialties in those same states.
Should be a very significant opportunity ahead.
You got your foot in the door, and you keep expanding.
Keep expanding. Right.
You know, kind of along that same vein, Molina's been one where you've, you know, kind of already followed that roadmap, and you've, you know, had some really nice expansion there. Can you touch on that relationship? You know, what's working so well, and why do they keep expanding with you?
Yeah, I mean, I'm probably gonna bore everybody a little bit with a broken record, but I think the biggest part of it is when we tell somebody we're gonna do something, we do it, we follow through on our commitment. That's part of our DNA and our culture. I, you know, I just believe that the way to win business is to prove it out, win people's trust the old-fashioned way and deliver. I think we've been doing that on their behalf. I think part of it also, though, is that if you're in the payer space, you're hungry for solutions to manage MLR because there's a pressure on MLR right now that's new, I think, after COVID. There are a lot of sort of niche companies that are doing a little bit here and there on specialties.
I also find that payers are looking for fewer vendors that can do more. I think the combo of all those things has been the formula.
How do we think about how big that relationship could be over time?
Yeah. We've talked about that in the past. Before NIA and before IPG, we talked about $800 million a year of sort of revenue opportunity. Obviously adding NIA and adding IPG, it's probably significantly bigger than that, but it's to over $1 billion, I think is a good way to think about it.
Great. you know, you talked about how you're differentiated and, you know, the, you know, your customers wanna have one vendor. Can you talk about, you know, how do you look different than a lot of the other models out there? Because, you know, you know, a little bit more in a kind of tech. You don't have the investment, particularly on the Evolent Care Partners business. There's a lot of other models out there. How do you differ from them?
Yeah. I think I'll sort of answer in two ways, Anne, if it's all right? One is on the specialty side, where the core of the company is today. I think it's really comes out of our DNA, which is very clinical. lot of work with providers over time, so we understand provider perspectives. We're not historically a payer company as much as we are a clinical company. That, I think, is the biggest thing. Because of that, we've been willing to take and manage risk, and I think that gives us a level of credibility. If you're selling a product to somebody, but you won't guarantee the result, that's one thing. If you're saying, "Hey, I'll actually stand behind it," it's another.
I think the combo of all those things is the secret sauce on the specialty side. Evolent Care Partners, which for those who don't know it, managing complex patients through primary care. It's similar to some of the other models. We don't employ physicians. It's a small part of our company, I think a lot of the differentiation there is the ability to partner with physician groups that wanna get into value but may not be ready to, you know, sell their practice and wanna do it on a network basis.
Great. You know, another big announcement that you made recently, you've had a lot of announcements for us yesterday. The NIA acquisition, and that was a really big one. I was hoping you could talk a little bit about, you know, why you decided to do that acquisition, y ou know, and what they're gonna add for you? And maybe the, you know, opportunity to sell that incremental specialty into your existing base?
Yeah. I think with NIA Magellan, that business for us is really important because it gives us breadth. So we had cardiology, oncology, end of life. Now we're adding multiple, four new specialties. What, again, I find a lot with health plans is they'd rather have one or two partners, not five. It gives us the ability to cover more of the waterfront. That I think is gonna be the main reason we did the NIA transaction and the main benefit. I do think the products themselves, Anne, are really complementary, right? They have radiology and genetics and some things that when you have cancer, you gotta scan your body to understand tumor progression. You need to understand genetics to understand targeting of a therapeutic.
Those kinds of things that NIA brings to the table I think are gonna make us a lot better at the specialties that we already have. It's those two things were the main drivers. I think the third one, though, is the relationship with Centene is a really important one for us. I think the reason we came together around that partnership is that, again, they see we already were doing work with them, with our oncology work.
Mm-hmm.
The ability to do more with them under one vendor partnership where they have trust that we'll do what we say we're gonna do, I think is a big part of that, a big part of why they were willing to give some additional commitments on the contract. They're obviously a big payer relationships, we've talked about Molina, we've talked about Humana. I think Centene's gonna be yet another leg to the stool in terms of just a great partner, see the world in a similar way, and I think we'll have a lot of runway there.
This was the first time, I mean, you've done a lot of acquisitions in the past, but this is the first time you've ever talked about synergies from an acquisition. You know, what made you decide to do that this time and, you know, where are those synergies gonna come from?
Yep. Yeah, for those who haven't studied it, there are kind of three synergies with the transaction. One is that Centene committed to a lot of incremental contract for NIA and expanding it there, and that's great. Second one is also a revenue synergy, but outside of Centene. You know, for all the other plans, a lot of Blue plans that they have relationships with that we don't and vice versa, there'll I think, be significant revenue synergies. On the cost side, I'll give you a couple examples. You know, we see a big opportunity for automation in this space. Today, what happens at NIA and New Century, for that matter, are when you work with a physician on changing a practice pattern, there is some manual work for the office.
We've already been working on automation. They're working on automation. I think together there's gonna be a bigger automation opportunity, which really just means less manual labor for the physician's office, quicker, more quickly jumping to the right answer for the patient, and it's less labor intensive, therefore less costly for us. I don't think that likely means fewer jobs at Evolent. What it really means is we can support growth with fewer people, but we're growing so fast that we can kinda deploy those people over more lives.
That's something you've already done in your core business, and that's been a nice driver of margin already. Hopefully-
Yep.
Similar roadmap.
Totally.
You know, you have talked a lot about, you know, new partnerships today. You know, something that is also a really big driver of your growth is same-store growth.
Mm-hmm.
You know, I'm sure we'll kind of get a little bit of a better sense how that turned out, when you provide your guidance in February. you know, how should we be thinking about, you know, same-store growth as the driver of that, you know, kind of long-term mid-teens growth target?
I mean, look, it's interesting. The last year or two has been very, very significant. Obviously, Humana and Molina I would characterize as same-store growth. We have very small footprints and big opportunities, a lot of other plans too that we're currently working with. I'll use Florida Blue as an example, where we have a, an important relationship, but it's quite small relative to their full footprint. In most of these situations, Anne, we've got one specialty, sometimes two, out of what will soon be seven, depending on how you count them. I think it's gonna be very significant. I mentioned that $50 billion dollar cross-sell opportunity.
Mm-hmm.
It's a third of our entire TAM now is cross-sell. I think same-store growth is gonna be a big driver. That said, we're also gonna put some focus almost like strategically, even though we don't have to, I don't think, on new logos, just 'cause the diversification I think is good. You're gonna see, I think, some of both over the next year.
It seems like the logos have been getting bigger. You know, as we think about, you know, the, you know, historically you used to say, you know, 15 new partnerships, we just announced a pretty huge one. you know, how do we think about that contribution from new logos?
Yeah. I think it, you know, historically was probably 50%+ of our revenue.
Mm-hmm.
It's gonna be significantly less than that you know, to quantify it. Partially because we already have some of the biggest payers in our footprint, you know, to your point. Definitionally more and more of it becomes same-store growth.
I wanna maybe take a step back and think a little bit higher level because you always have, you know, really interesting things to say about value-based care. Curious what you think. You know, we've heard a lot of people talk about it this week at the conference. Some say it's moving slower. Some say it's moving faster. You know, what do you think is working with value-based care, and what is, you know, kind of really catalyzing adoption there?
Yeah, no, it's a great question. I'll answer that, then I'll give you the Evolent component to it. I think what's working with value-based care is that if you look at the outcomes of engaging physicians and payers at the same time, you are seeing things like 15%, 20% reduction in oncology, which is great case study, right, of that kind of thing. It is working fundamentally. I think the federal government has sort of poured concrete around, this is the direction the world's headed, that all feels good to us. I will say for Evolent and our specialties that we're focused on, it really isn't contingent anymore on the pace of value-based care. Old Evolent from eight years ago was very much contingent on the pace of value and policy.
The way that this stuff works now of, hey, we go to a payer, we can commit to saving dollars and improving quality in any specialty like the ones we're in, to me, that doesn't require further policy change, and it's sort of really inherently in the interest of the payer to do it, and of the patient. We've insulated ourselves a little bit from policy up or down.
You have relationships with both payers and providers. Can you talk about how those relationships maybe differ and how you kind of work to kind of bridge them?
Yeah. I actually think this is probably the biggest issue around value-based care is there's historically been so much work on the payer side or the provider side, but, you know, the two don't meet in the middle very well.
Mm-hmm.
Right? Because we've lived on both sides of the street, that's inherent in what we do now. For example, when we do work with a payer on oncology, we understand that to do well with them, we have to win the hearts and minds of the oncologist. Winning that heart and mind of the oncologist requires paying them differently, trying to minimize the friction on their schedule, and the process to work with us in that way. Being able to bridge that gap, and the patient really is the one that benefits in the middle. I think it's part of our DNA and part of how we've done the build of Evolent.
You know, your business is, you know, fairly complicated. I think a big part of, you know, investors getting to know you is kind of really understanding, you know, what you do and how your business works, particularly with the specialties. Can you talk about, you know, how you drive behavior change, you know, with the providers and kind of get them to implement the savings that you think that they should be doing?
I mean, look, I think it starts with trust. I keep using oncology as an example, just so we don't have to jump around, but I'll use oncology again, which is, every month there's 300 new journal articles that come out in oncology, roughly. The average oncologist is reading three to five of those articles. It could be something as nuanced as how a genetic profile affects the use of a immunotherapy, right? There's very little chance that that treating oncologist has had a chance to digest all the evidence. Our ability to digest all the evidence and boil it down for the physician in a way that's useful to them is a good example. You know, I think some people refer to it as like a B2B second opinion, right?
The ability to, with the physician, help them think through alternative treatment plans. That's point one. We also then pay the physicians a little bit differently. You all may know this, but oncologists receive 6% of the Part B drug as their income. We have to be thoughtful about the impact of a lower cost drug on their income, and how do we adjust the payment model to keep them whole for asking them to think about the world differently.
You know, maybe just another question in terms of, you know, kind of the guts of your business is a question we get a lot is how does the shared savings model work and, you know, kind of how does that flow through your P&L?
Yeah. For those who are new to it, to Anne's question, one part of our business, Evolent Care Partners, is a small part of the company, but we receive a shared savings payment for the Medicare Shared Savings Program. The way that works is for, I'll give you a good live example. For the calendar year 2022, we will find out in August the final settlement. We have a good sense now, but we'll find out the final number for 2022 in August of 2023. We accrue revenue and profits in that business very conservatively along the way. And then when we get the final number, we true it all up. That's kinda how it works from an accounting perspective.
You know, margin expansion has been something that in the most recent years you've really, you know, kind of done a nice job focusing on. You've outlined the, you know, $150 million-$200 million of EBITDA in the core, but can you help us understand, you know, what you've done so far to get that nice margin expansion, like, you know, some of the automation that you've done, and how far along are you in that journey, to kind of, you know, getting to where you wanna be in terms of margins?
Yeah. I wish John was here, our CFO. John's done all the heavy lifting here and deserves all the credit. I don't, he and his team and the rest of the company. You know, I'll talk to it for a second, which is, you know, a lot of it has been, Anne, just what I would call classic scale, G&A scale, right? Like, the ability as we've grown revenue, keep G&A at a reasonable level. The second thing, though, that's there is around gross margins. The gross margin improvement, a lot of it is around automation and using technology to do things more efficiently. The third piece is the margin maturation of the risk product. You know, we're a couple years in now to our 21 cohort. Now that's contributing nicely.
It's the combo of those three things together that have gotten us to the margin curve.
You know, M&A has been something that has been, you know, kind of a part of the company's history, and you've done a really nice job of, you know, kind of more narrowly focusing and making sure you're looking at the right stuff. You said you're not gonna be looking at M&A in, you know, the first half of the year. You have a lot to integrate. You know, how do we think about your decision-making process for acquisitions?
Yeah, look, I think historically it's really starts with strategy. What are we trying to do? Who are we trying to become? Step one. Step two, it's really been around, hey, easy to create it financially. Like we're, again, I mentioned old school. We're a little bit old school on that we never have paid a frothy valuation for any acquisition we've done. I just don't believe in doing that 'cause if it's that expensive, we could go build it ourselves. Generally speaking, we've taken that approach of strategy first, make sure it's in the core, the right thing to be doing for our patients, our members, our customers. If it yes, then let's find an asset that's affordable, and be pretty disciplined about the price we pay.
We only have a couple minutes left. I wanted to ask you, what are you most excited about in 2023?
Work-wise, I assume you're saying?
Or for fun.
Yeah. Just kidding. I'm probably most excited about the level of focus we have on our specialty business and the fact these acquisitions plus the Humana relationship, plus what we're doing with Vital Decisions and IPG, all that together has created incredible focus on being the leading player in specialty and really being able to transform specialty care. I think contributing and delivering for our customers will have the right to keep innovating. I'm excited about the innovation part beyond what we're currently doing. I think we're gonna be doing more touching the patient over time. A lot of what we do today is B2B second opinion, so we go to the physician, but we are increasingly beginning to work with patients.
End of life is a good example where we get on the phone with a patient, their family, and a treating oncologist or cardiologist and make sure that from a motivational interviewing perspective, everybody knows what the patient wants. That creates a lot of, I think, patient value. It takes suffering away from those patients. It reduces costs in the system. I love that stuff, and I think we should be doing more of that over time. Our team loves that stuff, so our ability to focus in specialty, giving us the ability to hit our numbers and kinda innovate kind of the next leg of the stool.
Great. Well, thank you so much to Evolent for sharing your time with us today, and thank you all for joining. Thank you.