MOH - Earnings call transcript Q4 2020 | Molina Healthcare, Inc.

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Operator

Good morning, and welcome to the Molina Healthcare Fourth Quarter 2020 Earnings Conference Call. Please note, this event is being recorded. I would like to turn the conference over to Ms. Julie Trudell, Senior Vice President of Investor Relations at Molina Healthcare. Please go ahead.

Julie Trudell

to Fourth welcome Call. XXXX and morning, Molina Quarter Healthcare's Earnings Good

this current me and Development announcing Tran, fourth CFO, later President a are and available who quarter and after earnings Joe our Investor retiring on Joining A Molina's our XX-days. current CFO-elect, CEO, and Mark today is press and the of of Head to replay was Transformation conclusion available Zubretsky; Keim. our access is month; distributed Corporate our release be after earnings are the market replay this numbers The in call, website. for release. yesterday Shortly will close the Relations Tom the

GAAP herein rebroadcast this initial these Thursday, in release. to those reconciliation earnings the today, most remind call, have or measures. call. In this February comparable A listen can will refer XX, For XXXX, made non-GAAP been presentation, the XXXX as measures of to press with who updated fourth subsequent certain and quarter of measures you the to we not be of remarks we directly that our the found

Joe factors our X-K SEC. as the XXXX the Form filings with year XX-Q well environment, regarding making COVID-XX advise and our Form with actual Form our to, in for our report as risk the our review statements in we annual SEC, the to After limited including, listed XX-K filed our pandemic, and now open statements to materially Officer, longer-term our uncertainties XXXX of to we acquisitions, results our are discussed remarks, Joe. would the take expectations. and completion listeners the During cause forward-looking but factors of can are differ call, your Chief We all our the not turn call questions. Statements, Forward-Looking Executive subject I and cautioned to risks the that Zubretsky. to certain that from guidance up risk the be over current like will current will our call recent Listeners the prepared outlook.

Joseph Zubretsky

Julie, Today, you, on good morning. several will we and updates provide Thank topics.

financial lastly, will second, First, earnings and per enterprise-wide for our some we strategic guidance thoughts future will XXXX; initial and prospects. our with fourth share conclude cover compelling and quarter we full-year we for earnings results will XXXX; on and provide position growth the

approximately the the earnings after start me a for produced items fourth share increase net GAAP significantly for Let the normalized impacted diluted per $X.X adjusted revenue fourth the $X.XX of which night, On performance This of fourth basis, and of in revenue is share over a net the reported per XXXX, effect with per million earnings COVID. quarters quarter excluding the quarter year. adjusting each Last $X.XX per income the quarter. of we our were of billion with COVID, for prior the highlights. share consistent our defined quarter. with $XX as of three total earnings XX% in of fourth first diluted share, of and effect $X earnings Two

quarter curtailment the the in of the continuation of the impact cost per direct was COVID rate effect level modest in taken items refunds introduction these the income Ohio. net which more utilization retroactive Michigan together and of in and already These net of of quarter and high effect a COVID-related prominent most rate and in refunds offset actions of decreased California, this was by care. than COVID most first The net the to contributor The flight of significant share. $X.XX

net we most benefit earnings of the federal of net The adjustments was benefit per second a are an delivery these our item significant from our The of in from in of the share. impact litigation that summary, by a produced execution strategy. offset the a having with normalized proceeds quarter to partially the quarter significant growth performance came fourth $X.XX was and which pleased contribution focused earnings combined respect continued foundation. with In solid charitable of our both to

this the global the with effects was of achieved whilst of All dealing pandemic.

to earnings increased in XXX,XXX over we increase full-year, $XX.X billion, reported the member Now of X.X% due full-year members, a million managed the generated increase $XXX income with per an turning growth with year net $XX.XX, ended year-over-year, share XX% care of Medicaid. and reflecting XXXX membership. diluted GAAP XXXX a million margin. four We after-tax of revenue of primarily We premium to

XXX,XXX for of XXXX. the as major expresses of On strength basis, inorganic catalyst normalized Our organic our in normalized and on the million related a organic XXX,XXX our suspension offset by decline over from provide acquisitions and full-year and This the the business membership earnings members members, growth our per year. exit Medicaid of XXX,XXX over member on YourCare, COVID will members Xst planned full-year. year better of $XX.XX isolating Rico. growth increase to performance representing the Growth our of I finished This color which members Puerto XX% XXX,XXX strong Passport, or at share Xst. adjustments. financial prior redeterminations was our closed X.X on enrollment was related growth or now closed growth XX% September strong the the the which for of diluted Medicaid additional by underlying transitory were which July effects to of the reflects

respect margins, performance to $XX.XX normalized to established MCR full-year to Medicare, most $XX.XX compared COVID expectations. in is our guidance our is of was of the and met performance our marketplace, absence our performance in share, per medical Medicaid comparison. the for a in below comfortably which our In was year. expectations, therefore XX.X% the and basis prior exceeded Our while relevant the XX.X% full-year, on With normalized

produced X.X% marketplace substantial normalized underperforming. year Our G&A compared cost our by was a We benefits the margin produced in X.X% reflecting growth. disciplined the of normalized management to X.X% business scale XXXX for ratio after-tax and of our despite

while our operational the distortions produced and with margin, pleased we cost medical are caused target. that dealing We the long-term by complexity consistent pandemic, a normalized very with

other on on pre-tax effects item-by-item per the identifiable utilization our direct medical XXXX utilization pre-tax by costs comment effect both curtailed COVID on related negative that approximately the curtailment, by benefit several result the The moderately were of net should care in the the quarter full-year, the COVID For will any million of fourth the year. than higher sum was share. results. note $X.XX full-year, quarter basis. of or was COVID COVID-related income direct COVID $XXX offset This and positive to I Now million a factors while net fourth patients approximately is and increased the I $XXX of follows: quarter full-year as from in in

risk-sharing quarter new related revenue $XXX on end corridors active as third premium by a For three remained corridors reduced at reported million went the the in and quarter basis. the corridors $XXX pre-tax the was in approximately effect. of amount year, earnings COVID-related this fourth the million COVID and of existing risk-sharing already

metrics created For million basis. our spend remain to COVID-related increased Without underlying COVID operating and financial operating pre-tax our the fundamentals activities XXXX the effects $XX year, of metrics, strong. but G&A the by distortions on question, significant approximately a

York includes we revenue revenue both with balanced existing More guidance in Marketplace rapid December September York, the are of not and July Turning increase specifically, very year on revenue XXst. California, a carve-outs a of somewhat penetration by to of well in the of organic our In least over beginning Affinity YourCare Kentucky is and decrease Magellan from revenue, and win, in in is pleased on premium commenced XXXX. new guidance. carve-in our our guidance XXXX, Washington, of footprint. greater on XX% than partial Puerto which activation The billion, premium full-year X, expansions impact XXXX. our the revenue the premium benefit exit Medicaid this and we closed included we our at the associated XXXX acquisition our XXX,XXX of our products project growth with the a growth revenue is pharmacy on state from XX% of which of The a A contract begin Complete which pharmacy acquired in which to benefit planned a of growth Marketplace full-year revenue as This New of strategy. New we XXXX, acquisition revenue, growth with X, businesses, our $XX between members. premium geographies full-year Medicare Rico. of more we upstate Care into full-year XX% membership offset year with the assumed

We transaction to million revenue expect the premium so the acquisition more could additional second quarter, early in in as $XXX close provide XXXX. or as the

remain over The emergency the of extension has the that Our to match activated. administration XXXX, the the for in for likely X.X% entirety redetermination states the receive so, recently guidance XXXX, mid-April which the current includes FMAP is in decline public place emergency health likewise suspension relating growth of with year additional end is the state. requirement a set it public steady year. would continue the throughout off membership could remainder the indicated to redetermination extend If will Biden as

suspension members Although have during included PHE volumes adding the our of potential be continue pattern an this we than it PAG per is XXX,XXX associated additional estimate we extended quarter in not Medicaid would more extensions. whether further. redetermination from unclear in Therefore, have guidance been should revenue with XXXX,

$XXX by accompanied PAG suspension extended certainly XXXX additional to redetermination revenue redetermination month, estimate is could It suspension represent the our of the provide approximately that of could extension month. any April. every outlook. for However, upside We revenue per million past

given our our our would earnings focus have the per Turning going continued recent be forward and relevant M&A activity, now expected more of and measure guidance, earnings today. become comments to share of a earnings adjusted

share. XXXX XX% end guidance $XX $XX.XX range XXXX share to normalized of per from full-year or guidance per initial adjusted is earnings our growth in essentially earnings is of upper Our $XX.XX share our The $XX.XX. to approximately per XXXX equal earnings the of of adjusted XXXX range

Our durable challenges. are earnings reflects sustainable XXXX [ephemeral] earnings which temporarily industry-wide by and a (Ph) improvements operating muted and being growth profile

Complete value Specifically, our to growth actuarially strong following base which designs; sound reflecting performance and rate Care our XXXX Medicare, we XXXX Magellan on continued an target Medicaid positive focus of improvements mid-single-digit recovery as in competitive earnings accretion the in pre-tax guidance margins from business our intense and long-term our a environment. Continued reflects result for and Margin drivers: Marketplace product Passport operational businesses achieve Kentucky prices into installation. the and and and

and negative scores, guidance following industry-wide an at are the challenge of patient curtailment. risk-sharing of a net that although lower-than-expected the including And to due also existed which corridors environmental from COVID, challenges, that pressure level, of COVID-related risk cost care, utilization the in would moderate offset results. by XXXX direct Medicare continuation the industry-wide the many earnings Our another considers impact reduced

do of progression these risk challenges, acuity fully services we in their access risks seniors $XX.XX earnings quantify now and cash our the or $XX.XX XXXX midpoint Our XXXX to share catalysts not guidance from per adjusted reflect health membership scores challenging. reduced therefore, the to XXXX is as per earnings the our normalized of of care our Referencing of and share. more

core these continue offset approximately that by consisting near XXXX our per risk share. optimal. And approximately approximately the adjusted of curtailment and Marketplace by the COVID of positive per negatively risk-sharing strong growth, per earnings would $X.XX in $X are expect share temporarily impact positively score we from specifically, expect but $X.XX with Medicare pressure phenomenon to care, approximately industry-wide as two share. contribute cost net Medicaid direct accretion earnings, mostly challenges utilization by from shortfall per impact And Offsetting $X earnings along performance are corridors earnings, results We emerging acquisitions, Medicare temporary and repurchases, in by effect to factors share. will of to adjusted share environmental margins pressure

operating impact All combined approximately points XXXX margins, This income with initial XXXX by and point our net when impact acquisitions corresponds the on of of margin. MCR these recent the normalized. basis to compared items, XXX to performance a basis when target below XX

expect profile COVID the of headwinds solid achieve the the Medicare abates. their run in rate disruption overhang. when growth, and but it underlying The of represents We COVID financial score we COVID would potential as include: a industry-related guidance this picture to full first, And can $X.XX develop overhang has that created per when net share embedded XXXX disappear earnings approximately Our is will company. abate. the power adjusted risk earnings our of effect of earnings acquisitions constrained

will least disciplined per us Second, a expect gives created. our cash of as growth now our strategic to operating and position confidence our The caused challenges in Complete once at additional relaxation of of function growth in new once to in by expect line continued natural near-term targeted with the mid-teens. and and $X.X of the the and earnings margin revenue our as generating our our after excess we growth nearly billion winning that pandemic, The our remains our margins projecting create catalysts power leverage, comfortably the concluding we Care producing resilience and capital; which high-acuity Generating our and earnings annual growth, growing the durable sustained dissipate, synergized, of obtain achievement share share in contribution in has with per EBITDA our near-term is of margin recent of of distortions per business. EBITDA acquisitions harvest actioning a rate Kentucky states, Affinity rate these and deployment XX% earnings and I frame approximately and short, target of very temporary would we execution all of combined summarize, caused the populations COVID, guidance execute when our few achieve of margins the acquired we adjusted produce strategy business Despite in produce profile. and the in a excess provide growth on in two-year acquire run penetration challenges compelling attractive flow, comments of position accretive temporary financial adjusted soon which, the earnings in share. these core quarter; distortions will our pro $X.XX. by In producing we upside us equity of a closed allowed sustainability the return profile to inherent earnings existing ability on margin of businesses. implies to compound adjusted strong, which mid-teens and with is Despite an that margins X%, XXXX have in to forma produce states, share margin high. Magellan would XX%; earnings performance constraints, growth market X%, after-tax is a would being the characteristics global Our through increasing exceptionally attractive are businesses and businesses and our achieve

focused deliver. the vicissitudes top note that our pandemic, team line determination to continue growth value-creating and drive best-in-class margins I despite operating and will an and We remain sustain relentlessly our economy mission. metrics the and will associates and the management the ability have of on a to despite our demonstrated tenacity,

the people We are right with time. in the businesses at right the right

Our future Tran call Tom some Tom. turn over additional that, is will to very the bright. color financials. the I With on for

Thomas Tran

balance Joe. everyone. operating timing our you, flow XXXX rose receipts full-year the XXXX discuss membership Good morning, sheet, and cash the Thank flow and the of billion, cash payments. strong going was for I’m to outlook. government reflecting $X.X Operating and result

remains a cash balance prior XX, negligible Magellan parent million of acquisition. dividends for at to XXXX. the outlay We billion, period strong. XX-days cost our XXXX. was with end Complete quarter the remains of compared position third in primarily the year-to-date. medical quarter of in million XXXX represents quarter fourth reserve of $X.X XX-days the from million, of subsidiary Care reserve cash XX-days Days favorable quarter in company and expense in $XXX payable and decrease at the fourth modestly year's XXXX in $XXX of and in Our Prior was XXXX, in extract the cash to the due quarter the reserve balance The quarter of consistent quarters, development were approach the the approximately comparable and $XXX prior claim December

share. As statutory approximately $X aggregate per At XXXX, XXX,XXX XX, of had our an approximately capital of XXXX, plans December December and average of Through total billion, price which surplus $XXX equates million. $XXX for health approximately of shares capital. to of an XX, XXX% repurchased approximately risk-based we

the million of on the Debt trailing capital. cost to X.X $XXX due offering private of November we of XXXX EBITDA. notes used notes. quarter reduce XXXX, November to and senior XX-month of continue time senior a repay is the the end of We $XXX at our proceeds million a portion In closed

Our leverage ratio is XX%.

parent net a basis, debt cash, not the On However, is leverage XX%. company a ratio

metrics Taken position. reflect leverage conservative a reasonably these together,

Now initial of introduced range turning guidance XXXX share to per $XX.XX earnings our $XX. guidance, full-year we adjusted to

We expect premium XX% expected billion. $XX exceed greater to XXXX, revenue $XX and increase total is than exceed billion a to over revenue

XXXX and disruption to increase acquisitions. care the due medical Medicare ratio MCR expect to over from score risk XX%. primarily The continuing COVID, recent higher We effect the approximately net of MCR is temporary be

points to disciplined prepared is adjusted fixed I be the approximately by net growth, operating continuing continued basis we our items and to rate of is ready Medicare effect And risk XX.X%. remarks. G&A margins. impacted tax Operator, recent expected our improve expect ratio concludes which to X%. reflects acquisition just be cost X%, approximately to approximately target leverage. margin revenue below The initial adjusted is This performance management, We cost questions. XX approximately COVID, after-tax related This now are of and to take scores the mentioned, to including expected

Operator

with comes begin question-and-answer now will Matt BMO Capital go Our Borsch [Operator Instructions] first please Markets. ahead. question the We session. from

Matthew Borsch

was talk expect underperformance just this have into marketplace the a you enrollment consideration that about you you morning. when could you hoping little XXXX? characterized bit you period. special good to Yes And in what I take impact how

Joseph Zubretsky

Sure, Matt.

year the marketplace with Our with the didn't starting period. four a the XXX,XXX contemplate special and enrollment just forecast in the under for year ending and membership thousand

XX,XXX from members. aware what provide. XX,XXX to We those certainly for And it anywhere could provide have it forecasted of are couldn't certainly We XX-days, it. additional

that of revenue the for provide potentially million million extra could $XXX We $XXX an year. are it forecasting to

process, it by margin unaffected that. in the recovery context Now is of our

are put in are comfortable enrollment the we very comfortable period. year, margins We mid-single-digit our designs, the our of pre-tax attained benefit positioning, product product additional with pricing irrespective special the marketplace, revenue achieving with into very are any we our and comfortable designs to we and our the for very

Matthew Borsch

do how if maybe And the to in that, think just efforts your much you mid-single-digit get to impacts competitive I, to level? related the marketplace environment the

Joseph Zubretsky

new is XXXX, one we will is confident. if areas in is reasons are down, review scores. the very we confident risk and are let of There entrants, the two operational of it lots And very of utilization competitive. Well, you but attainment

operational other and two those We our two have excellence operating introduced businesses. fundamentals of

good in behind it really exist has were that And just company are good at been in it corrected. really and Medicaid We our importing at Medicare. platform. in skills That we marketplace the those and to

very that fundamentals, across so are two by to we get comfortable margins. back And we those executing mid-single-digit will

Matthew Borsch

you. Yes. Thank

Operator

Our with Goldwasser from Please ahead. go next Ricky question comes Stanley. Morgan

Ricky Goldwasser

morning. here. of good A Hi, couple questions

about of Just think in we a parts XXXX, thinking a just sort items onetime it we onetime COVID to XXXX, just sort can of kind of point temporary number in headwind? from clarify, the for it moving caused it. as exclude Because we year? the the next like think about and As of what about starting

Joseph Zubretsky

Sure.

we helping what prepared XXXX bridge and a the of our During pressures as quantitative with into catalysts at remarks, our sort understanding the looked investors bridge gave be point understand goal our a bridge guidance of jumping off all and committed might XXXX. a qualitative - inside

the So here and puts takes. are

risk normal, $XXX as the that share the of effect pandemic comes dissipate million $X.XX disappear overhead will back all, as overtime quarters evaporate to solved. net or per pre-tax of COVID $X.XX First of will of the is as utilization

access year. year score an addition, Medicare care. risk phenomenon, didn't the interesting last health In Seniors was

for the to challenge, And so risk a competitors. us, many was right for getting force them, not the just of our codes us interacting with attain but right

before scores, last we be the this has we obviously, COVID include year, And will the we Next either that will of that attain - can bids. meaning year, can, ever either services, will the in getting impact because we known. were if bids aren’t satisfied or they done risk we far our year,

of overhang at sort So behind gets as we very comfortable are $X.XX that us. combined disappears COVID

and accretion its that comfortable target in in full there this As are are closed that we are very their we comfortable also we really is target in the share additional there. putting we said, hit earnings integrated but with well, $X an saying, are year's being of acquisitions really, Affinity they margin, is and $X.XX addition, when hit our of per and margin when guidance,

share in, per good So a earnings power XXXX inside there sitting all guidance. of $X our is embedded

Ricky Goldwasser

to follow XXXX. when we to think I And we about just have management How bandwidth of continue acquisitions taking mean, of in in clearly, done do a XXXX should market? we then to you about sort acquisitions, you kind think acquisitions the the and back integrated year, the target about to margin they making sure think pause to of that coming or sort are should all this getting multiple

Joseph Zubretsky

bandwidth. the We have created

expert that M&A them finds action We them. how knows have and and the close an team to properties

have and have is targets Passport read built going we the really, in integration a the on the early world-class given so accretion The integration why well. going affirming we is We really are team. that well is you. integration really That Magellan comfortable

We a actually on time By second quite integrated, closing would perhaps fully fortunately, laid the Magellan by we very nicely the Affinity, be just quarter. have on is timeline. out

action couldn't next they be effective year, more late accretion integrating investors. harvesting we how the early one, promised and at our that year, this being the the if them more year very so and in we timeline amenable close or who many either two knows to And

Ricky Goldwasser

you. Thank

Joseph Zubretsky

you. Thank

Operator

ahead. question comes next from Please Jones with Robert Our Goldman go Sachs.

Robert Jones

two But through. XXXX looks in to Great. of of XX the be the the core off on a that would HIF these of not somewhere $XX.XX I long-term would the questions. like the of X.X% much target be XX. breaking the bridge benefit below range. lot obviously, I of maybe is that sure just baseline I'm flowing Thanks guys guess for you it appreciate and out growth components, how

are into wanted range XX. that pieces how maybe the get long-term some through of thinking see to XX about to the moving you to could of if timeline that you Just back importantly, here and into walk more probably

Joseph Zubretsky

make your to I sure understand question. want I

about puts or talking within guidance the and takes our are beyond. XXXX You

Robert Jones

Yes.

the like growth have in of XXXX, slides top in it look below targets. that of you at you Sorry, out these the would just seems the be kind obviously, on $X.XX if laid that $XX.XX, core long-term of

obviously, that baked kind back your back at are I'm that necessarily curious through here yet, if be wanted range. laid on to getting you the are I it of have like towards to in not sounds Just the could you there versus thoughts getting sure core which tailwinds talk helpful. some But just get And growth out would the range. long-term

Joseph Zubretsky

in performance different bear as the net mind irrespective Well, which COVID, of in Sure. that tracked of core articulated effect here the have the is we is place this. a way

So It year. in $X.XX position Medicare this $X.X puts if pre-tax. obtain start the year. we the margin just with some billion, And tailwind and billion is how the margins a going Medicaid. underperformed of grow of Medicaid look top margin the that in breakeven we for you to XXXX, There But $X.XX targeting you the performance is business picture that the mid-single-digit upside into a Medicare revenue, marketplace and $X but since to about are takes there contributor formulate there, last at that are, lot to and line of core the are and was was potential mostly is can not they a are is. and there significant where

respect as we A margins. to business core very step marketplace be. would are Medicare Medicaid So optimized be from perspective. our with for mid-single-digit we are said a first with much The back here pretty that margin getting we would we and to comfortable to position where a target pre-tax the XXXX. presented

Robert Jones

here I think and $X.XX you $X.XX remember, sounded roughly from just dollar Puerto I the maybe guys the and you called Now, the on follow-up that is exit like helpful. super YourCare out. I out repos, Magellan. net acquisitions one for Rico would to and bridge, have if guess had It expected

to that fast I should as math up far and the about the dollar forward $X.XX think as would be first, then and to to for does bridge split guess, I trying make $X.XX So make other balance? repo Passport and factor. how repo between swing think that we sense that

Joseph Zubretsky

the say committed I for range to that apart that the would Yes, $X.XX full-year generally were Magellan, in break to you is dollar, top the end area. are first If which the I we is right of ownership, of of it peak will $X.XX how would full-year very you to get and the be ownership, about after $X.XX is we to on on close that buyback. breakeven margins in Kentucky. It dollar. and That the to first drive the

Robert Jones

Super thanks helpful. Joe.

Joseph Zubretsky

Okay. Thank you.

Operator

comes question Please go with ahead. from Charles Rhyee Next Cowen.

Charles Rhyee

Yes, COVID or apologize if are bucket that. just question. is one the within about hi guess I question clarify in thanks impact just COVID effective I you COVID in the COVID the for I of Passport in that we net for out acquisitions? you thing. Kentucky, like Joe, assumptions have taking $X.XX, it I in bucket? acquisition the in to of just been is the your wanted all When follow-up to other missed to talk for the pulling or here the accretion something is factoring effect XXXX all for the

Joseph Zubretsky

caring is of reframe COVID how refunds acquisition to we the just rate the offset it. due And COVID our We is of That corridors. sort the to captured believe COVID related if we course, in medical liabilities retroactive in for of that, have of attempted to item. any observed or by both have how then, capture offset amount suppression line. line patients. by we an And impact, cost COVID of the track COVID cost estimate the And impacts the to capture we all direct of it generated impact is

Charles Rhyee

of going Kentucky we have are look a Passport, thank when they will sense of and sort to numbers follow-up quick you. so do timing your you just a yet enrollment, for what on Okay, the will know in membership And do on like? sort

Joseph Zubretsky

XXth. to the March open Kentucky, extended period In enrollment was

contract XXX,XXX still are shutdown, members how same with. with March the moving that XXth, know and will has us new there began we many in on members. about period The year latest accounting members beginning So will is We we the around. our that zone. But

Charles Rhyee

Thank you. Great. Okay.

Operator

Our Taylor JPMorgan. next Please ahead. question comes with go Gary from

Gary Taylor

I Joe. wanted your understand I about morning sure saying good are assumptions. you to reverification make Hey what just

for I So and rolling that you is the are of is you off, take you of net have place and suggesting when this just look presuming that back are still negative in and to are at number reverifications at, think that for XXXX size that saying core Medicaid embedded that whatever your growth, happen that we most about like and moment enrollment are this to sure example, doesn't year, bridge comes that right some if anticipating there. XXXX, between number Is the $X.XX start I'm you going can embedded But to the it exchanges. to mid-year way of negative us? if you there a in is want make from

Joseph Zubretsky

interesting redetermination. timing in roles numbers, It month turn there membership all member redetermination a is flows, Sure. But because both way of attrite on I is XXXX, is of in XXXX, actually about how would the assumption increase just will your tell our back acquisitions once states you, membership based and XXXX on. it fast in the the both the and

way of it the the estimating upside earnings the would determination. depending reintroduction year. the have our how would redetermination to the I would how we plan no, prudent how fast actually they We states many and and to revenue was felt more pause is get on wasn't credible we roll of picture nor off the members then implement that XXX% if redetermination just did any say with in process So extended,

phenomenon just guidance is to say the that I the for So both issue upside and our would revenue or year. earnings redetermination

Gary Taylor

that half, enrollment the about leakage is the growth weighted half, So positive in but average now assumptions playing second you still through have first some year-over-year. got still some out

Joseph Zubretsky

year X.X, roll our another at a way The the on members. Medicaid We then would look are we January Yes. MCC. based with redetermination its XX,XXX of basis, would the historical year. it about we hit It during beginning And million XXX,XXX average members. a quarter, but pull off in on XXX,XXX of come Xst, at in balance suspension. first members On due the peak X.X over in month to the XXX,XXX

and And might and growth process conservatism how grew timing our it X% in acquisitions, Medicaid. XXXX timing against there which on number then actually off, happen if month yes, the that and a XXXX is forecast. is is in our that of perhaps slower, Now roll another quick of the you element a pretty of membership

Gary Taylor

helpful. Thank Very you.

Joseph Zubretsky

you. Thank

Operator

Our Lake Justin Wolfe Please ahead. go question comes with next Research. from

Justin Lake

couple Thanks, good A morning. of questions here.

First, people lot to of than the was the a that materially less Joe, headwind JPMorgan going the $X. at impression COVID that got be

of to of if is between laying up And that that to curious I'm push did then job $X. a out closer and versus So same for Thanks. us happened XXXX you be and COVID there where you for then great to Can utilization? kind now the expect COVID tell within you number utilization? headwind. Can the normal XXXX us the cost on components something do specifically you

Joseph Zubretsky

Sure, for so provide XXXX. sure, context let's the

utilization combined million surplus, for suppression somewhere the we there the we direct modest and were for orders for netting Our estimate while. it direct medical of a to of for offset of elective our is And which now year, reason about additional And supply medical suppression. be the is economy care call the and risk-sharing year benefit, a to it the side was afraid company liabilities a were to softening business $X.XX million mandates we more care an cost rate is both estimate, which the in them, actual hesitate the more answer number, supply think the demand but the due direct of suppression suppression COVID shutdown is a go for of against this recorded approximately XXXX. around refunds, of side G&A last and million they million with not from COVID question, amount services. net side $XX health resulted of million in and demand discretionary a will level entire in that, many of an Juxtaposed forecasting for one-third the $XXX if in by share. provide of a pandemic. to year million is this costs that of $XXX year $XXX to and the we a is cost experienced Patients million. The patients, your in were executive procedures. year, surplus result for of would moderate, $XXX are not year, impact was quarter open cost still in on COVID COVID to there of a $XXX $XXX That wanted And

will of will social will direct that the vaccine forecast dissipate year. and in the happen COVID all half first Most million. really the year. the we of vaccinations $XXX costs in We later million this, in this incur somewhere $XXX and is the of cause care. to half Hopefully, net And the the of all distancing of between

retroactive, we million quarters, that, million, not nets Now against should $XXX is to $X.XX but impact risk-sharing about from I forecasting which share. your approximately are of a which retroactive also or say, $XXX

$X.XX but numbers So less the share. is are gross netting a a lot to it dramatic, still

lower the is are One impact. we some suppression a focus on net of hedge higher really corridors the sort the with Because down would be of and this is flex corridors. and of the comfortable than if natural the actually risk-sharing reasons estimate or very utilization themselves. between up There we is expected, there

this be obviously. So we on with comfortable the number, away, basis, net goes the there impact goes pandemic that and are normal very COVID we as number. look times, a back And no we from would at think going-forward to net

our that estimate I XXXX. So in was I hope COVID that with what's pretty for helps the included that $X.XX but of know tail that cost is tape. for detailed,

Justin Lake

your are that here problem. helpful margins target, effectively and seeing really what is risk that typical whole you and is just have so setting where is got Joe lower your than $XXX are you really corridor the they million

down, but stuff them $XXX like on? around coming target and your of The risk this there up other at of have you here point going uncertainty are all to states by below is any million. flex corridors, is more

Joseph Zubretsky

yes, first answer to part, me that response the the true. first Let part. the is The is, address

risk getting just the corridors to risk on no impact specifically, outperforming is didn't or look net address If back that MLR some you up are because through down, COVID are medical money there your MLR, at to if you way state. is it, costs you the are in go suppression and your corridor it already a the addressed company. that targets, But then sharing

between COVID the suppression against intention So have is a medical generally. corridor, corridor the but costs was to in direct a correlation

made The that higher profitable the will and a we would of there part a question we a and are the surplus many the either little additional that corridor not, So the where your biggest in the state in we where Texas refund is already correct. people corridor have states, other benefits state have - costs. or in very state that second into that does not some state outperform XXXX a effects of the up additional down participants But of is and market are California. enjoy Washington in medical them rate XXXX. fact done the some states, probably number continue to we the and expected. already answer a of on only states our is of all is It might higher are than have flex in your we fact

Justin Lake

Thanks.

Operator

Please Our Fidel question next from comes with go ahead. Stephens. Scott

Scott Fidel

Good thanks. morning. Hi,

X% inorganic conceptually just in a profile, the and sort I the your long-term are question, side looks the of wanted couple us, of longer a of been First like the just lower-margin businesses. just margin crosswalk a acquiring term, guiding Investor It you maybe Day for have terms exchange years with back just that level though, us you for little Joe, long-term just last interested, margin ago, since taking about rebate that of couple more you we other guys the doing when growth, view that that bit think comfort that a gave you talk target. about to to had And years.

from a mix them. of up will up end sort end that come programs, impact liking So also there the of some likely just And and then corridor bit that. them a at states risk is these light consistent keeping

just that get of some headwinds just target. So of against sort those framing wanted I long-term longer-term maybe your to thoughts on X%

Joseph Zubretsky

Scott. Sure,

guidance. sit global we long-term here are As not this of pandemic, going year we the update to in second margin our

what go, views of plow We sort is of are looking to go as going form your you through just landscape this, you to like it. the start through as plow as you

part is approach. a high you pro To said to that more that quite many having to when your of this the of forma forma or second of close question, temporary, that our can thing at the that, the these acquisitions think sweat actually to have good of prudent we for margin are Xs I perform, consider if I hope properties we impacts that pro we actually you buy is just form can phenomenon look back X%. But sitting another perform the get have with equity, do always that not first in year. them and inside that is to their accretion. decrement That decrement a because underperforming

line. They part the in they were to mostly basis be were XXXX, were because So after retroactive presented related acquired the In margin guidance, they is our of way, of had on XX they year they points to they pandemic pandemic. points, the related when introduced your line this question risk first clearly basis properties our the in Look, on started. both and the the the were MCR literally in related were in G&A corridors. XX underperformance our in was the XXXX that because to that introduced last to

as was they As they the COVID the is were basis. symmetrical presented XXXX, reintroduced why there cost suppression, the The introduced could additional feeling pandemic-related. from were were vaccine, that strange a additional of on that pandemic costs, and effects for they be

these have approval, are stipulated that on related the to they on for protected guidelines, In when as being is CMS' approval protected they pandemic. are You upside. to clearly the the attributed receive impacts viewing the they downside state utilization and the these

to medical them we will has approving when CMS environment back rate-setting been pretty are and it clear And that using be presented pandemic. to relating basis set as the and baseline. well So traditional on relating is pandemic to dissipates will as where a they to off baseline cost disappear pandemic. rates that of prospectively us were a believe that the trend credible the the these

Scott Fidel

the out just this of the of in temporary a or absorbing your for follow-up in frame from came caveated opportunity you the means just would use it. content two-years. E&C just HIC and funding also the they reconciliation, the my from some last is guess lot I that And guys ways with proposals Joe, has framing come are two, for and of know on sort of day you for And probably how expansion then only then of interested, subsidies the proposals But Got expanding and I on it and because question. out that? on that some Medicaid it.

guess the the back it in Senate there at right example, took or the be funding, I sustainability House XXXX. for to questions Republicans on would So the

Joseph Zubretsky

question. thanks that for Well,

first public the has order, look all marketplace. only access least to are the order special the the afford period The enrollment that end of order plenty has the weeks terms executive that order states three the it. in been sure three and the intention can introduce requirements. the to executive care at social prior to disadvantage euphemism in taking what into at the Medicaid work health executive net look they executive proponents chargeable new the what encouraging knew administration happened policies, at was the a of just government have the was safety and We would done. new look year. to of to which be of and the the of weeks And the We high-quality extend shot government PHE on subsidies in the making so really

out up means at and three accessible over XXX% so for Making language committees care can your on The and and the of through to. to the just so they FPL. and write ways subsidies reconciliation health at the are the the incredibly oversight. health past energy, product look marketplace and generally house And get what's come disadvantaged. House capping of the so that to e-commerce To introducing, bullish are three increasing in they cost X.X% on XXX%, the White in income, done the issues on. people So point, their going to process and government-sponsored the is on are that in things other of care, weeks particularly

in the and better Managed the Care, and Executive Just new coming a we being both for already pleased that government-sponsored government, in just progress out see made. of weeks House in of that the be legislative White from to bills are couldn't order House three are

Scott Fidel

Okay. Thanks.

Operator

from comes question Windley Please go Jefferies. next Dave with Our ahead.

David Windley

I'm lot made that that happen redetermined was And on. to wondering profile around Last questions. thanks included maybe was that time when this gets wanted I estimates? risk on even assumption that your taking or the finally when it utilizers. think zero like of on morning. redetermination. the a kind the off around that good this back my if of realization guidance Hi, was for folks to pretty questioning you attractive, is time back follow Gary's have Joe in in margin there you of line turned on turned on, likely those or your

Joseph Zubretsky

to of it part Dave, acuity we question, your to population. answer the last is of But The what the does to be your remains still it seen haven't. no,

last the Now quarters quarter the introduced more so and three the in in attrition growth guidance the our starts our member because year. members then we only forecast, XXX,XXX year haven't corridors it anyway. the includes have of first of continued a we in But the softening of certainly happens in not of And fact a if and go will profile forecasted base. against happens, acuity in it fact, that membership in say, our back quarter, many

So is the is any rolled it quickly. extension first positive, net to redetermination on dimension, quarter, guidance. We net-net, of members a not off positive a them include we The suspension did pretty past net our any of the impact the

that prepared of the of remarks, guidance and for margin acuity impact any we our or for improvement is a the per you What redetermination month which get that take members. earnings I additional as year, have very at that a is As positive of got profile you as million sort improves more the either $XXX in what membership share. included the flow of to is every sort is not earnings revenue. our that speculate acuity can in is revenue, members, in $XXX good But PMPM population jolt it said if of XXX,XXX my we very, you there

David Windley

topic. Okay. And separate follow-up then,

is bandwidth think do mix thought best? you are opportunistic earlier I around MA about M&A, influence build acquisition does MA, at, or How what to you as to look in the it having it built well, book to growth? looks integration about more as would continue of an at to at comments the your balance and think and look the to and standpoint, business the really your relates the i.e. on balance you guess, As you like of your looking increasing how what - a inorganic you targets, team book from your of

Joseph Zubretsky

would to Medicare. balance with it with hard more more balance love to They find. would we out are But We love out Medicare. to

We lot important. market have High couldn't we is lot it high-acuity to get of high good a the but don't look really are would we Medicare organically, that have And lives a where love are a growing there of acuity, them. much so state. Advantage within acuity. have at lines to is new done? and we important, that state or we the have really populations. ability D-SNP share Is have it find along I players nicely say asked properties states out really that would a bolt-on there little manage it we you the question, more to Lighting up

margin of $X,XXX potential. on upside per premium the So huge huge, is month

they love not actually will expansion. the up are playbook through Molina because So margin is that important, accretion the then take acuity. we would underperforming our but operating broken, say high open I drive team, And geography the better we all if and

David Windley

you. Thank Great.

Operator

ahead. comes Our America. next question go from Bank with Please Kevin of Fischbeck

Kevin Fischbeck

Great. Thanks.

factors lot something Just $X separate, net we account? wanted number if take it kind talked that of It wasn't if you be separately out when kind that something earnings as XXXX there COVID this about redeterminations that guys that should XXXX power. year. are in a that I guess we into to of to identify I of any a other headwind not about you spiked is or in was your is guidance. contrary you sure I that would included theory, in But understand, make should it is that something thought is sure

Joseph Zubretsky

guidance, did there in mean, I therefore, from our - positive if did it create - in XXXX. No. impact, in is a since is impact redetermination not we not then, any we since a headwind not XXXX, put the

I a profit So is And any just the the question, attrition membership guidance. be slower any enjoyed from additional to extension revenue in of clear, of our impact appreciate April beyond membership not very in member or additional XXXX our in guidance. not any by is months

there it, said, comfortable on the really as upside XXXX is So I suspension. only are redetermination we to to

Kevin Fischbeck

Well your you is the guidance, going coming in then have slowly I'm XXXX what April talking and as goes on. it in because through year off about

year XXXX goes on. in Medicaid So the but the and be you in will to quarter member months, full member your at your months end your number, months point than about rolling XXXX member enrollment because as your first will for higher partially off just redeterminations

Joseph Zubretsky

your I your question. apologize understand again, and weren't XXXX we sorry, I specific Sure, I I'm misunderstood giving a outlook. No, question.

But is to more share craft bridge. earnings an we extend if that due that for into gave than XXXX a an is as power earnings to weren't necessarily phenomenon. $XX that inside higher we bridge We trying to are some $XX trying the revenue guiding sitting XXXX, or with temporary you to are we

question. initial now at will a your come later misunderstood date. I that But Sorry,

Kevin Fischbeck

that is in factor to think power then? earnings else so should Okay, something we about

Joseph Zubretsky

on is might there XXXX, and of on goes piece through in. stay the suspension is other acquisitions do, on members that then we end the depending coming unless Sure, Affinity that the

not your But guidance are per and we I one. So legitimate a understand bridge doing a se. it is question, XXXX

Kevin Fischbeck

that is that part a and we unusual how quickly risk to line the business? for exchanges, of a you second margins about is it exchanges? then guys And top very the normalized think sounds then expand like just company XXXX grow how outlook margin? it and it. coding do about should long-term But guidance think growth Okay maybe see is way question, Obviously, obviously you the did.

Joseph Zubretsky

will a We changes to are guarded The day. every competitive land. of where in be landscape the giving forecast margins going

to are mid-single-digit very getting this this We year. in comfortable pre-tax

again, to of the in That is hope, mid-single-digit the bring that to competitive XXXX. future. to through lot members the the on, a would revenue could our business given we But Now perform. of after-tax let's where a landscape, work service. is lot lead There think

new. Some are them of

will to their get have We scores. risk

to time, we bids get margin And for we one through at asked much let's my the get But as XX% starting in we sort then membership year think year-over-year our to and margin with and this the how I business. mid-single-digit let's we a So XX% the much start can a get. think can growth nice was team, to pre-tax prepare step get year. how we this XXX,XXX XXXX, revenue game a back in

Kevin Fischbeck

thanks. Alright, Great.

Joseph Zubretsky

Thank Okay. you.

Operator

go comes next Our question Research. Josh from with ahead. Please Raskin Nephron

Joshua Raskin

to Thanks. Good X% higher sort the of I of bit suggesting. total headwind or are others Medicare that I risk per a than share, little on the morning. revenues which think question seems A your of Medicare what dollar some calculate about

scoring premium risk your are how guess of for there and my get are the next actually as dollar this bids of much to of of year you term that any Medicare year then improve risk to sort shorter comes overall And I be from in the try So year? sort actions middle the question adjusters? taking and you would ready

Joseph Zubretsky

be in truth a Josh, bit little dollar physician is the from that fee told schedule. Yes,

to was big didn't that just out. think enough it we So call

bit a X.X% times to schedule So I right there little X%, last that the year. what that, in had least from But to zone, And revenue score our recall. fee the multiples at physician industry are is in risk choice is two there. of you three a of

pandemic, of April. middle March the it in the just in are and started We

we didn't your Obviously, we put now on bids, points in will on And submit. that of year, any risk estimate always benefit target allow then are that to for what fall with can and while in this conservative develop on for we meaning scores. revenue what and okay, we tend we for, would starting either But our to going us attain, we line. bid margins, the short the the specific have part, our based next We three hindsight, bid. think for load then an cost we we are we year, most to be design

or for think the a we we it, it. at to So either way one-year way, price is whether the whether this we That phenomenon. is risk get we look

Joshua Raskin

But the right? of revenues Okay, this disappearing sort of as could it That be much got math, it. as even third risk a year. is to total your score half

Joseph Zubretsky

that, is about about think third. I I it but a will I a it is think third. check

Joshua Raskin

then where your And on just follow-up in and Medicaid a you end Medicare? quick did margins, full-year XXXX margins

Joseph Zubretsky

line end? net or margins on normalized we we individual XXXX, again, did that you for On X.X%. our business basis a the look margin, were Where not, at lines whether adjusted the Well, income with long-term of for would earnings depending are tell X.X% generally normalized And you targets. I in but, at

pretty the in So X.X% line. marketplace, much adjusted, business, X.X% is breakeven, which lines of are normalized, and acceptable obviously, close we to

Joshua Raskin

Alright.

Operator

Please comes Our next George go Hill ahead. Deutsche with question Bank. from

George Hill

and about to guess, can as that. risk the as Joe, your beneficiary conduct for the talk it scoring, I ability you Medicare it expectations the thank you relates to or Well have valuations relates to through the XXXX timing maybe of just the these in people? expectations you in as the seen XXXX roll talk as of your to of and what we half kind back about ability front get

Joseph Zubretsky

remain suppressed did is the But through look, late in on team suppressed balance utilization It well, Sure, year. our this. XXXX. the of wasn't as

consider very of it is you sure team. interactions Medicare this, extent of many your actually your all estimate their long-term credible And your over the you estimate make to crackerjack a reasonable expectation, it short proper instructions attained. achieve, of simple, and bid. have scores have a can falls in We They risk are are how what

way, competitors. making sure product designs with the of remains and benefit from your So goal obviously, with competitive either

team the into is this good pandemic it. in not introduce is made that news submitting to Last the we was it we throttle. we will would This as bids And your think decision was all our right year, year, conscious full full So [indiscernible] over bid. the year, have visibility. And otherwise. the

George Hill

you. Thank Okay.

Operator

conference our to any Zubretsky for concludes to closing turn like the back remarks. over session. I would This Joe question-and-answer

Joseph Zubretsky

and succeed, to you When that Tom, ahead The Operator, to we best recruit could end started over so we that, transformational the work tireless right form continued three-years moved confident the this success, large. that team operator. high-performing our knew we you, your Thank we health sought wish journey our in ago, their behalf We who of of team, Tran pretty developed steady success personally, we if good early Managed We will industry financial with all and Tom that. from have what good Tom's will exactly constituents, veterans, will, that would hand you veterans, and a we thank personifies contribution of instrumental battle-hardened our if for on all. will today. call nature missed retirement. in very has me lasting success. immense be a durable impact. your we been do. by infrastructure are know the our is certainly you built to in one, and energy, which and we and luck Care us

Operator

now you conference today's for Thank concluded. attending presentation. has The

disconnect. now may You

Molina Healthcare (MOH) 11 Feb 212020 Q4 Earnings call transcript