- Earnings call transcript Q3 2022

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Operator

Good day, and welcome to the Molina Healthcare Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Joe Krocheski, Senior Vice President, Investor Relations. Please go ahead, sir.

Joe Krocheski

Good morning, and welcome to Molina Healthcare's Third Quarter 2022 Earnings Call.

Molina's Keim. CEO, are our Zubretsky; today Mark CFO, me President Joe and and Joining release our available press market Relations A announcing closed after was website. yesterday the distributed and is on Investor third our quarter earnings after will available replay for call, be the conclusion days. Shortly this a of XX earnings numbers The the access replay the to in are release.

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

and of the to We with efforts measures for are unable without range. of years a difficulty due within predicting of GAAP provide unreasonable adjusted outlook XXXX timing various beyond items amounts the a to reasonable earnings our reconciliation the

current will all with that to subject outlook and cautioned our acquisition forward-looking pandemic future regard and and and now Form earnings as earnings from take risk our Listeners XXXX, redetermination the risk After will call, call will We report turn we these factors recent completion I in regarding statements cause projected Form our our including, call your factors Executive our our XXXX our statements, listeners open not but Joe? are Chief to with our and can XX-K as the uncertainties materially competitive X-K fiscal listed our certain to RFP year that SEC. filings forward-looking the statements and M&A Officer, with be over the to, During risks actual XXXX expectations. to and and submission certain results to and our both well with awards the growth revenue COVID-XX strategy, prepared activity. questions. limited guidance, SEC RFP can The XX-Q Form growth advise Zubretsky. long-term of in our the associated to filed our of our remarks, the making the annual margins. awards, the are we Joe discussed power review current and our differ

Joe Zubretsky

growth full strategy will Thank topics, third on we the our our you, for third and our results guidance of our in the Today, provide profitable for our and Joe, several growth. sustaining morning. year good context financial initiatives quarter of updates XXXX results, quarter XXXX,

premium premium new Our revenue for and lastly, outlook early on XXXX given and revenue outlook and success on recent earnings XXXX. growth business our

we XX% with Let me highlights. third year-over-year. share quarter of adjusted diluted growth Last reported per the earnings $X.XX, third quarter representing start night,

and reflects revenue embedded growth earnings XXXX Our margins target growth, realization strong sustained earnings. of portion the a meaningful premium our of

XX.X% Our operating pandemic-related ratio quarter X.X% consolidated pretax even medical prolonged performance adjusted third as navigate challenges. care demonstrate strong and G&A we margin X.X% ratio,

our underlying range, year-to-date management. and The costs is long-term reflecting on of COVID diversified XX.X% execution. of the strong and of strength continues cash is flows. margin stable. XX.X% previously pass-through have by portfolio very are of flagship and XX% and representing margin pretax long-term payments approximately Medicaid, the enterprise This prior pretax Our with the targets. environment cost MCR, year-to-date normalized operating MCR predictable our reported The rate tempered medical is our sound end G&A a when adjusted a in marketplace the squarely executing highlighted risk and focused ratio we produce business, an at our of reported X.X% X.X% to adjustment revenue of fundamentals for and results line true-up target year effects performance, the our increases lower reported. revenue,

MCR Our serving even operating performance. grow organically year-to-date members, from high of target to and at revenue, Marketplace, with in continues reported to of XX% representing sustained continues The towards profitability COVID-related revenue, demonstrate strong acuity XX.X%, Medicare track a pressure of enterprise niche low-income enterprise on return with pure care range. basis. to line X% our in is a long-term cost fairly XXXX period

earnings have performance. it with to pleased and and in the summary, on We our growth deliver keeping solid We keeping strategy. keeping executed quarter In are it and well, succeeded third year-to-date very business silver small, our delivered stable. we operating continued

to the our We billion above or project now of XXXX $XX.X this represents X-year, rate. guidance. a to approximately pivot our growth XX% guidance. in compound now XXXX guidance our updated annual Turning XXXX, From time previous be million XXXX $XXX growth our premium to revenue revenue

impact redetermination growth our Excluding annual pause, of the X-year estimated XX%. the is rate compound

guidance have Marketplace from despite share per per This In $XX.XX. effect absorbing year of share $X.XX a least guidance adjustment our additional addition, prior COVID full per we increased XXXX represents initial true-up. XXXX an the adjusted our and per the year risk at earnings to share increase to share $X.XX net compared for $X.XX

to into of grow. which earnings have to prepare we head off we XXXX, baseline As solid a very

Turning update profitable an for long-term to on now sustaining our growth. strategy

executing We our the are strategy. many on dimensions well growth of

a of In highlights important In Medicaid continue The also one a but were the awarded Medicaid to provide serving is on as state's well total count. existing of was which projected be plan Medicaid retaining X San Diego selected million is measured were counties, selected in associated the contract at state. serve We Molina new growth, commences the entering many. County, model we growth. managed add but XXX,XXX. to at as managed a winning County, own not and serving retained a Angeles, the published where quarter's we Los statewide on And to both population health it Los as in California one January significant entire Once build continue current X new excess Molina existing is membership were Angeles organizations in our across are On and award were California, of We now X contract premium statewide selected the X members commercial additional County plans X.X were of based population XXXX. managed care projection footprint, revenue XXX,XXX. county. our contracts XXXX, members Mississippi, we've in also which each currently current in This premium In contract on our Sacramento revenue. membership selected Medicaid we're membership managed record roles only the RFP county-by-county success organizations we of in membership which will the front, total in X-plan awarded currently of a Medicaid sole Nebraska of county significant Iowa, care to ones. we expect as in new to track serving membership

both Counties in Empire, won known Inland successful as San being our also we in we counties, each in remain X county Bernardino the we California of every to selected awards and current expect With we bid. where which levels same. these awards were membership Riverside Finally, the on in

operationally ability confident expansion. We prepare our this in for to are very

of have an Los the long-term program, in existing deep We have knowledge a and Angeles. we [Medicare] presence

revenue add build-out all annual full share, $X expand contracts XX-month XX new margins. rate the and $X.X of for These premium portfolio at to per will of Medicaid In expected approximately our this these commenced billion run contracts states. earnings already have we once in significant least to We expansion. combination, are achieve

ability due this RFP been are contract win believe We the Looking contracts. and proposals. well-positioned for our demonstrated remain winning reputation, record our new evaluation operational With STAR+PLUS]. state RFP excellence, retain the opportunities we ability pending [Texas in innovation years, response forward, standing subsequent to is we track and over to new and additional of state and multiple to has cutting-edge submitted right coming It award confident clinical announcement. our to

Indiana, growth the have the our underway, revenue potential nearly long-term its our have In Mexico business other contract LTSS and footprint and for state creation to well We potential. new summary, record our former of success development statewide proposal validates to in track submitted of initiatives strategy the many New and Florida. including in value expanding our for returning state

turn the I a both put the want company's briefly in achievements Before our some Stated XXXX impact and to on on profound achievements the the few and of for for regarding particulars of those outlook quarter to further magnitude third level, point I a future next company years. the mean high a the have company. over at our what our wins will business new XXXX,

infrastructure of to to achieve XXXX, service to XXXX, new emerge incurring revenue. full of a this earnings operating as now prepare As costs. this our color and busy XXXX will growth. with from expect revenue run I we And we outlook. rate scaling margins. full our view, target run year-by-year revenue, an new front-end Against our will we rate In expect background achieve to matter revenue provide contract beginning finally, significant our we the year proven implementation new important XXXX, sequencing, be this will be high-level some in regarding XXXX for in sequencing

our staff capacity. already training ensure be additional to hiring to and our and teams will expand systems We expert extending ample

per onetime this that expect be in share. the We nonrecurring with robust expense growth will associated $X.XX XXXX

on at growth updated our at XXXX current earnings is are $XX.XX our share outlook share. company now at meaningful been before share. of core share the measure least have $X.XX When Given costs, least we would represents for implementation underlying earnings recent per This XX% outlook, wins least per guidance per today's core include $XX.XX by raising a nonrecurring $XX strong earnings produced onetime from XXXX per of share that performance, performance, these earnings our outlook, $XX.XX. our to at the XXXX least we per reported

outlook to for now Turning premium revenue XXXX. our

have While revenue line provide XXXX, too XXXX. financial to drivers the premium it that growth guidance we for to to specific sight far expect we early is of materialize many of in do

we in First, current to our footprint. geographic to organically grow continue expect

add to well Second, that by we in growth premium My words and potential $XX go, blocks recent additional Combined, full pharmacy over earnings attractive our impact a beyond M&A premium Iowa and And XXXX drivers and to and be XXXX. as Medicaid third, earnings rate Nebraska offset our as would revenue Choice carve-outs. forward and California, profile, this we redeterminations in With a acquisitions potential wins will embedded AgeWell procurement at already trajectory expect run revenue. A growth least attractive path an on RFP through of year near create provides to Wisconsin revenue view XXXX. billion expect which few revenue these picture. our at or building be these the new our operating to wins of announcements in partially

earnings the $XX the of growth we power months. few operational. our long-term in incremental share past of continued in the per earnings premium least be share begin share latent described, is summary, $X.X $X addition, any recent is profile, earnings capacity initiatives. embedded earnings this earnings previously then impact pleased now in and billion will anticipated $X our wins this strong objectives. financial Combined, power RFP this all and least RFP share our a is of XXXX, of and wins share. billion incremental near- business With all are from to with XXXX before earnings. exciting core the solid XXXX $X $X new As XXXX our to per to revenue embedded of of In revenue nearly $XX.XX XXXX nearly growing XXXX. developments in over our execution emerge achieve in at our adds in per created per total performance These when very at from per and are This has

thanks hallmark Of strong, course, model XX,XXX approaching in and insight team, operating additional associates, that, for accomplish management proprietary dedicated have results. the With I not concert who on financials. of Mark this the To all team without deepest will excellent appreciation. my turn produced over again these Mark? management the and call we our I now and extend to could with heartfelt entire once process, some our

Mark Keim

our Medicare, the lower quarter our color you, above which performance, was management. In of In range. utilization. our end our our guidance target Thank results. outlooks by modest higher COVID was on performance strong additional balance cost reported with our our and range, additional points squarely the driving effect Today, XX.X% MCR and everyone. quarter a was by long-term MCR. net third of line MCR in of driven MCR sheet, Joe, and reported target details our a our blocks Beginning was strong strong some long-term XXXX This the revenue third in within COVID our I building will is for discuss at with non-COVID long-term range, reported EPS and XXXX. XX.X%, driven updated target quarter XX and figure good morning, XXXX our was Medicaid, our Year-to-date, basis medical XX.X%. and reported some The

our by points per our approximately net net of track consistent We expectations Marketplace XXXX. profitability XX effect quarter, impacted net the of aggregate, range. reported quarters, third MCR quarter. COVID. In was was in COVID effect the on net return and on continuing of utilization basis squarely long-term share business, target in reported to year-to-date XXX During MCR line of by MCR with and the Though our remain a Despite to by COVID our increased XX.X%. utilization, period basis business by XX.X% Similar Marketplace, the with higher the quarter of in basis our reported our MCR was it varies previous pure to COVID-related $X.XX effect income in points. was decreased

outlook per share. at remains the Our full of effect $X.XX year unchanged net for COVID

Additional XX improvement G&A quarter year quarter the results drivers prior interest adjusted increases in higher from ratio, point include and third investment X.X% rates. basis income recent third our a strong of over a net

to our balance now Turning sheet.

approach to confident continue position. we be with was reserve remains of end payable the quarters, Days consistent at the quarter with reserve claims this and XX%, quarters. and prior Our prior consistent in

capital Our XX.X%. and XX-month our trailing of fall strong. basis, respectively. cash, end at of to company these X.Xx XX%, the Debt was parent ratios quarter remains ratio EBITDA, On debt-to-cap and debt the net X.Xx a net was foundation

capacity, and years average capital growth our and of strong inorganic weighted quarter and cost cash dated on cash debt $XXX remains X%. quarter. are end drive cash the the at at subsidiary and leverage of We of long X to was million bond maturities average $XXX debt the harvested fixed cash With million. free we hand dividends have our incremental Our company just in flow substantial on All low. strategies. organic Parent ample

the and reflect which approximately updated million year redeterminations, extension for we by expect Now addition million the a We closed $XXX now to related and X; increased $XX.X $XXX guidance by quarter guidance. approximately to October delay driven of public few components: full the impact in in X for XXXX our $XXX $XXX latest January emergency AgeWell, which our of the of resuming comments on million revenue third million premium billion, approximately the health to through XXXX. begin outperformance, the approximately

per We several also adjusted share at year increase guidance raised XXXX earnings $XX.XX. our to The by driven least $X.XX full is by items.

on higher in the recent fourth items fourth share offsetting wins. Third we public contract as activities these is recent quarter, revenue by quarter extension the rise outperformance of about $X.XX and per of additional per as share, $X.XX the driven emergency, which share income the net new investment enrollment $X.XX $X.XX expected by estimate about approximately margin and from share of the in rates. additional health quarter of interest at per approximately driven the open marketing G&A, per well Partially

of outlook $XX.X to known blocks, for on revenue our XXXX. premium for billion. building our outlook timing revenue now the expected is Based initial the approximately earnings XXXX Turning

implementation before onetime We EPS to XXXX at our updated growth $XX.XX are our to outlook. increasing earnings costs core XXXX or the guidance. The XX% least compared nonrecurring

Our drivers. earnings several growth outlook reflects

we in portion XXXX of earnings XXXX. embedded First, our [emerge] expect to a

carve-outs pharmacy in associated by in our Second, growth attractive footprint the potential will partially offset margin, XXXX. earnings incremental current and the yield

new translate should including rates Third, our renegotiated of enhance estate interest finally, new contract, our our expect outlook expected growth, on at Nebraska, of California, yields costs higher higher contract investment share per per least a PBM recently and implementation wins Iowa in we for XXXX. catalyst reduction, updated the combination into $X.XX of Recognizing operating XXXX correspondingly real income. our to net $XX.XX our earnings and onetime share nonrecurring

fourth for be our Medicare initiatives. informed well Marketplace season outlook the for our XXXX execution as evolving strategic will of the as the of by Our in performance and enrollment and XXXX quarter ongoing

we at $X embedded made of per XXXX nearly of with components. previously the following Joe recent per reported earnings embedded share As $X we costs XXXX per and that $X our the outlook, our to add earnings XXXX program IT of add from new share start now it the by nature $X.XX recognize our is power in least several wins, for months earnings implementation per $X enhancements mentioned, contract share, We decreased is we of contracts new our up onetime platforms, finally, of of ramp-up. staff and share,

blocks billion $XX.X at billion premium revenue following ultimately, on our path the $XX.X Now The of some from XXXX. building and for to billion for a XXXX. expected of $XX to in color premium additional outlook XXXX least revenue XXXX, provide projected approximately revenue

approximately in Iowa Medicaid composed conservative projection includes and California, premium XXXX. revenue of from from contract of revenue of Nebraska in we and emerge billion redeterminations $X.X in $X.X and is premium we of dates, premium a to expect wins. XXXX, estimate billion the revenue announced inception to expect billion million First, California recently be from $X.X Nebraska. while our the expect in X $XXX impact This a Based we Iowa contract portion on realized in

Second, underlying our organic and membership. we in consistent billion, rates with expect growth of footprint current $X.X growth in

in full $X.X year X of to XXXX. regulatory the acquisitions the $X.X Third, be these My billion, is impacts. Partially offsetting approximately premium and approximately AgeWell revenue expected billion drivers Choice the the redetermination, on for in emerge pharmacy January. of of XXXX. will we latest impact of most carve-outs, end And $XXX which for based million emerge which outlook impact of for XXXX and Wisconsin of which incremental to expect between Approximately XXXX growth the the will most are emerge evenly the in PAG

to of concludes our remarks. prepared initiatives questions. execution this we ready This upside strategic outlook. continued to creates are Operator, now course, take our Of revenue

Operator

Nephron Josh at comes Today's Raskin Instructions] from first [Operator Research. question

Josh Raskin

L.A. want there could development provider on I to win Question and for contracting implementation. and specifically say in I'm interested maybe the to that you preparations network on the speak County contract and on then think your own? infrastructure deal a you with guys the accelerate all readiness build-out. it can potential you And I'm to incumbent curious that if or help there's do

Joe Zubretsky

this is Josh, Joe.

answer All is determined. First, I that to first. would your second question be

wins, industry, in certainly to in possibility, here that discussion. I'll that and leave know, further is you but the past As contract a both

been we've know and preparation, Sacramento very years. We California the for On XX Diego San well. in

likely scale Our double to membership is up. We'll there.

big We Sacramento a a to We're County. that landscape of much confident for ready we're know the have things current in to we providers, we see mind, the prepare, we really X commercial don't know Bear you subcontractor in on day we so and XX with and San need to the L.A. plan. months X. are lift heavy Diego. that And the and be

time, the to on we handle will ready and the we be new fully have the And money we significant in We know-how. the LA X/X/XX membership have County. have

Josh Raskin

that charge just then, then And out? you're taking? expect to that a the is Perfect. costs born additional just that guys be you calling $X.XX through Or that that is P&L

Joe Zubretsky

I Well, but up, is a I has that to of cost it of it scaling. mean think, in to X/X managerially, be showing revenue we take a incurred have advance it's the IT charge. it's earnings. through

how cost to the ready to $X cost other Take of staff. $XX million that and billion you at going to advance can having in X of pretax trained variable easily revenue And for contract. running and share. is go $X.XX and the X a paid it's see The of look X/X of months cost

Operator

of Justin comes today from And Wolfe our Research. next Lake question

Justin Lake

organic you billion off, First of your X and of price through business the lines? along us growth can membership the walk components Maybe maybe just growth. $X.X

Joe Zubretsky

back peel it to able turn to he'll I'll you. over Mark, and be Justin, for that

Mark Keim

from of Sure. years. a growth, was looking billion build over When X-year organic $X.X number we that's our that think X about the

and can X% right on or book more rate. of which We're bit about environment numbers. think certainly annual typically of membership half little in basis. and year, rate current about work X% we math Justin, organic growth a do a organic In a an our on that's trend. matches half Generally, with growth to But that's those less. you lower now,

rate of for this, is to got thing The million book have that our think that on this some have We've pass-through of want as other adjust revenue about stack you'd of pass-throughs about to in top $XXX the you organic right you year. that we now. growth

the it grow to a So growth otherwise right? to times might only think of comparison many a thing to than our on on look year-over-year other not course, going mentioned that's Marketplace, Marketplace make about is is, recurring that's as because less strategy item, organic Joe Then ambitiously. not

or get Marketplace think X.X not very I a you'll things would about. close rate number those add growth you the I rate growth put together, if to So year-over-year. on necessarily But meaningful I talked any

Justin Lake

win to anything I a the Great. go the And timing in hear folks who then know judge Is are from And play on we trying then could to that? didn't California get that on from just us with on court. lastly, a you might share what award out? there's stay and that there might how

Joe Zubretsky

won't were No, believe specifically that with well on the RFPs states is effectively by the proposals We and merits. process executed that protest this the itself, and comment awards. were on all their designed X Justin, thoughtfully Joe. judged various our but We

for states protected the in heads day pretty handle we're processes preparing are answer various and come And familiar X well-resourced right course down, due culmination to very confident very actively these protest of will to We're these that in be implementation. an We not and are protest and processes engaged and soon. now, it. with many

Operator

comes Nathan And Rich, our next today question Goldman Sachs. from

Nathan Rich

we a X% targeting up that? wins. beyond versus ask years the the like you're new that maybe the about and in about expect could follow-up on about Can I what on in XXXX a talk margin It that XXXX you margins beyond. If should Could you new ramp talk on business. contract how contract looks

Joe Zubretsky

this Nathan, is Joe. First,

our pretax is cost correct. after generally I'll either to not X percentage X or acquisitions the Mark, thing I we fixed first it math tax. contract Your wins. a will sort impute $X -- implies margin, leverage And before points The new point do say on is percentage of kicking

it Obviously, loaded business of $X with all So expect book fixed by the [true-up] fixed costs fully significant amount with span short Medicaid we revenue, either bottom leverage drop the these incremental offset that's growing of the burdened business. the We'll kind or run pressures cost of anything on a hold of in fully time, but and when to [MLR]. back. to realize we a our billion more line to get of we a off that the it, wins? margin, XX% perhaps margins potentially will installations in it the Mark, on report new other

Mark Keim

No, that's exactly right, Joe. The X% is fully loaded.

question As we times conservative assumes cost bps with we've see G&A a the numerous this said But fixed to a bit leverage, go back conservative view maybe would in -- on give outlook few run might and you of ideally ratio. little is a that XX have part run your conservative rate. a rate. XX ramp view The now into is rate. But been X% of nevertheless,

XX, that the ramp does interesting. On how up? It's

and markets first rate. in Some the 'XXs normal used quarters. have quite people at for to to the utilization. come product run more on couple they in markets, hot and Medicaid Other if normal They'll folks in come of can in Medicaid, are the are where been new the

the say So we hotter aspired a think bit Medicaid much. first in that longer-term too to they year? to. little Maybe. to our wouldn't hotter Remember, come But a is I in [MLRs] XX% will XX% that be than outlook. Would the than little be conservative, I'd

there. run rate our And a so to it to conservatively, we get say takes year

Nathan Rich

could follow-up. a ask Great. I And if just

quarter, for as business. on called in and changed maybe utilization, Have You to Medicare there think, pressure COVID from your into we fourth COVID your on the front the COVID assumptions? particularly some about changes quarter I as flu your at and any non-COVID think well the as continued all then out 'XX, both expectations

Joe Zubretsky

for outlook goes our which a pretty is call have the share. contracts what been the utilization $X.XX same. think Medicaid nearly COVID remains the going suppression. been generally, into the direct entirely us care, what's of cost cost our has modest cost COVID-related in been to outperformance COVID -- net risk-sharing I quarter-to-quarter No, It's happening have offset amount corridor. COVID-related we the And therefore, that of by been And

'XX. a year, the on first for hasn't million, next outlook now went back is season our normal into Yes, to about to flu normal in the fully baked XXXX flu to and we million we expect plus increased expecting it pandemic. season flu nearly It plus are at that It's X a us. our forecast. changed. season So million really $XX normal half $XX to about size into after $XX go into for

Operator

And our of comes Fargo. next from today Baxter Wells question Stephen

Stephen Baxter

on wins. the Congrats Medicaid

hoping could in you XXXX, this Medicaid of provisions of prepared for then of think I update for side. for you Medicaid the environment guys to the premium next rate that separately, remarks, both expect outlook mentioned hoping thinking the I could And years. bit COVID a for were in preexisting on era lower us I a little you're the the guidance potentially couple was see you amount of any inside give sense being how about and in was you your us provisions an give on a also return of total states? the rates

Joe Zubretsky

is be Stephen, for and changes establishing carve-out baseline, adjusting for in acuity process well stable environment, to The traditional cost of used. has of and off continued carve-in on that medical rational. population tried supported the think business process traditional summary comment that's the the and baseline, credible a the trend it's rate decades, this and that I and benefits the and been true a

future generally There's X into pandemic we capture we'll [software] in indicated months that And those by have the the subsided. not. corridors to or remaining. utilization it risk-sharing play ago, persist during the many terms introduced were year As of whether

that and is rate Mark. is say, it cost the to base I'll second stable, a rate very line trouble of overall establishing but environment very the question, So your would I stable. process And kick had trend baseline. I traditional hearing a off environment

I think he has it.

Mark Keim

Yes.

X and I'll the $XXX billion XXXX top about full I would revenue we And X split off the about will the $XXX Choice, remarks, My that's $X.X on revenue talked which $X.X work of Medicaid acquisitions pharmacy our states. that million full that will year -- in redetermination new just for of affect build full picture. expect. be of components finally, add billion build, million. years, AgeWell, have X We headwinds Medicaid $X.X Then coming $XXX on between we prepared across million, the we across years million. the mentioned Just this will see be revenue about mentioned evenly, carve-outs The is the for the Other pretty Medicaid $X.X X in which revenue the X years. from

Medicaid, the I the for organic put give you the blocks. assumption that growth You Medicaid components best think would and on your building of

Operator

And A.J. Rice Suisse. comes question today our of next Credit from

A.J. Rice

you're saying next you're know what updated comment assuming on that your there particularly growth is a longer-term will thoughts? not Any Any you where the of well? and lot as margins objective on Marketplace, think the for there. I go year

Joe Zubretsky

A.J. Sure,

profitable outlook which digits mid-single year basis, experienced Our business is pretax adjustment we basis. XX%. expect business for this in on risk quarter. pure prior in margins the of This the true-up the of We a the be on even around a year, second to Marketplace we the period effects break eliminating at

this X the margins. we to operate and we And last push can can attracted is year. we So that The I business the mention if attracting things. mid-single-digit SEP far than between think we membership are will we pretax membership XX%, XX% lower SEP year

membership, a and as with That month last quarter. said it we to in XX,XXX SEP We usually acuity. higher last XX,XXX a are year, attracting comes barely it's year, XX,XXX XX,XXX,

of of at we as check. into that's now XX And our looked XX reminder, points where and position confident product secondly, markets the no competitive to stands So will looking put pretty decrease or reason against many meaningfully our We've our we're the expect result competitive larger positioning increase a at that of in our market. membership our and a rate in we've have our that competitive maintained and competitors, to positioning. as

A.J. Rice

Any versus 'XX don't on lost at Okay. about 'XX. your much have your about a much thoughts 'XX PAG. spread you offering. delay updated with you 'XX in did looking any And a know over being the and recapture remarks, I reverification about then where And Marketplace impact any you'll updated little how think Do -- talked And you've X-month in it have talked today. the ultimately think I bit be don't guys land. thoughts we talked you and prepared lives? Obviously, then about think would you recapture of I

Joe Zubretsky

them On a the will subsidized redetermination second lose becoming people many holding going to hard a on on as highly we of not that be does Marketplace. believe how We're for our is forecast as likely who include revenue eligible much point, a It's to recapture forecast will. very We upside. of Marketplace. result ineligible

in protocols Medicaid to warm to over operational have transfer our Marketplace ineligible We business. members place

our to turn upside I'll revenue give the forecast. Mark remains it a X-year period. So how it to emerges over to you

Mark Keim

Yes.

recent reminder, the a most -- was October to extension on as Just mid-October mid-January.

be a We to less, and later more start they be to pandemic. since to in remains that get can across or expect states do would month they done the redetermine straight-line there states XX not across year, the in currently or let's XXX,XXX in that We're X year. assume carrying February start do it of the CMS earliest then that But has the expect roughly them members to months. seen. basis, a required whether

A.J., to the will lost retained on I across is $X.XX the about the these. assumption, end redetermination. model book have XX% a XX% we of them that of only Our of and PMPM year, at

the do billion. be loss when remember, revenue math, total the X So $X.X would I across spread years. that's But

year, and this While the was membership this half the comes year year. revenue down half next

year, months, X.X% call months that. member your member so the to all And at course, this the X.X% of support look models. into that back will you it year, revenue If next

Operator

next our Bank Fischbeck America. comes of Kevin today And from of question

Kevin Fischbeck

earnings make in understood fully. $X wanted sure to Great. power the I just I

know with guys that? and that earnings I $X just I make said about if right But then taking $X that from guess, makes from out should with applying to the out power. I the think I want just Is dollar the deal bucket? $XX.XX, COVID base that is this guess we're sure to $X I you have you this the first, believe existing that the started -- we $X.XX, at to have the So -- you said business, new $X that we $X to And you bucket on of added from? where think you're about I to don't the then you the the took year that sense. back How

Joe Zubretsky

charge to or The here, $X.XX -- depending but per it pro-forming Mark. complexity share it's little complex I'll of $X.XX Kevin, actually the a XXXX. creates $X bit accounting you're either turn whether on or $XX.XX the

$X $XX.XX next better just when earnings the year. $X.XX at to of Mark? under for earnings reported have we're So been per compared share

Mark Keim

Yes.

you we embedded last $X about earnings. walk me In call, of our let that. through talked So

an new the rate increasing we're mentioned, recognize of $X additional Joe X the As to by states. that run

redeterminations, we're $X about So realize our a $X and embedded for go carrying $X.XX off earnings, acquisitions -- redetermination that's acquisitions of COVID I'm our of way. a to $X.XX about the In the in me, next next that dollar going into a effect finally, I'm into excuse guidance embedded expecting -- come I'm net the down The other are we're of then that It's carrying. outlook -- COVID. $X.XX year. currently earnings. we're effect of on our $X put expecting to negative on our outlook to And year. the combination going the $X of that net will currently. to for at $X go comes my

that costs. recognizing we're add So dollar. that's onetime you the finally, of $X.XX Then the up,

$X.XX that And our clear, the a $X.XX. So the for outlook. what that gets $X.XX you of you to increased we're off to to cost is it $X.XX for into be earnings to gets dollar million adjusted for that outlook, $X implementation very putting $XX.XX

Joe Zubretsky

just I'll just don't precision point say embedded to in what it, I to thing false a want caught on I here. call would make earnings other get sure put we The to about

$XX.XX had historic earnings and the give concept, $X, share view headed. top of is $X incredible our we've earnings is XXXX and in and growth future earnings or of the per it's given due the Our or embedded of should leading base of pandemic indicator $XX.XX investor the on or of whether business, power then the nature wins, the it's $X.XX to a of where sitting contract you a business good to pretty give new acquisitions

embedded per on when is $XX to to per record of we have this share intention share yet that now further and actual a -- $XX $XX, of a I every history harvested, to earnings and we due theoretical it. harvesting pulling be earnings. which look is full to have going and unless track timing, really not through. say of from is theory. earnings track embedded This you you is Embedded And only Now earnings at our record would

Mark Keim

year Joe, on just of we went I'd A current that. put a X year $X had point embedded ago, that into and performance. more earnings than of

into So real earnings. it's converting quickly

Kevin Fischbeck

That's a really we're just guess dynamic, And as helpful. far redetermination dynamic. about still the revenue as talking I

feel you shared there the be implications redeterminations? dynamic? still shouldn't from a there You data risk some giving a Is there that kind past. And guys pretty in that is to margin know that from pool out any point implication anything be confidence comfortable of I margin would you won't you

Joe Zubretsky

disenrollment increased more that's chronic, is of modestly do products. do only see favorable duration continue population Nonutilizing really you might we X/X still We they're affect It's as the revenue. ABD [MLRs]. off to members much as longer -- and our high. up because pretty across have because And see the doesn't the rate duration we look think data. at not This but members the are

to in minimal. but have to see the we population, do likely we if pressure, we're Mark? it so any And expect be expansion it

Mark Keim

might they're because actually On quarter, have longer not is disenrollment still in-depth. quite I still. the That's Joe no as mentioned, third with meaningful It's that you us as We of up one leaves. the studied are rates. like much for think this rate not meaningful disenrollment than course, But year, exactly X as they're right. it's quite and members up. across second

So look with no up is what not members much. a the that at but it's claims, little we

Some kind basis. the are, X ABD no then cohort, through we That's the a When hasn't weighted as population I'm That's up members average that group seeing much. looked a but It's the mentioned, that's really some at in see folks. here. folks the also to to very claims MLR on of the really of meaningful changed. but in a like expect stable Joe that what XX model XX% we range. have impacts of impact not revenues not expansion our impact,

Kevin Fischbeck

year, mean talking the mean about of an basis entire your about on I you like take points down take had when wouldn't not MLR the business? had that points? -- points, utilizers, points like on like say and the you guess, follow Medicaid basis do your XX the in up and -- we by Because increase up utilizers earnings much increase Can basis have reserve X the following basis Are impact on utilizers, that? utilizers, your it Or we more we just and take just delta you or say you are your you expansion? across when a then talking doesn't XX what like XXX if Like book that there's XX% over big MLR people I XX about XX%? by of are point overall an X MLR to

Mark Keim

changing is go other they're utilizers XX%, there impact. obviously, between, the if more the point, If big fairly if in it's again, the is average impact anything much. now, what the thing gets book, greatly to of that's But slight. to so to? going X And mostly not impact are they point, expansion, a they our it's to In diluted. an XX% which your But are if weighted to expansion,

Joe Zubretsky

And members are utilizers. assumption X that being that, going -- that is MLR to ones have there's made no always We low assumption just data and really no is to statistically on that those leave the going put the and relevant underlying percentage course, evidence. is have change, are MLR. that's suggests there We the always those the even underlying of is low did the if utilizers, that pressure

Operator

question next Valiquette Steven at from And today Barclays. our comes

Steven Valiquette

Great.

under is regarding how the in the contract a every [indiscernible]. outcome mean, just bit So a L.A. I state they successful different that award. County of handle appeal little Medicaid

would be any Molina just XXX% I plan an dilute and Just the in as other. could added on above incumbent what. is as the you So as the award new guess question scenario, one guess the my around over and completely the on to appeal by your is otherwise? I just no And County well. if high-level thoughts in matter awards stay just a L.A. get sort by other for sponsor that awards analysis, existing reversed confirm state also the the there's Or a or the other sponsor to scenario new additional membership that to does would gain of too, be scenario successful curious place just that really color under back And that. incumbent? the in plan the way

Joe Zubretsky

that is part of an answer Nebraska there was the point Tuesday. data that last because your question was first one And on information. public just That's the emerged important in I'll protest denied Tuesday.

I anything processes, whether So -- want don't that's With I'm respect process or that I private. don't And that to through appeal know. Tuesday. But speculate. was administrative was announcing question, other on goes to not your that an denied protest

actually of be what the the state process. to department would me would inappropriate speculate administration protest I California, think during the it for do and the Medicaid

for in its well-structured questions excellence that has preparing planning have a fully day award sure was down and process. access and hallmark. X evaluated for merits, providers It that was staff scenarios ranges I their our have outcomes. answered, operational is to ramped been think one of up, our we is on are The are design implementation heads of make that thoughtfully members there our services, we're to

think even I and might contemplate for So me what be decide. improper it perhaps state speculative to would the

we're and X/X/XX going in a so. now, we to I of options. in ready there's But that on business County L.A. do be think range think to getting right

Steven Valiquette

right. Okay. All

like still sounds it it's So TBD.

helpful. That's Okay.

Operator

next comes from today Scott at Stephens. question Fidel our And

Scott Fidel

us. maybe for hoping you diagnostic could was I do quick a just

I we priority when the has that seem fixing know sort on really hit sort in just more and of of board. the quite stride recently. just had success look accelerating just really you Joe, Just that a since its RFP recent really and was substantial. at strategic really been And came key RFPs But to capability you the

that. you of pick those if just transferable that ahead these in resonated awards, things that particular in would And think hear had somebody's think or then in are X still So and Texas. to big recent states are helpful you to you how to RFPs be the about do X Florida with

Joe Zubretsky

Yes.

state buttons unit, apparatus. Whether developing and high-quality player, a are behavioral that can are seem be to what to go really our capability, it with pure-play winning. our populations, referenceability. of of that and it's write understanding high-acuity actually we it's will the development Medicaid you, referenceable, their it's their that community to particular program. I the capabilities, an with determinants to an their conditions, perform -- proposal use intense as national government well we've and actually proven proposals it's involvement of getting there's score able and with would providers, are our and say our The is value-based RFP the a opioid it one it's business business mean, and concerns our really social to types to entirely of what and the I developers. playing -- managing engine, being disorder, advance which great population But tell Medicaid particular And that and affairs innovation. health, to write stand it other is in a leaders really state respect secondly, thing the skills behind our understand to key are network abuse of engine, hot mean [indiscernible] anticipation proposal It's and substance with well. years into be the really our whether of X thing ability able relationships writers, playbook. another well an a writing and playbook contract, new Our in community to capabilities I I easy referenceability And to stand behind Medicaid and

Scott Fidel

a the relatively membership ask now sort lot to really which you're the And the and obviously, just back back market, of could to going the this I these of And year to pretty aggressive really going be trying with XXXX of going just separate put some unusual follow-up a on players I pool. keep is into exposure limited. But is that exiting membership to like know Bright manage if exchanges. one

So how increase premium that? approaching that probably that are XX% in landscape you you end and versus But did membership premiums potentially. a are right talked data of yesterday market. the your lot with can up about conservative we adding I the mean you pretty see still

of about managing business you're incremental exposure? sort enrollment sort that the interested then to low sort of relatively keep So of in and how still trying just thinking

Joe Zubretsky

there. a CMS companies of suggested thought of And Texas. is, the that not market least to it's We in see the sort what approach respect that or exiting. we Scott. it margin we about, "assigned" and you've are has business. product, overlap this Sure, note of Molina read various Where members that to overlap our in thousands. that we've not There's footprint exits for to they a and share know to still don't the perfectly at priced market thousands, to that measured our lot grow we there move the not tens With the but mapped characterize is in did

we meaningful yet. have right, on mid-single-digit meaningful market not impact all, data purposely to And would next in have the growth priced you're I work year, a seen yes, going the that pretax margins, exits But exits produce rate a haven't say fall the the not revenue should We our absolutely to is market made. should impact. whatever but be all

Operator

from today at question Sternick comes next our JPMorgan. Calvin And

Calvin Sternick

related looking really California, of lift products hold in that in sort you county? maybe know to complementary Just and that overlapping you if you of the the having on that But business? to to Marketplace not Sort get about and natural grow Marketplace. think talked Medicaid you'd Medicaid a on I positioning it. do

Joe Zubretsky

Calvin. Yes,

large absolutely participants. we we yes, things X yes, Marketplace whether day would Medicaid followed say in L.A., because upside products the and But we one now, to we've consider in particular, up of job yet would diversified LA the is followed a the operating a we're our But in got small we included come with scale one. have haven't would and growth that robust D-SNP build right the place, across those has have membership, California job our members those I pattern our portfolio. Medicare be X operations and it very the L.A. and because of -- fully well would handle we Medicaid in our Medicaid, high would a the readiness flag in the to estimate. talked One once product evaluate case, whether to about our our products current evaluate concentration products. plant quickly comfortable, -- product ancillary have and that Marketplace country, we in we we wouldn't we product And California, scaled of in in presence I not while but presence currently in same County,

Calvin Sternick

to and court about And there is to XXXX, maybe next you timing? being that is that opportunity? protest, what thinking you it as on year. go have your is something Medicare of that given the middle you that are Because could think more a XXXX just bids submit Or the by

Joe Zubretsky

later in until serviced X but be the pretty be that would and And we Well, know got contract haven't -- we population early we our to that X Medicaid and would right we're let's this implementing say yet, on. we've months operating I that assume quick that happens. That's would not I what on planning now, ancillary we planning X/X/XX. filing Medicaid products we're will valued be excellently. then pretty be well think

So that and 'XX more of filing 'XX. 'XX, a you've I 'XX be would say, my top to would probably just now off not head the like asked, it for

Operator

Windley And question comes at Dave next our Jefferies. today from

Dave Windley

your organic capital opportunities, continued of environment Just valuation about your then updated a on cost just lot plate? Joe, environment. also get higher in I are to wanted on expectations, of what scaling terms thoughts of M&A M&A? your thoughts

Joe Zubretsky

the last continuing hear couldn't do of I end your to what. question, David, sorry, I'm

Dave Windley

are thoughts you. acquisition continuing merger your and activity for What about

Joe Zubretsky

M&A. more pipeline of been new portfolio, didn't talk will revenue of of operational you, acquisitions during type purchased. rather Thank out XX% these bolt-on wins, properties very robust hallmark. lot you. that same And to But includes capital. us them because of We're revenue, a target playbook dollar and acquisitions We've cost up on the get spend we some the about about continues We've contract tuck-in time be their promised Well, allocated every capital. about with regulatory we've quickly. this our leaders to of our we of and which underperforming turn earnings only of tell gotten billion we with $XX I to the we only have and margins accretion the these report all to

new from So We capital debt constraints continue capacity, we existing rate, as capacity, We close wins capacity. or and XX% way Mark about pivot to ample grow either We're talked acquisition growth this by by XX% to XX% produced at flow no in can to prepared in growth had promised have the debt XX% Investor ample our to Day. trajectory. his We've growth continue fund and to our or by at We to great flows. organic in contract this cash remarks, XX%. since to continue XXXX. on cash growth

Mark Keim

with given pipeline a out relationship is we're Dave, point, We're any Just point to building. At on there. discussions robust. in put that, the numerous targets

looking encouraged the I'm position. very a out that. by feel So capital with our capital perspective, comfortable months, very I On next XX over

the some all as organic ample the that need we new to commitment flow see outside. I procurement potential capital organically, anything between capital self-fund see in of going I pipeline capital without I wins as and even well of Just the for M&A. for these can cash most the support

else never see everything there. would to all is and the at M&A growth, self-fund months, still I see Now can looking say with that raise go over I I pipeline But XX next we outside wouldn't to capital. our what more we're

we So that pretty about good feel outlook.

Operator

Our Hua Michael Morgan next Ha comes today question of Stanley. from

Michael Hua Ha

your earnings. guidance appreciate the redetermined up, recapturing looks net and I more about when your drive details. even of exchange investment like potentially it recession fix to your family maybe if upside question, the your lot Clearly, could lives guidance, that rising But picked to think new in a in new income potential I and Appreciate not rates. update upside glitch better tailwinds exchange Medicaid there's new embedded all 'XX, guide, from benefit book book, that's benefit

radar? be So redetermination on our the any drive tailwinds included are Am these your drive could upside? buckets carve-outs I pharmacy headwinds, other that new items any large that in are of Florida guide? there any on And rate should actually headwind cut, missing from in

Joe Zubretsky

to take. core, do reported guidance to you're when earnings, take to or this Mark catalysts earnings the and share think it during mentioned a you give per we components XXXX that harvesting year $XX.XX great interest it have I I'll growth, But bridge Mark prepared organic the from for then, harvesting, tailwind the for the a to year tail rates short-dated as hand $XX.XX of trying next said, the our from significant remarks, are his operational and nature expect a component course, which given track of embedded record of we we of of portfolio.

the don't you why Mark, numbers? take through So

Mark Keim

Great.

very in it's we mentioned, little to from our talked bit remarks, prepared of M&A I've It's starting earnings. be growth, that, then certainly, of realized. It's on income where effect portion, I $X from is and our investment billion I upside cash portion and about the the PBM and in the just rates mentioned, going. bit of short-term the membership. yet manage that's in XXXX. a Investment on responsive about little We estate those here which $X rates. a on Joe longer-term is COVID. are net that, cash But fourth the at renegotiation the that. on comes to $XX.XX, an rationalization, recurring a knows income, some expect portfolio real mentioned headwind to operational As address investments. And redetermination split in quarter. catalysts, as off the Who the the growth upside today embedded between my which point rates net definitely Organic

our Michael, the are potentially. So things working $X.XX some on upside to All bunch will of that open redetermination. upside. that's We're core that as work, things number of don't investment the the upside. maybe cross-sell enrollment opportunity assume come still I -- $XX.XX. bridge think Marketplace, any more on the net is Medicaid, off you on the We in the how mentioned that Joe a gets hit outlook. importantly, nice the Marketplace, all XXXX through back income those you there. folks What to you certainly addressed into you

We continue as about Joe rates as rate we an of to as most definitively. tied aren't something thinking through trend, work into so our go, known requirement. the go year, that work day. But we're rates those environment need we that's that's be mentioned, actuarial to every We to through this new

on rates in potential you thing That's I it. the the evolving trends where think of that's in move. see our and mentioned But let's there, one a So you of components overall, core items got still top number outlook.

Michael Hua Ha

Just organic a may. if I on growth, follow-up quick

Just specifically on Advantage. Medicare

at strong accounting offering to raising in But your moving premium improved I [plant], think overall, looks you plan, your growth But like your it and on has entirely yield doubling it mid-single-digit mentioned both roughly last looks footprint pretty out-of-pocket. the footprint on nondual I'm [indiscernible], targeting low growth. you're X% would to landscape, based membership. quarter, single-digit imply revenue maximum first like If that significantly. pretty not X mistaken,

steps expansion. geographic You've taken big and

membership So last quarter. have since just year improved next been your growth thoughts curious, on

Joe Zubretsky

misleading Medicaid probably counties XX% of because or counting we're number answer I think counties. actually can from the a XX% give the a of at perspective, only about footprint

XX% cover However, population. that were the of in counties

So in which well and Medicaid we're pretty the you're counties, Medicaid. where is saturated bring penetrated follow D-SNP into concentrated our strategy, in

government. income still did is We're of simply demonstrations, operate strategy. roll resources wherewithal who And that auto rates we then, D-SNP and the low and assignment we to not traditional people the Medicare with Medicare federal a above Medicare. assignment the trying seniors. is to a low-income Advantage, targeting are we low-income affluent in compete levels, of but but grow it We're strategy is enough It's levels call a are you Advantage course, what to launch big just after going product. with the guys very have have need which our at auto D-SNP, basically algorithms teens offering, Our

expect niche at said So teens it's we our Day, low to low-income grow, offering, as a we rates. Investor still and at

Mark Keim

And point just 'XX a expansion on put to X was year. for area The largely things the that. service

talking this, expansion. rates you D-SNP For is when growth service 'XX, on not at area segment, growth seeing and Advantage the Joe Medicare to And you we're about products. a know Medicare the that is meaningful related the look our know I

growth product, of course, half different business. of other segment more block has a that The -- half characteristic of the close than is a which, MMP being

important So but dynamic, think know growth the about components X that I separately. it's to of you know

Operator

our gentlemen, Joseph Capital final today with France Luke comes from question Markets. Ladies and

Joseph France

both Scott's response, you in to about first on of commercial Los your want helpful. tell relationship subcontractor just the follow question very with were the up I in Angeles? us scope which Would plan

Joe Zubretsky

million I've very latest at XX,XXX, dollars I is business. But Sure. well. in percentage a of It's only the under of members count we Angeles. And it's subcontractor a that in for small XXX,XXX that return plan hundred members. relationship. the It's environment probably -- very XX,XXX Los around there's the we're of one we service are a It's premium meaning in that couple know commercial a book But we believe premium, and seen members. in

us gives with there have the familiarity we big headcount with footprint. it respect a territory. to installation So Obviously,

well. know while familiarity going it's the that's us scale that But small. up, very very, So help we relationship it very us the area financially to gives

Joseph France

the no had bearing really it So on itself. RFP

Joe Zubretsky

or I not, I whether that's comment that but it couldn't did would suspect correct.

Operator

for And and We ladies presentation. and today's thank question-and-answer call. concludes today's gentlemen, attending today's this session you conference all

disconnect lines, day. have now and may your wonderful You a

Molina Healthcare (MOH) 27 Oct 222022 Q3 Earnings call transcript