MGLN - Earnings call transcript Q3 2020

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Operator

Good morning, and welcome to the Magellan Health Third Quarter 2020 Earnings Call. We apologize for the technical difficulties that led to the rescheduling of this call this morning and appreciate your patience in this matter.

As a reminder, this call is being recorded.

We will be conducting a question-and-answer session after management's prepared remarks. It is my pleasure to now introduce you to your host, Darren Lehrich, Chief Investor Relations Officer for Magellan.

Darren Lehrich

you Magellan thank XXXX third and call. earnings morning, for Health's joining quarter Good are Ken Magellan's Dave today me With CEO, Bourdon. Fasola; CFO, and this The earnings our announcing morning. distributed press third release was quarter XX, be A of after through this will XXXX. replay available call the shortly conclusion November The found the can earnings be numbers replay release. dial-in in

to October the been of made are call during presentation, who initial XX, and remind not we the today, have XXXX, those subsequent For rebroadcast you call. listen updated this as to this that remarks earnings of the

expectations, During we and to predict well differ advise our subject filings, subsequent to in of our including call, can actual materially we uncertainties today. these review are will risk February current on this as to many Form as filed including make difficult risks XX-Q are statements our our cautioned from and cause XX, factors forward-looking generally and related the to to statements XXXX, Listeners uncertainties, in are statements, Form discussed risk be to beyond filed and listeners XXXX our XX-Q outlook. which These results Form that control. XX-K

please note when our the uses the GAAP for website, results. non-GAAP measures certain that non-GAAP of financial describing release, to this financial financial to tables corresponding available Please measures refer morning's with our on Magellan financial included measures. press addition, is In which a reconciliation

call, call Care's from will I Magellan Magellan exclude result Finally, our to Molina Care now operations continuing as on All Ken of to to Fasola. a otherwise, divestiture be CEO, Magellan Complete turn our will results discontinued planned Healthcare. financial Health's Ken? noted to reminder, reflect results the operations. as Complete this the over Health's in presented statements a Magellan unless references

Ken Fasola

new to care undergoing fast September good Magellan is morning, start. is to off an accomplished who Financial Dave to opportunity transformational welcome with and take a significant Bourdon, and Thank the businesses team health growth. like I'd in leading this finance Chief executive everyone. our Officer, Darren, you, joined Dave experience

ensure high transition endeavors. a team, Magellan level, that continue behalf has appreciate XX-plus very Magellan. in support Texas. have based his years management of Jon including U.S. in year-end. to continue of products Magellan to executive financial performance his consistent finance led quarter I I a in Jon internal the dental. he'll We Jon the health wish we're to at to and providing from through behavioral, over States the pharmacy supporting Dave future and our support been offering in a Dave's At is third services, against offices Dave, of join XX well our the plan. the During his leadership and was demonstrates On we this Frisco, Rubin we're to to our he United individual want Guard, our served diverse proud at veteran also and a care, businesses Dave corporate smooth and in for XXXX and execute transition Cigna, employer our range grateful and team. in thank entire with retirement function Coast leadership years expectations

income and reflect our adjusted net share special guidance segment guidance adjusted for and we're range charges. our while profit, per XXXX year accounting also reaffirming ranges for to full earnings As such, per revenue, income adjusting earnings net share GAAP

and Pharmacy we work both segments. our quarter, the remained to business implementation important underway the During XXXX Healthcare focused new support within on

pandemic our and our part small the clients the no vibrant in significantly. delivering share our efforts associates engagement Magellan of is risen during on our This the based employee success on testament culture. while challenges, the distinctive enterprise commitments. these of scores needs of that who across and to have I'm our to the have members Our responded very to in pleased is face a

initiatives several cost focused on advancing initiatives the demonstrate made progress of significant specialty points transform on to we're a growth. also growth our reimagined share and the proof I'll remain we structure, these third that set pharmacy portfolio driving and innovate quarter, in executing future health During our stronger and our accelerate behavioral, through solution solutions.

health As key while payer developing services and remaining mental disruptive, driving integrated that insights. on partner new We're we health company, build is independent in Magellan integrated costs of years physical areas higher-quality will through experience and a leading solutions lowering to payers committed a manage offer high-cost care services for insight and care to comprehensive care. total enable complex and care members. to

the comprised member total an our exceptionally for facing on behavioral billion of incorporate white $XXX more million vision accounted of costs for and complex a of our vision models for behavioral and behavioral health of XX% to XX proactive conditions supporting play. insured need and yet analysis but than patients less needs. our evidence care examining focus intensified solutions challenges for continues patients high-cost in study the and million a just-released separately of X.X% and Milliman a leverage be patients years advanced which well create total of that people discussed high-cost conditions characteristics supported of not medical indicating body believe whole population better cost all evaluated paper solve more comorbid enhance total by in further health to developed high-cost to we COVID-XX addressable to have year heightened The model also the focus awareness specific diverse physical the more of behavioral build. what health person. $XX only for there's we The while specific drawing health appropriately customers demonstrate predating role evidence-based coordinating also By distinctive to experience In mental that sector pandemic. persons well-coordinated care of health needs, impact August, across plans, moderate the our these care This can also to outcomes. physical health published a XX savings. The on care found patients conditions. collaborative Milliman previously significant excess spending on only lives with customers. this commercially our and the care already with subgroup's that better tools for health health the work potential half a behavioral research. public physical on strengthens of offers model, data our the COVID-XX total Milliman behavioral behavioral clinical This generated behavioral Our to support Milliman nationally. analysis cost XX is individuals per serve. the the of We individuals that that subgroup the of the experience effective result analytics address health health impact this emphasized integrated care cost, health approach do total with this market interventions We're meaningful of health care of white treatment, paper facilitating can We've achieving than of has The but employers experience a digital new the and lives pandemic with a

sector connections Kaden's care for the strengthen capital with Magellan care suite, our model behavioral innovations virtual We market the use deploy provider Magellan's collaborative substance vMAT consultations help impressive health potential for team plan providers will behavioral deploy we'll technology-enabled primary new with use telemedicine and self-directed will and psychiatric opportunity virtual to across Virginia a interventions that foster combine management Kaden's will collaboration relationship cognitive future into and our to care Deploying support deployment. care the such differentiate case The enhance the use to behavioral be us customers. develop believe called also data collaborations increase of to our existing is identify we Connect primary a excited Livongo point persons Kaden innovation ensure is which our scale health support care health capabilities Connect, relationship partnership assisted offerings care our in we a health virtual our health and expertise. it's Connect Connect and physicians believe about allows provides overall collaborative the supporting out commitment as with care for innovative announced digital care capabilities platform program. health investment adaptation we first engagement, Magellan as solutions. to capabilities strategic our with a added mental be then comprehensive coordinate public behavioral into model holistic members implementing product establishing analytics to rapidly quickly and modern a to Magellan capabilities with strategic Magellan digital Connect. cases we're vMAT We're proof behavioral reimagined the demonstrates Livongo to us partnerships medication platform for with a platform. digital vision well-being elsewhere. with Kaden our providers to future into and better announced coordinated point care existing needs our us on third will network digital or creates. care. This health accessible Magellan other with behavioral continuum. disorder. that strategic solution that allowing these care. and by within will with is Molina Magellan solution, self-management clinical We new in solution to important wraparound This across We Livongo's will plan Virginia. this and behavioral with through added to integrate and explore those therapy behavioral is initiative. agreement product believe an care will Our we proprietary Livongo's these and members. health and and management psychiatric proof digital telemedicine it quarter capabilities this treatment tools allow with care aligns with us individuals to model another a roll with our enhance Health, Kaden features our in Today, virtual The allow in company in

our equally between front on solutions EAP growth, Health forward is Magellan our innovation collaboration the Magellan Currently, playing central to product the customers in resiliency is Federal a on through on the moving Studio. Health Magellan's proof and exciting new which new Studio, to innovation being business progress point created and through unit we're launch for Another our role focus a that's business a Magellan insight. develop

Our growing their customers our asking employees facing the to challenges and communities. support spreading for issues pandemic and and are families with across XX societal are the response Fortune

place Health tools new assets suite distinct trust develop reimagined for across our the in one market. the offerings performance worked that become in military resilience for studio supports us in leadership. a skills, battle and optimistic foundation and through and Many Through be battalion the commercial differentiated military is this will employer into to designed to products strategic largest nearly It's experts we such recognize and expertise acquisitions. life Army communication important coaching. aspects for EAP For the Ready innovation with brigade fact, offering, of over investments a outright of and The arena training at will We're have of specific space. variety as new Resilient bringing and counseling and this the for Federal providing This internal Magellan's product, psychology. in professionals and resilience the members families that enhance culture training program tailored XX solutions years, that specialized to world's of together development work have expertise Magellan Kaden, of as to XXX locations program Magellan a taking readiness. the performance their of partnerships incorporating as in professionals Magellan valuable around including disciplines and designated Army Livongo, performance world, a unique performance approaches, driven such provide the or of XX Federal with the With clinical are, is commitment and employer activate to through units such graduate allow has proudly experts these Studio the in coaching. cognitive with army

execute the pharmacy implementations of on proud to Turning focused the contract. of of support administration commitment to our pharmacy in extremely of I'm attention team Medi-Cal the growth; benefit our

line largest working in nation's and team to of the with implementation the PBA meet been time contract pharmacy has XXXX state contract. strong start specifications Our a collaboration the for the

was existing addition are up of pleased lead for business our In the states seek Rx increase achieve ranging their Medicaid implementation California, reduce state as to simplify Magellan the solutions ongoing all retained to pharmacy current formulary Magellan single to spending. XXXX. offers one help that to they pharmacy in in transparency implementing cost trends team centralizing administration, States Numerous multiple has results, various vendors. I'm pharmacy to a work solutions following renewal customers under goals. and Medicaid to or these that state additional government share and California's are during from Rx achieve seeking future management

expect to pharmacy allowed administration, gain our PBM stable losses membership as from in economy. us strong We leadership Rx to continued trends from momentum remains have and typical our our and Medicaid trends market results expand churn government the nationwide. outlook in our client growth to Separate commercial business, market-leading these these Pharmacy segment's weaker offset continue sales

to workflow, team realizing management efforts across customer expand are performance We're top government. health on We're relationships our of automation, and effectiveness. efficiencies, sales states overall the a return reporting proposal large to actions new These to part support and growth. a implementation including competitive this platforms our add We've our continued also meaningful Turning intelligence. making quarter of to strong support including XX our management associated enhance is federal and focus expansion and our to committed sales account sales almost level to contract the new base, growth CRM sales and intense our retention strengthening at into begun and progress every mindset. customers, our management senior account plans, line our with plan growth client enhancements, as enterprise executives consolidation full and our office; transformation

the to selling in our investments expect revenue during we've XXXX the our growth We increasingly from benefit sales made season. expanded team

face care various outcome health among health will quality their Regardless monitor for in following of national the differences political the affordable Americans. philosophical issues increasing care election solutions to the and of complex that address to cost burden we suicide; common respect the and we believe health health most of that the November, drugs spending the within substance physical designed areas are year. after ACOs burden the plans, election: continue behavioral and this part help reimagined concentration conversation will We the disorders and We issues of Magellan's and continue health candidates for remain health, of escalating in payers, suite our well-being employers, these of specialty military the of common and families. of populations; prescription solutions are the whether and their this current use health to and focus. and of or medications; care on especially the impact governments,

to In addition, as while leader the position in financial into expertise experienced We'll for us continue focus the our XXXX. clinical beyond strategies, growth strength combined and in care and with team, serve thought health future. strong election remains a our

turn Now, for review. me to over Bourdon let the Dave? Dave call our financial

David Bourdon

Ken's year analysts in very wishing have the manage I'm I attracted good focus participants and investors lower and overall. more on two outcomes system quarter as Rubin Magellan, connection during interacting remarks and Magellan of approximately this best his to now of a transition, believer from for Thanks, and forward. while his support Magellan. effort to the body this the going some the excited comments provide patients the big with to consider In at echo XXXX. energy experience third potential forward everyone. connection our health cost outlook organization. opportunity to to months, look our was care and want the for between for disruptive with thoughts and results, better been discuss I I'm I'll morning, grateful of the I in and an Magellan morning, Jon full the to reaffirmed about initial become partnership in and Ken, him have and achieving retirement at our impressed talent, to review I've mind and the importance Magellan and be my I'm to for

The This million $X.XX share. for net loss million the was to $X.X or for within a operations $XX.X Pharmacy continuing our losses X% $XX.X of of loss was segment. increase quarter contract in our and net offset same the net million the segment profit XXXX, an the of $XX.X compared third growth of million share quarter quarter attributable representing Total for For versus for the period the compares of quarter, from income to revenue earnings per in segment $X.XX XXXX. by was per Healthcare third quarter to of billion, largely $X.X XXXX.

For the income $X.XX share. was or third $X.X adjusted quarter million per of XXXX, net

a from XXXX is well business, MLR $XX.X in The segment contract third representing primarily XXXX. decrease Healthcare Healthcare quarter year-over-year thresholds our net profit was by minimum for of million the of losses contracts. as decline of certain quarter driven third million, in as $X quarterly the For results

levels As quarter third the due in guidance, previously in half of XXXX pandemic. was suppressed contemplated higher the to the year, of comparison we which first the experienced to utilization in

was of Management; segment million quarter largely strong operations partially start-up of as a a contract well a from and third of $XX.X third This Medi-Cal with result contract decrease Turning associated as we to XXXX, profit by for loss representing the specialty the settlements. million XXXX. offset Pharmacy customer year-over-year of reported favorable of from the costs results $X disclosed decrease quarter previously

by XXXX and inclusive costs timing the Corporate $X.X overhead $X relative The third the costs, of totaled September quarters XXXX, million segment for for to higher XX, of and respectively. million previously is and growth quarter benefits of offsets. the discretionary initiatives million to MCC million allocated business versus investments transformation the costs include ending $XX savings segment the corporate corporate in primarily results, XXXX. financial of other increase and Regarding eliminations, $XX.X in driven

$XX.X with associated charges preferences. footprint and charges work to decisive been needs footprint. million we to real noncash related with abandonment estate During our estate the lease reducing rationalizing We've quarter, recorded additional primarily third our real of our about special associates' align

we work space result, site transformation savings plans strategy to net seats have from the XXXX. in by the X,XXX to initiatives a As from for The end contribute of X/X defined leased the targeted reduce office of place approximately are expected approximately X,XXX our to seats well and savings XXXX.

charges further quarter related $XX additional the million fourth expect to in of business activity. transformation approximately We

was activities to period. XX, accounts attributable of compares year Our prior the $XX.X the This by from months charges. ending operations This flow for million capital the operating provided flow is XXXX, working of from other for million. continuing cash continuing decrease nine $XXX.X operations September timing to cash receivable and mainly

continue up to that freed months. We on of January expect X, exit sheet within received approximately XX balance million will that following of PDP, XX to our and $XXX capital our the Medicare be be will majority working effective XXXX,

XX, XXXX. unrestricted the to As I'll MCC XXXX, as amounts of XXXX, $XXX.X at discontinued cash cash exclude and These XX, September was $XXX.X million $XX.X Restricted and cover update. at million $XXX.X totaled million operations, the XXXX. company's XX, compared June June compared at as September XX, which investments in investments million to

paid $XX XX, facility XXXX. During extended million our quarter, debt, the our under down XXXX. of third October, program undrawn September we repurchase at XX, million credit through our leaving November share In capacity revolving Board $XXX of

had of buyback As $XXX XXXX, of September under authority remaining XX, program. this million we

Now MCC. I'll to an move update on

any offset as approvals to months to rate for third with MCC's end the fourth close performance, related the million during is Excess on related capital nine MCC's the a amount to by strong on XXXX primarily is quarter million operations make XXXX, profit September previously more MCC discuss to of to to million Including remain of increased and somewhat MCC will segment possibility distribution, performance note through earnings the out XXXX. that and capital was profit to quarter. the It at Magellan related end of closing basis third the the earnings earnings million. Magellan the commentary $XXX $XX.X primarily with in XX, including regarding within third MCC, million, now of the by COVID. contemplated, year-to-date and XX. MCC totaled We This capital lower MCC. reflect $XX.X prior regulatory MCC's quarter XX, MCC September excess ending important the to undistributed $XX.X year-to-date continue due of on strong $XX million by segment totaling XXXX approximately provide than utilization I amounts the will XXXX. markets, was adjustments $XXX Molina due for our on XXXX, excess certain from capital distributions divestiture net necessary additional of to undistributed the million quarter towards results MCC closing. and quarter of discontinued of closing progress generated guidance some the to excess securing directional XXXX, $XXX to date, first of June

our of $XXX We XXXX of million income share. net revenue $X.XX and $X.X adjusted earnings to between between ranges $X.XX segment and billion are adjusted billion, million, per profit to for $X.X guidance million $XXX $XX between reaffirming $XX million between of to

income and special guidance higher our fourth press have We modified in mentioned. and GAAP reflect quarter for net earnings to ranges release, previously per anticipated as share, charges noted GAAP as year-to-date our

release. planning in fourth In XXXX next some Turning earnings well revenue in the about our strategic year; provide initiatives. MCC in our advance about of to quarter XXXX, are guidance, detailed as to next we we the provide high-level in the like thoughts to profit Molina. conjunction I have our capital growth and guidance the of business commentary deployment for and divestiture XXXX, and strategy as and segment year with process from expect close we still expect confidence we following some Overall, would

guidance environment to midpoint health patterns, care economic utilization the XXXX a our the coming will demand As the From million. future perspective, considering outlook, pandemic uncertainties in related services. profit the we behavioral and potentially including of we view finalize higher our segment XXXX the is be of months, in range for $XXX

the can XXXX. items Medicare growth. year-over-year uncertainties should stranded segment believe elimination cost overhead Separate Molina, of fees majority in $XX the are are during these also million focused the MCC. well from macro the of profit service transformation PDP the quantify contribute against PBA combination of the implementation activity, as to exit There in from executing we known we initiatives, at to collectively which remains us approximately are and of point the our elimination business $XX this stranded environment our from $XX including our $XX savings allow million, receive amounts from The million the investments. to million our approximately on the $XX offset HIF agreement We and difficult will transition few the security savings to Medi-Cal as sale a team of in overhead this $XX of million, headwinds quantify million planning, to which and the IT increased with

As the to XXXX, HIF income offset. due to neutral goes far be but segment will to the profit item as income negative tax for this net

IT items in XXXX with due from our companies P&L next more the on environment security cyber the decision Regarding investments, to current are care year the invest for this a consider cybersecurity other to threats. there company. a perspective, in is respect beyond to to perspective new few and a even based for health From planning

calculations about on a in range the also MCC basis, on excluding enterprise to additional Our XX%, is items. potential your a of exclusive When any tax for rate XX% thinking tax models adjusted bear EPS go-forward in mind future preliminary reform. now view in two of effective

awards. next share due million to with of which a of business the per few $XX there cost fully diluted we intangibles, of second, years be rate XXXX next X% savings for the item net acquired to derive expectation an our $XX net in to to over of $XX are year pretax step-down in year million amortization add-back initiative we during to to $XX the connection to expect in million is run this management of XXXX. transformation, $XX equity terms increase is And net expected baseline our savings our XXXX. comparison adjusted million and X% million count to yield in reaffirming savings income, First, In

Finally, subject, few we've deployment want on questions our comments thoughts closes, Until be but to we respect MCC received with detailed capital this would the a numerous plans investor at share transaction this provide to following the it premature to point. divestiture.

First, we'll an support prioritize from business inorganic investments and both growth perspective. organic to

Second, debt we level. reduce our plan to

repurchase also shares Third, to we may choose opportunistically.

and X.X concentrating the our debt an return. with improve maintaining new interim growth gross an results We time. that of leverage preserve with opportunities right in strategic times peer on flexibility averages or consistent positioned risk-adjusted a is future over our to and leverage leverage with compelling still of effort on are a policy gross plan Regarding generally well level, pursue closing, we believe for to we retain long-term away In believe executing post very our businesses within the and strategic establish to acquisitions to balances target driven establishing we cash our while less. third practical due net the target we rationale We business all that remain solid expect for us that cost want is following approach potential do core We by to deploy immediately net emphasize higher close. not the acquisitions, pleased transaction to to long-term are to proceeds strong quarter structure. focused by plan for fit disciplined and assets in how we MCC

we will following the flexibility We financial to divestiture, and a committed of capital remain manner. completion With deploying the add to Ken. over that, disciplined to turn shareholder MCC back it significant in have I'll value

Ken Fasola

Thank you, Dave.

to have one mark in honor and overarching strategy. stabilize to place The not first, arrived, and the When job improve Magellan. third, business and accelerate the business changed: initiatives I for since reduce will execute innovation robust deliver create contemporary competitive transformation engine across and build the operational week, Next quickly our market; businesses. a new on commitments; four efficiency, one-year our reach second, reliability joining effectiveness; the cost rationalize and put solutions for was and to compelling, on our fourth, I priorities growth structure we

medium four these look ahead focus over term, we'll we continue on pillars. As to the

exit to payer sell Medicare sponsor, Medicaid to of advent to our began services. D to back the With business Part a our pivot as managed and Molina we plan decisions to

we those for As in meaningful creating will share result $XX of a value generate per proceeds, shareholders. decisions, our approximately important cash

solutions Magellan As business our of behavioral consists pharmacy we around health areas management. forward, health, centered that care: payer following specialty are high-growth health, of focus and the difficult-to-manage

and them that clinical for person total on better are services experience of flow whole an solutions products delivering lower Our overall cost and better and from a the our outcomes care, members. focused

stakeholders why to in solutions these answer the energized Magellan. key question the mind, With to we're with share

in robust capability Our insights. points products quantify be value-based and the identify intervention partnerships opportunities enables data solutions. providers predict interventions, of those of and us first, differentiation and impact capabilities: following new across pharmacists analytics identify to This create solutions impactful with for opportunities, anchored will the and and our

digital that user-friendly enables tools improve behavior client for capabilities; deliver capability to and effective changes streamline and us and and through through stakeholders, all drives provider utility engagement automate drive that digital to Second, member, and assets. digital this sharing data collection tools create care intervention

to develop improvement on continuous With over become turn focus and will move questions. look organization. think care, adoption the partner opinion Implied entire through journey, high-quality personalized capability evidence-based capability management this and personalized Magellan clinical protocols, and to providers, and us report on deliver partner for an your both leader of data execution, operator tank clinical as care; drive the fourth, the on high-quality programs enables enables for to relationship availability provider this when quarter community by market-leading of networks, Third, the to access we to to realize assets. key this choice standards. a our asset this updating care I clinical superior with that's results. us solutions; high-performance the to leverage embraced now We're that, relentless fourth back again and in you forward I'll community-based to great digital call be strategic differentiation making insights and progress And

Operator

Instructions] of from Fischbeck Thank first you. Our [Operator America. with is Bank Kevin question

Kevin Fischbeck

Okay, great, thanks.

commentary just XXXX to to here. go I So kind wanted your of

and to Part heard be then So the California, to the overhead million I'm in if $XXX adding million doing million as zero cost I $XX $XX cost from right, minus saves, at mitigated is $XX basically it D, base, stranded million. it's going

of So of point is million to a million. that kind $XXX $XXX kind of starting

separate that organic growth and separate a meant top profit to kind as be you your I dynamics to you that of kind of or you a going incorporated businesses. expected growth was wasn't whether in made growth if comment You of revenue those that be on there's that profit add-on outlined. sure into that

Ken Fasola

and give that, Kevin, you're hope I'll for then question, Ken. well. thoughts in necessary. and for the let I you build this Dave is jump and his as I'll Thanks

David Bourdon

for the question. thanks Kevin,

think just addition one revenue the far So as like that of that's of as profit growth, as a statement statement. as on earnings your once in necessarily you maybe math, to think that We'll segment to to. that get we be macro regards to macro -- detail on update on -- in as XXXX adjustment. quarter. Don't we and for more addition fourth In

that for So you we'll if our those million the of the of you'd yes, about out. net headwinds. and add this take $XXX the overhead about, midpoint then think $XX stranded as add tailwinds million the for And year, you guide

Kevin Fischbeck

Okay.

So that's million actually what million? million was $XX to $XXX saying. than more That's $XXX I actually

David Bourdon

Correct.

Kevin Fischbeck

perfect. Okay,

the then in side as didn't side, -- things. losses in as quarter disclosed, segment? but new Healthcare previously that You you wording on the there Okay. itself it of that Pharmacy far was were And have the goes, mentioned same the Healthcare segment contract

to how just on there's trending update have been see any if that business. contracts in So wanted

Ken Fasola

embedded agreements, would Dave in provisions some some I Yes. and which start, downward certainly can of MLR more jump of pressure. a probably can you draw those little to I in. put the

extraordinary where and we we're by, So considering building there. came there wasn't think, offset momentum from, real good growth and I losses any

some So as put on I'd talked pressure previously substantial downward any opposed contracts, weren't of point losses that which about. revenue towards inside to provisions existing more you

Kevin Fischbeck

long-term today, Okay. And of business long-term about? then anyway. then, kind how there I of now after should think we growth thinking to -- guess, update kind do maybe we guardrails way when last of question Or you expect those about for any kind XXXX? guys on be have kind if not that of should targets? any an Is the you When

Ken Fasola

the Yes. pare up assume your and I question. let I captured sure it you're bit, a little breaking make but essence Kevin, back of -- me

assuming And across beyond with about growth that's So longer-term our trajectory. outlook to XXXX businesses. of respect you're all asking I'm

Kevin Fischbeck

yes. Correct,

Ken Fasola

Yes.

respect making I'll know building, progress points things we've with we're I businesses. our So them a individually. case I of business committed the around and each one the good proof around -- to we're to think, reimagining I take

the creating we rapidly build ways of health, think I the that Magellan really we're are that, respect the which conversations with an is large not you energize more to obviously, the but behavioral on whole expand to impact behavioral that about in us the only important, for granular impact to person. recognition this as kind So capabilities payers, the And the doing, think, get managing has nationwide. Virginia, pandemic to health is behavioral intensified on to mental around we're and and opportunity things more beginning having Connect, we're with having branded health,

talk employees about particularly, issues work impacting our has I and behavioral their us XX their the providing for the that so of the to also societal and Fortune pandemic, Murray Jim are around consolidate the health concern own impact and customers is And concern on to businesses elongated did think their EAP a employee to the of quickly well-being. challenges forum growing Fortune on XXX growing

mentioned military I our building so And program the that we're experience -- Magellan with quickly, in leveraging the in Federal.

in normally of I accelerated another seen procurement where think more we've BH a example, RFPs. things that can and Just is do what than pipeline the we some cycle the little traditional

really a medical the business in year, relationships. so including Livongo new narrative inside couple capabilities make then as we're existing a the pharmacy of our we're where logos. management, and management, of this help think I business the Kaden advent door, well. well-run of and new another collaborative formulary pivot the And health the if even with what business, extension telehealth Rx front of doing And specialty and business to really for we strong some momentum with Pharmacy, of care our we're to I had by first big now we've our right that think performance stronger. then year, lean we've in got as client knee-deep us, strengthen I real into And up-selling so implementations -- driven -- vMAT, Specialty digital

an continued oncology into increased products that are think focus of a we to support momentum provide and kind the new focus I move around So going and XXXX. opportunity build oncology as to

so to all in we builds pleased And with XXXX remember, while that said was given our or each the these businesses earlier point procurement had to the there I is And was a point, in three-four-month -- that XXXX where tied and XXXX And pandemic. which let's lastly, pleased through the of more there script. in one that to see the this XXX% actually procurement new in and guess that mentioned selling really we we the pharmacy, cycles RFP processes to BSH add we there's we pipeline calls that as I'm to out the compete. -- lag, delayed PBA our businesses. of -- respect say, the as we're renewed were weren't season, I'd versus well, the cases. well think I extremely And some RFPs call positioned think are

'XX we're demonstrate growth just are -- that focused on and hope proof points and So a that 'XX. into of those keenly couple we

David Bourdon

which that. that's investor revenue, to profit us pile And with segment And Look, the noted. key provide get at on some to consistent on operate, an just this Ken And areas long-term phase and like just we'd growth towards transitional time, that. be on and we'll that we would will through have know after to that of how the working and community we EPS. do targets to we're strategic demonstrated appropriate like

Kevin Fischbeck

Thanks, Dave.

David Bourdon

your Appreciate questions. Thanks, Kevin.

Operator

is with Jefferies. [Operator next Styblo question from Instructions] Our Dave

Dave Styblo

for Good morning, the thanks question.

cost I'm think expect if and for they follow-up Is a bridge are on curious that they IT. something decline? do understand front? a would XXXX? have those you'd Would I after I just but to XXXX something security persist onetime-in-nature all on that the Or I comment, it of the rise? new investment

Ken Fasola

Okay.

jump all, of let morning I start, and question. -- I'll First good your Dave and I'll can appreciate in.

And excited One I analytics going and cybersecurity forward, the I'm the is that in digital that insight. -- are and is if for of back about things step about talked going robust the and the think an you area things us be arms to and tools and whole differentiating capabilities is advance race. about

class to So best that systems to advance necessary really anchored making enable sure key around data are the strategy that confident in and us. in the our connections hard investing to is we're analytics

were platform seamless work go those early. contemplated of in respect enable concert and we're identified is we to so the to the tools, the digital we're this making lot of So doing our these investments underlying in are implementation investments with in making A with and hand. in that new hand transformation

Dave? when just not we we So but the -- there's piece security to of -- and be that, about no extra reason think diligent vigilant.

David Bourdon

would our rate very I going you environment. and there, as, there's what to of and making Dave, -- said. protecting we're I'd I seriously, reinforce onetime information Yes. Ken mean think run mean certainly in be clients' charges our forward. I the harden just investment we some this while I'd to take have this members' to that's why consider

Dave Styblo

and any to in information, conversations some at in point? where the going be be we early before a the talk to and shaping And this is goal. Is reads then a on an pipeline with given just update are process? as XX-person building force helpful. up sales that behavioral months still those to up that's you position of the about that away cycle? conversations in it clients on give better towards advanced you how the are where are this you medical you your Can guys are know the Okay, Or few and integrating year you'd more pharmacy I of share employers us

Ken Fasola

there. And really I'll exciting Actually, important, really couple as this making. -- comments not a only has about I we're been but pivot we make of the think

to that partners things cost calls, prove earlier we of challenged growing care. the the our by are and of to mental don't behavioral total on payer one on of said is health impact I As do have the

and we in And again, challenge customers payer time saves been those and future conversations around when of lot strategic fact and it's will having We've existing, growing C-suite walk by the this so and it intensified to pandemic. pivoted a prior start what more more hope that be you conversations. the with

X/X be with training sales with really experienced again, X/X direct to new -- those eager specific for And We deep with domain-specific to We've a to the so we are also we're of very only deep actually talent. experience actually right outreach experienced and with hand. channels. respect who, respect We've include professionals, solution creative And that largest -- individuals look our in relationships lines of and filled customers EAP where to to started lot -- challenge. offers in deal the integrating, we with the of we're addition well sets already. cost health, probably care specialty of but program the are first our we're got And exist business, week. not on wanted And last hiring ways total behavioral health received. and company that to in -- capabilities growing has again, been really the and really

function of by. our pandemic-oriented an at those And And are demand issues begin reflect employers. you're to again, and I challenges think came of more I that And substance in of on disorder of issues. there use was mental that of out these, which that's one with recently targeted of mental directly health challenges health. and -- larger among to again there's cycle, RFP encouraged I think some step conversations we're as related just see those and respect and off so large saw a some people And suicidal child to starting back going states both the existing

Dave Styblo

just of housekeeping both a And of Okay. then, on couple questions segments. the

costs the similar side. material and contract start-up were positive. have Any been into those on -- And flip you for might the I are third how like quarter? for. better build side, might like takes the on quantify can that costs the start-up quarter Is California year? there were any that than in Healthcare you as then going Molina or the lot for there or what fourth costs things on the And we So on settlements question the there next the much transformation Pharmacy, for think were results some for were contract then there? a look looking puts

Ken Fasola

the mathematical driven PBM specialty beat, performance that probably and can about the I Dave, Yes. and And about the the add we business call. want the in you revenue as it's Dave to additional I'll following on the color. order, really earlier start, think in build in new But that? talked

David Bourdon

unpack Sure, There bit. little few questions I'll a yes. Dave, in were that a there.

So pharmacy let's with the piece. start

our step-up expectations. sequentially result you in segment Having that, pleased profit. with noted, is consistent of as really with that said big We're So the business. pharmacy performance the

a from on basis, third quarter noted the settlements. the and in be the specialty the start few that Pharmacy onetime second of we which Within segment, the trends, and experienced of a around we XXXX our unfavorable To the in benefit the segment almost also year XX% the business. some PDP in And the to highest quarter in ramp as had of Medi-Cal third guidance to being like a items second going implementation claims because some in -- closer we unusual related weighting received contemplated higher we to quarter, stronger contract. specifics half, earnings, question see are sequential highlighted Ken we with quarter, new costs customer to the the your a get

segment is the will generally a of one as sequentially, QX. $XX return was -- profit in our of the Healthcare, are going we in million you're in $X drivers behavioral expectations lot a of -- down start-ups the utilization and compared from well. MLR that reasons our thresholds the as regards to it as what those profit -- the start-up with quarter, second higher In utilization, see of it quarter behavioral and largely some as about first So year, why segment QX favorable in the not to was think having we'll quarter basis specialty driven the And that that fourth saw to throughout The primary both that, first the costs you perspective, a to of some by that and was the to well half. in for of minimum a sequential step-down from in we continue remainder of aware, in said as we've consistent On level utilization care we seen be think specialty the impact sequentially. In to favorability From the in Pharmacy. million half now the Medi-Cal, and I normal sequential decline see big regards expect contracts. third the to did level year. same in as range

expecting and to And We third much expecting continue did move fact, the were ran than or pre experience As at were we pretty it that our into a levels matter to expect that it quarter. to -- higher COVID. we levels. in we fourth quarter, pre-COVID normal of the up

a had or segment matter second were those primary quarter. profits for quarter to a -- So the that from step-down why step-up third we reasons in

Dave Styblo

it. All been have All Thanks much. Got right, asked. thank you.

Operator

to the have Ladies and call of reached to question-and-answer gentlemen, remarks. end the session. management we I the would for like turn closing back

Ken Fasola

power We Listen, everyone and the very wish continue continue times much. and for to we the you today's delay to through unique Yes. thank in apologize these pandemic. around call, the as we to need best

appreciate continue stay We support, and to well. your

Operator

lines This you this Health today's at your You time. disconnect Magellan conference. may your concludes for participation, thanks

Magellan Health (MGLN) 31 Oct 202020 Q3 Earnings call transcript