Centene(US:CNC)2020-10-31 15:36Financial Data and Key Metrics Changes - For Q3 2020, revenue was $1.2 billion, a 1% increase compared to the same period in 2019, primarily driven by growth in the Pharmacy segment, offset by net contract losses in the Healthcare segment [23] - Total segment profit for the quarter was $34.1 million, down from $45.6 million in Q3 2019 [23] - The net loss from continuing operations was $17.3 million, or a loss of $0.68 per share, compared to net income of $4.1 million and earnings per share of $0.17 in Q3 2019 [23] - Adjusted net income for Q3 2020 was $2.1 million, or $0.08 per share [23] Business Line Data and Key Metrics Changes - Healthcare segment profit for Q3 2020 was $21.2 million, a decrease of $5 million from Q3 2019, primarily due to net contract losses and minimum MLR thresholds in certain contracts [23] - Pharmacy Management reported segment profit of $31.4 million for Q3 2020, a decrease of $4 million from Q3 2019, attributed to a previously disclosed contract loss and start-up costs associated with the Medi-Cal contract [25] Market Data and Key Metrics Changes - The company noted an addressable market exceeding $400 billion for patients with comorbid behavioral and physical health conditions, with the COVID-19 pandemic intensifying focus on behavioral health [9] - The Pharmacy segment's commercial PBM outlook remains stable, with strong sales results offsetting typical client churn and membership losses from the weaker economy [18] Company Strategy and Development Direction - The company is focused on transforming its cost structure, innovating its solution set, and accelerating growth through a reimagined portfolio of behavioral, specialty health, and pharmacy solutions [7] - Strategic investments include partnerships with Kaden Health for telemedicine and Livongo for digital capabilities, aimed at enhancing behavioral health offerings [12][13] - The company plans to reduce its leased office space significantly, aligning with employee needs and work preferences, which is expected to contribute to net transformation savings targeted for 2021 [27] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed 2020 guidance ranges for revenue, segment profit, adjusted net income, and adjusted earnings per share, while adjusting GAAP net income and earnings per share guidance to reflect special accounting charges [6][31] - The company expects revenue and segment profit growth in 2021, driven by business transformation initiatives and the implementation of the Medi-Cal pharmacy benefit administration contract [32][33] Other Important Information - The company recorded additional special charges of $16.6 million in Q3 2020, primarily related to noncash lease abandonment charges [27] - As of September 30, 2020, the company's unrestricted cash and investments totaled $120.9 million, down from $161.5 million at June 30, 2020 [28] Q&A Session Summary Question: 2021 Commentary and Profit Growth - The question addressed the expected profit growth for 2021 and whether it would be in addition to the previously outlined figures [42] - Management clarified that the macro statement on revenue and segment profit growth was not necessarily an addition to the previously mentioned figures [44] Question: Contract Losses in Healthcare Segment - Inquiry about new contract losses in the Healthcare segment and how contracts have been trending [45] - Management indicated that there were no extraordinary losses, attributing revenue pressure to provisions in existing contracts [46] Question: Long-term Growth Targets - A question was raised regarding long-term growth targets beyond 2021 [47] - Management acknowledged the desire for long-term strategic growth targets and indicated that updates would be provided after the transitional phase [53] Question: IT Security Costs - A follow-up question on whether the new IT security costs would persist after 2021 [55] - Management indicated that while there would be some one-time charges, the investment in IT security would be considered a run rate going forward [56] Question: Sales Force Update - Inquiry about the progress of building the sales force and the integration of behavioral with medical pharmacy [57] - Management reported that they were on track with hiring and had begun training, with positive feedback from clients regarding integrated solutions [58]