Centene Corporation

Q1 2023 Earnings Conference Call

4/25/2023

spk18: Good day and welcome to the Centene Corporation first quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Jennifer Gilligan, Senior Vice President, Finance and Investor Relations. Please go ahead.
spk07: Thank you, Rocco, and good morning, everyone. Thank you for joining us on our first quarter earnings results conference call. Sarah London, Chief Executive Officer, and Drew Asher, Executive Vice President and Chief Financial Officer of Centene will host this morning's call, which also can be accessed through our website at centene.com. Ken Fezzola, Centene's President, and Jim Murray, our Chief Operating Officer, will also be available as participants during Q&A. Any remarks that Centene may make about future expectations, plans, and prospects constitute forward-looking statements for the purpose of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors. including those discussed in Centene's most recent Form 10-K, filed on February 21, 2023, and other public SEC filings. Centene anticipates that subsequent events and developments may cause its estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. The call will also refer to certain non-GAAP measures. A reconciliation of these measures with the most directly comparable gap measures can be found in our first quarter 2023 press release, which is available on the company's website under the Investors section. The company is unable to provide a reconciliation of certain 2024 measures to the corresponding gap measures without unreasonable effort due to the difficulty of predicting the timing and amounts of various items within a reasonable range. With that, I would like to turn the call over to our CEO, Sarah London. Sarah?
spk09: Thank you, Jen. And thank you all for joining us this morning as we review our first quarter 2023 results and update both our 2023 guidance and 2024 EPS floor. Centene's first quarter results were strong, reflecting continued positive momentum operationally and the beginning of another year of disciplined execution against our strategic framework. We reported $2.11 of adjusted diluted EPS for the quarter and lifted our premium and service revenue forecast by another $3.7 billion. We also moved our full year 2023 adjusted EPS guidance to at least $6.40, the top of our original range. At the same time, as you saw from the press release, we have updated our 2024 adjusted EPS floor to greater than $6.60. Given the focus on 2024, let me start there by providing more detailed commentary on our insights and current thinking. Then I'll come back to 2023 and our recent progress. A year ago, when I stepped into this role, we were in the early stages of executing against a three-year value creation plan. We saw no reason to change that plan as its basic pillars were rock solid. Streamline the company by focusing on our core businesses, price our products for profitable growth, modernize our business processes and tools, and deploy capital in a disciplined manner to create enterprise and shareholder value. After 13 months in this role, I am even more convinced that this organization has the capacity to deliver substantially more value to our customers and shareholders. This team has a clear vision for how we intend to execute and transform in a sustainable way as we set ourselves up for the long term, and we are confident in our long-term growth algorithm. We also have the benefit of a far more complete view of the near-term dynamics we will need to navigate, and the investments required to ensure Centene is positioned for market leadership. That combined insight is the underpinning of our revised 2024 earnings floor. I'll outline the major drivers of our decision, and Drew will walk through the numbers and mechanics in more detail. The first and most significant driver is Medicaid redeterminations. Over the last month and a half, with the benefit of finalized implementation plans and early data feeds from our state partners, we have refreshed our state-level models and projections to inform an updated view of the potential impact to membership and acuity of the redeterminations process across our 31 health plans. Based on that analysis, 2023 progression looks slightly better, But we now believe it is prudent to build in a more conservative view of the potential disconnect between rates and acuity that could manifest in some of our states in 2024. As a reminder, we view any disconnect as a temporary one. We fully expect that states will ultimately provide sufficient rate adjustments to reflect any changes in acuity of the Medicaid population. But we are building a provision in our 2024 target in case there is a gap in timing in some of our states. We remain committed to ensuring that the most vulnerable members of our communities have ongoing access to high-quality health care, and we are empowering our local teams to navigate the redeterminations process in a way that strengthens the partnership with our state customers, given their critical importance to our long-term success in Medicaid. The second major driver of our revised 24 outlook is based on our 2024 Medicare Bid Strategy. As we evaluated the final 2024 CMS rates, our view of potential 2025 program dynamics, and the strengths we saw in 2023 performance, we decided to use 2024 as an opportunity to more aggressively right-size our membership and focus on our core member base. This will move us away from some of the membership that resulted from a growth-at-all-costs pricing mentality during the 21 and 22 annual enrollment periods. and create a solid foundation from which to drive earnings power in the back half of the decade. At the same time, we see an opportunity to make targeted investments in Medicare that enhance our ability to reach and serve these members. These include own distribution capacity, provider enablement tools to support value-based care, and the acceleration of digital capabilities that will truly differentiate the WellCare member and provider experiences going forward. Given the fundamental impact this strategy will have on member VIX, as well as the changes CMS recently announced to the STARS program, we are also resetting our multi-year quality target, given that we will be managing members who are naturally more complex from a quality standpoint. Our focus over the next few years will be to maximize contracts that reach the three and a half star threshold, and to begin laying the groundwork for the Health Equity Index adjustment that CMS will measure starting in 2024 and 2025. Drew will walk through the mechanics, but given our target populations, we believe a near-term focus on maximizing 3.5 star plus results when combined with an adjustment from the Health Equity Index when implemented will most efficiently provide both the long-term quality profile and the economics necessary for WellCare to be competitive in our segment. For the upcoming October results, we are trending pre-caps between 14% and 18% membership in four-star plans, but we have one large contract on the bubble that represents 10% of our members. For those still watching that metric, we are conservatively assuming the downside scenario and therefore expect minimal four-star progression year over year, but we expect to see solid overall contract improvement reflecting the operational progress we have made. and we have baked a conservative view of these results into our overall assumptions. Ultimately, we believe that returning to WellCare's roots in serving lower-income, diverse, and complex seniors is an anchoring position in what will be the fastest-growing subsegment of the Medicare Advantage market, and one that aligns perfectly with our local, community-integrated model and our Medicaid footprint. We are investing today to protect and enhance this business because we firmly believe it will be a powerful earnings and growth engine for Centene in the long term. The final major driver of our revised 2024 outlook is the recognition that we need to invest in specific infrastructure that will allow us to innovate at scale. As we work to consolidate systems and simplify our technology ecosystem, we see an opportunity to future-proof our target architecture, expand and modernize our data layer, and build a digital operating structure centered around our customer relationships. Done correctly, this work will accelerate our transformation, allowing us to tap into the power of Centene's unique local data footprint, automate more of our core functions, drive innovative clinical models, and deliver market-leading customer experiences across all three of our businesses. We recognize the significance of increasing near-term investments at the expense of adjusted earnings per share. Ultimately, we are confident these investments will fortify the foundation of the enterprise and accelerate capabilities that will position us well against our long-term growth thesis. Let me close out this portion of the 2024 discussion by emphasizing a few final points. One, we do not intend to update this number between now and our annual investor day in December. Our goal is to provide you with as much detail and transparency as we possibly can about our assumptions without compromising our competitive strategy during the bid cycle. This includes the improved segment reporting you can find beginning this quarter in our 10Q. And three, this is a number we are confident in. As some of you have been correct to point out, a floor is not a finish line. And $6.60 for 2024 is not our finish line. This is a number that we intend to meet and beat. Before I turn it over to Drew, I want to comment briefly on progress in 2023 because performance this year presents an opportunity to strengthen the position from which we navigate through 2024, and we are executing well in 2023 thus far. Our local teams were fully mobilized to support the beginning of redeterminations on April 1st, although by the time planning was complete, only two of our states chose this as their start date. The remaining 28 states are evenly distributed across May, June, and July start dates. In general, states are pursuing a balanced mix of population-based and time-based approaches. Recent changes to implementation plans have biased to later start dates, reflecting the unprecedented scale of the undertaking for many states. Our focus from the beginning has been maximizing coverage continuity, both for Medicaid eligible and for marketplace potential members, and we are executing well against that goal. we have robust multi-channel communications in place for every state. In states where we have already commenced with early member communications, we are seeing positive early indicators, including low opt-out rates for text messages and higher engagement than normal in outbound live call campaigns. In all but five of our states, we have either already received membership files or have a clear model established for data exchange with the state once their process begins. Where we have already received member files, we are using them to refine the analytics driving our outreach campaigns and to inform productive discussions with state actuaries and our regulator partners. Leveraging Centene's local approach, we have deployed community-based provider education and engagement campaigns with a focus on educating our FQHC partners as well as key provider partners in every region so our members have the benefit of multiple trusted sources of information as they navigate this process. For members losing eligibility, we have launched both direct and indirect outreach campaigns to educate them about their marketplace options. Across all 25 states where we have an overlap between our Medicaid and Ambetter footprints, we have activated our unique and comprehensive Ambetter broker network so they are prepared to support members transitioning to the marketplace. And we are working closely with states where we are able to do direct outreach to members to facilitate warm handoffs in the enrollment process. In short, our teams are hard at work supporting members and continuing to build positive momentum with our state partners. Turning to Marketplace, as we've discussed, Centene's Ambetter product line experienced incredible growth during the 2023 open enrollment. This positive momentum continued during the first quarter, and we closed the quarter with more than 3 million Marketplace members. As we move through 2023, we continue to monitor new member demographics and overall claims data consistent with the rigorous tracking that occurred during the first quarter. As I mentioned earlier, the proven breadth and depth of Ambetter's broker network, a clear driver of OEP success, will also be a key differentiator as we look to maximize the catcher's mitt opportunity. Overall, we continue to view the marketplace as a durable coverage vehicle, and AMBETTER, as the market leader in this space, continues to represent a powerful organic growth opportunity for Centene. From a Medicare standpoint, while we are working through a strategic rebuild, it is important to note the strong underlying operational improvements we are seeing that align with our five-point plan. Examples include a new center of excellence for Medicare calls that has reduced per member per month calls by almost 25%. The implementation of new AI-based call sentiment technology resulting in real-time performance improvement. A 20% reduction in voluntary disenrollments and a 47% reduction in CTMs year over year. We have added almost 1,400 new clinics under value-based contracts, And most importantly, we are seeing member, provider, and broker satisfaction scores in the mid-90s year to date. We are on a journey, but there is tangible improvement, and we continue to build operating momentum as we progress through 2023. Finally, a quick update on our value creation initiatives, which remain front and center as we work to fortify the foundation of the business. Overall, we are tracking ahead of our SG&A goals, excluding the additional investments I mentioned earlier. and our slate of SG&A initiatives is progressing well against key milestones. We continue to streamline the organization through portfolio rationalization, closing three transactions in January, and more work is underway. And finally, importantly, our PBM implementation is on track across all work streams. In short, 2023 is shaping up to be another strong year of execution and earnings performance, and we expect to gather further momentum as we progress through the year that will help us to power through our updated 2024 floor. And while we are changing our earnings path to and through 2024, something we certainly don't take lightly, we have not changed our focus, our strategy, or our confidence in the ultimate earnings power of this organization and its long-term growth potential. We are not just building a company for 2024. We are making the decisions today that will enable us to deliver 12 to 15% adjusted EPS growth in the back half of the decade and ensure Centene is the market leader in government-sponsored programs for years to come. With that, I'll hand it over to Drew to walk through the details of Q1 and the interplay between 2023 and a new prudent floor for 2024 that we will work to beat. Drew?
spk14: Thank you, Sarah. This was a very good quarter as you can see in the press release. Adjusted EPS of $2.11 was ahead of our expectations and a good start to the year. Let me hit a few key items for Q1 and then spend most of my time on the remainder of 2023 and 2024. Premium and service revenue at $35 billion was strong in Q1. The HBR was on track at 87% and adjusted SG&A at 8.5% was consistent with our updated mix of business. DCP was 54 days, consistent with Q4, and up one day from Q1 last year. During the quarter, the Medicaid HBR of 90.0% was on track as well and reflects two items. One, a delay in a 2022 rate increase from one of our largest states, which we expect to favorably impact our Q2 2023 Medicaid HBR rate. and two, Senate Bill 510 in California dealing with prior period COVID claims. Those two items pushed up the Medicaid HBR over 40 basis points in the quarter. The Medicare HBR at 85.2% was a little better than expectations. Marketplace revenue was stronger than expected, while the commercial HBR at 76.3% was in line with our internal forecast. Q1 cash flow from operations was strong, even when excluding a few out-of-period items such as early Medicare premiums. Overall, this was another good quarter with sound fundamentals. In the last month and a half, we've gone through a rigorous process, not just to refine the forecast for the remainder of 2023 in our typical 3 plus 9 process, but we also accelerated what we could to develop a more detailed forecast for 2024. Let's tackle 2023 and then get to 2024. For the full year of 2023, premium and service revenue is coming in stronger than our last midpoint of $132.5 billion driven by Medicaid and Marketplace. Medicaid revenue improvement is largely due to the refinement of timing of redeterminations in 2023 versus 2024. As an example, as we entered April, one of our largest states provided updated clarity around foster care redeterminations, moving the start date from April 1st to September 1st. And they also clarified the timing of other populations, resulting in a start date one month later than we had planned, resulting in more Medicaid member months in 2023. In Marketplace, we are very pleased to be leveraging our number one market position to not only seize market growth, but also increase market share. We finished the open enrollment period strong, and that carried into the special enrollment period, or SEP, with 3.1 million members at quarter end. We expect to continue to grow the rest of the year. To draw a distinction, the 2021 SEP during COVID was wide open for all eligibles and had pent-up demand with a different acuity profile than the SEP enrollees in 2022 or today. Though we have found that partial year SEP members' profitability is below that of open enrollment members, largely due to risk adjustment mechanics, the ability to renew those same members on 1-1-24 will set us up well for 2024. Consistent with what we shared on the Q4 earnings call, the demographic data, including subsidy eligibility and product mix, continues to look encouraging. Product positioning and distribution execution are also strong. The overall individual market has grown more than expected this year, and this macro growth is a positive factor when considering risk pools. Overall, we are able to absorb this additional growth in 2023, and this should provide an earnings tailwind for 2024 to help offset other areas of headwind. We are lifting the 2023 consolidated premium and service revenue another $3.7 billion to a midpoint of approximately $136 billion driven by Medicaid and Marketplace. A revised 2023 HBR reflects an overall 10 basis point improvement to a range of 87.1 to 87.7 percent. This is driven by a few net items. First of all, there's a slight shift in mix due to growth in marketplace, which has a structurally lower HBR. And as we'll talk about in a minute, we now expect a 10 basis point improvement in Medicaid in 2023 versus previous guidance. A revised HBR also reflects a specific nuance for Medicare. I mentioned on the February earnings call that we expect to lose money in Medicare Advantage in 2024. Based upon our latest underwriting estimates, we have reflected in 2023 guidance an approximate 200 million premium deficiency reserve, or PDR, which we would expect to record in the fourth quarter of 2023. Other than that, our fundamental HBR is good in Q1 and on track for 2023. This PDR will be refined as we finalize bids and get further into 2023. To be clear, we are absorbing this Medicare premium deficiency reserve into our revised 2023 HBR and adjusted EPS guidance, demonstrating the current strength of the business. On the flip side, growth in marketplace, with more than two and a half times the SG&A rate of Medicaid, due in part to distribution costs and exchange fees, changes the mix for SG&A. When coupled with investments in quality and other key areas Sarah mentioned, our adjusted SG&A guidance for 2023 is up to a midpoint of 8.9%. Let me demonstrate the impact of mix. Someone recently asked, why our SG&A rate isn't in the low 7s? Actually, if you pro forma our 2023 revenue mix as if we were 80% Medicaid, we would be in the low 7s. Of course, in addition to our number one position in Medicaid, we like having the number one marketplace franchise, the number two PDP franchise, and a Medicare Advantage business with over a million members across 36 states. Investment and other income was strong in Q1, and we expect that to continue for the remainder of the year at a midpoint of $975 million. We have bought back $577 million of shares since the beginning of the year. including $300 million post the Q4 call toward our approximate $1.5 billion goal for 2023. We expect to continue the majority of our health plan dividends to come late in the year. As of today, we have an approximate diluted share count of 550 million shares. As we generate cash at the parent, we plan to deploy it to buy back our shares. For instance, In April, we were able to monetize the stock consideration we received at the closing of our sale of Magellan Specialty. We seized this opportunity so that we could deploy to share buyback. Overall for 2023, inclusive of the items we just covered, we are lifting our 2023 adjusted EPS guidance to at least $6.40, the top of our original guidance range. Let's move to 2024. On 2024, while we were previously targeting 715 of adjusted EPS, we are reducing that to greater than 660 based upon more visibility on key 2024 drivers. While we are determined to do better than 660, based upon what we know today, we believe this is a prudent target for our 2024 earnings. And we believe this is the right jump-off point to apply our long-term growth algorithm, CAGR, of 12 to 15% for the back half of the decade, consistent with what we shared with you at December Investor Day. Let me outline our approach and key assumptions to this revised 2024 target, starting with Medicaid. The first redeterminations just started April 1st, but what has transpired over the past month and a half has enabled us to gain more clarity on each state's process in terms of timing and approach to the sequencing of populations. As Sarah mentioned, we have also been able to refine acuity projections, state by state, subpopulation by subpopulation, as well as anticipated degree and timing of projected rate actions. Acuity projections in many cases are based upon specific data from the state and their actuaries. For instance, a number of our states shared files with us for those they expect to redetermine in April, May, and or June, And we are using this information to calculate the acuity of stayers versus leavers. On the other side of acuity, the rate change projections are state by state, subpopulation by subpopulation, and they are often based upon direct conversations with the Medicaid departments and their actuaries, including many verbal acknowledgements of the potential need for rate actions as redeterminations unfold. We've had very constructive discussions with our state partners about redeterminations not just in terms of process, but also the rate implications. We have also thought about the RFP cycle as we forecast the timing of future rate actions. While we are still early in the redetermination cycle, which we expect will last into Q2 of 2024, we have developed more confidence in our estimates of the net impact on 2023 and 2024 with the benefit of the clarity gained. One more relevant fact, for 2022, we were approximately $2 billion in payable back to certain states for risk corridors or minimum MBR profit-sharing mechanisms. That's important to factor in relative to any expected acuity shifts in those specific states. Finally, with each state putting a stake in the ground with respect to timing and approach, we are better able to refine our forecasted premium revenue for both 2023 and 2024. Ultimately, We expect the rates provided by our states to match the acuity of the population, as has historically been the case, though this is expected to ebb and flow through the redetermination process. In other words, if there's a mismatch between acuity and rates, we expect it to be temporary. Now let's get to some numbers. To provide some of our assumptions embedded in our updated 2024 target, we expect approximately 77 billion of Medicaid premium revenue in 2024 relative to approximately 84 billion in 2023. The premium revenue drop in 2024 is largely driven by redeterminations continuing and annualizing into 2024. There are also some other puts and takes in the revenue, including market share shifts, As we have previously discussed, the California contract renewal and the projected potential county shifts in Texas Star Plus, as well as the added North Carolina expansion population. With respect to the Medicaid HBR, as you will recall, we were originally expecting to be around 89.9% in 2023. Our latest forecast is slightly better than that at approximately 89.8%. For 2024, based upon the process I just described, we have now built in 50 basis points of HBR increase to be prudent for redeterminations and the potential temporary mismatch of timing between acuity change and rate. That would put us at approximately 90.3%. Then we expect approximately 20 basis points of benefit from a new PBM contract and other initiatives to yield an estimated 2024 Medicaid HBR of approximately 90.1%. In Medicare and Marketplace, we are still refining our bids that are due this summer. So we're going to be a little guarded with getting too granular with bid assumptions for each of those lines of business. In Marketplace, our first quarter results were on track. And while one quarter doesn't make the year, we are so far pleased with the Marketplace positioning, not just for 2023, but also the longer-term benefit from strengthening our number one market position. We look forward to getting more insight into 2023 marketplace performance as the year unfolds, including when we get the first view of the Wakely risk adjustment data in late June, early July. Suffice to say, we are bullish about growth and margin potential in our marketplace positioning and business for 2023, 2024, and beyond. and more importantly, the chassis for seizing individual market opportunities ahead. In Medicare, we received the final 2024 rates and risk model clarity on March 31st. The 2024 final rate was less negative for us by approximately 1.25% relative to the advance notice, but still an inadequate rate relative to trend. Some of the final rate change will accrue to our provider partners, and some we will work into our bids. We continue to forecast a pre-tax loss in 2024, which is embedded in our revised 2024 target, inclusive of the 2024 amortization of the PDR we expect to record in 2023. As we indicated on the Q4 2022 call, underperformance in Medicare growth and earnings is a while we balance the preservation of a base of membership with trough 2024 STARS revenue and expectations of improvement in STARS scores now geared towards our low-income and dual strategy Sarah described. While it's widely known that moving from 3.5 to 4 STARS comes with on average 5% more revenue, there's also a meaningful economic benefit of moving from 3 to 3.5 STARS that averages the equivalent of 3% to 6%, depending on the contract. Given we have approximately 80% of our current membership in contracts below 3.5 stars from last October's scoring, our focus now is to first maximize 3.5, especially as our membership will be shifting and tilting more towards low income and D-SNP in 2024 and beyond. So while you might consider Our Medicare business is temporarily under construction for 2024. We believe Medicare Advantage will be a margin expansion and growth driver for the back half of the decade. Once again, we haven't yet submitted bids for these products, so for external consumption, we're going to combine the Medicare and commercial 2024 forecasted revenue for this discussion. Together, we expect approximately $46 billion of premium revenue from Medicare and commercial segments in 2023. and $45 billion in 2024. Directionally, we expect to grow marketplace throughout the rest of 2023 and into 2024. On the other hand, we expect to rationalize certain Medicare plan benefit packages, or PBPs, in 2024, which will result in lower Medicare membership, but membership composition will be more consistent with the strategy Sarah outlined. When we add our other businesses, which represent approximately $6 billion in premium and service revenue, subject to additional divestitures, we expect total premium and service revenue midpoints of approximately $128 billion in 2024, compared to about $136 billion in 2023. We will issue formal 2024 guidance with a full table of details later in the year, but we thought it would be helpful to review some of the underlying assumptions that we believe support an adjusted EPS target of greater than $6.60. By powering through 2024 Medicare challenges and getting to the other side of redeterminations, this company will be stronger to seize the opportunities in the back half of the decade. Finally, While we are disappointed that we are lowering our outlook, this revised 2024 target reflects our updated view informed by an accelerated 2024 forecast process and recent insights in Medicaid, Marketplace, and Medicare. And it is a target we have confidence in delivering. This perspective also gives us the flexibility to make the right decisions for 2025 and beyond. We will do our best to exceed $6.60 in 2024 without sacrificing anything for 2025 and beyond. Operator, let's go to Q&A.
spk18: Thank you. If you'd like to ask a question, please press star then one. If you'd like to withdraw your question, please press star then two. Today's first question comes from H.J. Rice with Credit Suisse. Please go ahead.
spk13: Hi, everybody, and thanks for all the information. Just maybe to drill down a little further on what you're thinking with respect to Medicaid redeterminations, I guess it sounds like you're reflecting in your outlook for 24 a little more caution on acuity and potentially how quick that gets picked up in rate adjustment. I wonder if you could give us a sense, are you falling more on just thinking there's a little bit of lag in the period in which the rate adjustments get updated, or are you seeing anything that's indicating to you that the acuity itself will be worse than what you were thinking three or six months ago? And I wonder just granularly as we start to get into this, as you're talking to somebody that's getting redetermination, do you give them the notification? Does the state give them the notification? And As you talk to them about their options to sign up on the public exchanges, do you have a sense of whether they're going to do that immediately? Is there going to be a lag in the way they think about that before they immediately go and sign up? Any updated color on that as well?
spk09: Yeah, good morning. Thanks, AJ. Great question. So relative to redeterminations, we've over the last couple weeks of states have been approaching the April 1 start date. We've gotten a lot of good information. Some of it is from them finalizing their implementation plans. And as we noted, some of those have shifted in the final hours as they contemplate sort of the scope of this work. And some of it is states who have actually given us data files that allow us to update our models more formally. We have used that to refresh a really comprehensive multivariate model that we have across 31 states that takes into account all of the different dimensions that Drew talked about and allows us to project where membership shifts may happen and where acuity shifts may disconnect and then how all of that plays out over time with things like the risk quarters, with things like rate mechanisms, rate calendars, And then really an overarching view of what is the agenda of the state and are there other things going on like procurements and things like that. And so as a result of that, what we're really trying to do is build in a little bit more conservatism in 24 where we see the potential in some states for a temporary disconnect between rate and acuity. And again, we see this as temporary. In the long term, rate has always equaled acuity in Medicaid. But it allows our local teams to have the flexibility to navigate not just the redeterminations process, but those conversations with the states in a way that really prioritizes our customer relationship because of how critical we know those relationships are to our long-term success in Medicaid. So that's really sort of the driving factor behind additional conservatism in 24. And then to your question about how the tactical rollout is going, You know, the answer really depends state by state. There's obviously official notification in every state that goes out from the state to the members who they need to take through the redetermination process and then, you know, timelines in terms of those members being able to respond. CMS has done a really nice job of making sure states are following, you know, the guidelines in terms of multiple outreaches to members and the timelines in order to ensure that we don't have folks dropping through the cracks because of process. And then we have lined up, as I mentioned, those sort of multi-channel communication plans as well as activating local providers and our broker networks where we're allowed to so that we have direct conversations with members either through their providers where they can get more information or in those states where we can direct, educate, and outreach to members who are qualified for exchange products We actually have marketing campaigns specifically around that. And finally, your point about sort of the speed with which members are being responsive, again, I think it's going to depend, but one of the dynamics that we're seeing in marketplace special enrollment period and actually overall marketplace growth is a result of the combined awareness and affordability that has come from investments in broker marketing as well as obviously the enhanced APTCs. We think that, in particular, the broker community is really well mobilized against moving those members over to marketplace as quickly as possible.
spk18: Thank you. And our next question today comes from Josh Raskin in Ephron Research. Please go ahead.
spk00: Hi. Thanks. Good morning. Just a quick clarification and then my question, but did I hear that PDR is expected to amortize partially in 2024, meaning MA profitability is supposed to be expected to be negative in 2025 as well. And then my question is maybe, could you provide a little more color on your thoughts around statutory capital, especially as you'll see some of these revenue headwinds? You seem to screen as holding a little bit more capital than the peers. And I guess sort of how you think about that relative to debt to cap and share buybacks would be a strategic enough reason to maybe increase your leverage above your debt to cap targets.
spk14: Good questions, Josh. The PDR, no, we expect to fully amortize that in 2024. It's a one-year contract for Medicare members, as you know, and so we don't expect that to bleed into 2025. And so if that number is 200, that's what we've built into our guidance for 2023, but we will refine that as we get the bids finaled, see the rollout of the annual enrollment period beginning in December, and that will dictate the specific amount that we record from accounting rules, and then that would be re-evaluated at the end of each quarter of 2024 and adjusted accordingly. So that's how the PDR would work mechanically. On statutory capital, It's a good question. You know, we modified the management fees. We think we improved the management fee structure this year with more precision, and that has the result of trapping more capital into our regulated subs, which is why we expect to only do a billion and a half share buyback this year, which will be largely, you know, late in the year. We've got $300 million under our belt already, and then we expect that to step up to about $3 billion which we mentioned on the last earnings call for 2024. So, you know, we've got a certain level we like to maintain, but we certainly don't need to have excess capital sitting in our subs. And we'll go after that through the dividend process, you know, back half of this year and into 2024. Our debt to EBITDA is right around three times. We're, you know, we're content with that. It'll probably move up or down a little bit around that three times, but that's our target. I love the fact that we're investment grade now, and I think as we look at our debt stack over the next decade, that will serve the company well.
spk18: Thank you. And our next question today comes from Justin Lake at Wolf Research. Please go ahead.
spk05: Thanks. Good morning. First, a quick follow-up on AJ's question. Drew, is there any way you can delineate for us the impact of redeterminations on the risk pool versus what you expect to make up? On pricing, meaning maybe you could tell us if states kind of pushed off pricing completely for a year, how much of a negative impact do you now think just changes in the risk pool would have on your MLR for 2024? And then my questions on Medicare Advantage. One, do you still expect to lose money in Medicare Advantage despite the $200 million PDR, meaning X the PDR? Are you still losing money in 2024? And if so, maybe how much? And then appreciate the color on the stars at four stars for 2024. But as you said, three and a half stars is really important as a first step. Any color on how you expect to improve three and a half stars for 2025, I should say, versus the 20% you're at today? Thanks.
spk14: All right. A multi-three-part question there. On redeterminations, some of the mechanics on that, So when we went through that process, as Sarah described, of really looking at subpopulation by subpopulation, looking at the data that we had, what was shared by the state actuaries, you're triangulating a bunch of data points. And now we're starting to get data, which is great. We concluded that it would be prudent to have a provision of 50 basis points for the timing mismatch. And we do believe it's merely a timing mismatch in 2024. And so as you heard in my script, we're doing about 10 basis points better than we expected to for 2023. And we previously had 10 basis points of degradation built into our modeling. So we needed an additional 30. And so that's what's embedded. That's part of the driver of the $0.55 drop for 2024 adjusted earnings target. The second question you had was on Medicare. I'll answer the financial question and then pass it to Sarah and Jim Murray here on more color on Medicare and STARS and whatnot. But yes, we expect to lose money despite the amortization of the $200 million into 2024. So we're looking at and we were able to look at a number of things, including how we were performing in 2023 as we're thinking about setting the bids, and obviously getting the final rates was a pretty important factor in that equation, but yes, the Medicare business, we expect to lose more than that amortization of PDR.
spk09: And then on the STARS piece, I do want to be clear that we're obviously not taking our eye off the goal of maximizing four-star membership, but the The previous target of 60% and four star over three cycles is really no longer relevant for two reasons. One is our adjusted 2024 bid strategy and the intentional decision to double down on our core membership, which is inherently more complex from a quality standpoint. And then the second is CMS changed the rules. And so introducing the health equity index adjustment, which we are very supportive of, will actually help account for the management of that complexity over time and But we need to make sure that we invest in the short term around the health equity program in those contracts where that's going to matter in order to have that lift, take those contracts to four star in the long term. And so in some ways we're sort of slowing down to speed up and the near term objective of getting more of those contracts into three and a half star is really based primarily on operational execution and some of the investments that we talked about around not just HEDIS, but also the customer experience, which will influence CAPS. But let me let Jim Murray talk a little bit more because he is watching this day to day.
spk01: Thank you. Hi, Josh. How are you? What we've talked about in the past is we've been a very transactional company as it respects some of what we do in Medicare. And, you know, Sarah has pointed out a number of times around five strategic areas of focus in Medicare, and I'll reference some of those as I go through that. The end goal is to try to create relationships with our members and with our providers, and were we able to do that? I think it's going to have some positive impact on STARS, and I'll try to introduce that to you here. There's a lot of things that are going on, and I'm I'm going to be agnostic as it relates to either revenue year 24 or 25 or 26. But Sarah talked earlier about some of what we're doing around the improvement in CTMs. Obviously, we're doing a lot of work here to reach out to our members and try to create a better relationship with them. But one of the five areas of focus is rebalancing our distribution channels. There was a significant movement this past year where more of our members came to us with our W-2 and our direct-to-consumer and broker-on-the-street selling channels, which is significantly stronger for us from a lifetime value than some of the other channels we had used in the past, and that's having a significantly positive lift on CTMs. Sarah also mentioned we've really focused on service, We're starting to get back some of the CAHPS survey early returns, and we're seeing that there was a nice lift in the CAHPS question related to service, and so that ultimately will help us with CAHPS, and we're happy about that. Appeals is another admin measure. We're seeing some good results in 2023 relative to appeals. And our HEDIS scores this year, we're in the final week of chart chase, are improving year over year. But if I were being brutally honest, I would say it was done more with blunt force trauma as opposed to having an elegant infrastructure in place. And that's where Sarah talked earlier about needing to be in more value-based contracts. And we have a team of people who's focused on that. And then creating value-based enablement tools. We need to do a better job with our providers in showing them where we are and where they are relative to the risk-based contracts and the quality that they're delivering, so that they can take proactive action to help us with HEDIS scores. And we're in the process of building those tools, and I expect some really good results from that. So I think we're making some nice progress. I think you'll see a nice lift in our three and a half in October. But, you know, I like to say around here, miles to go before we sleep. Thank you.
spk18: And ladies and gentlemen, our next question comes from Stephen Baxter, Wells Fargo. Please go ahead.
spk17: Yeah, hi. Thanks for the question and all the detail. So when we look at Medicaid margins, either industry-wide or state-by-state, we see margins that are fairly elevated relative to historical norms and by an amount that would exceed, I think, what you're talking about, around the 50 basis points cumulative impact, you assume, which I think is at least in part thought to be temporary. I'm curious how you respond to that. For example, if industry-level margins went from say 3% to 2.5%, and that's still above target margins or what the industry has historically earned. I guess, why do you think states would respond to that? Thank you.
spk14: Well, states, they want a successful program, and they want payers such as Centene to deliver quality and savings, quite frankly, help them manage their budgets as well, especially with the complex populations. And so, I went and dug out, going back in time, to get to the essence of your question, what was the HBR for both WellCare and Centene over an extended time period, meaning you don't sort of, you know, any year you can have a little bit of a mismatch in trend and rate, but over an extended time, and let me just read you how consistent this has been. WellCare, 2015, 89.8, 16, 89.5, 17, 88.8, 18, 88.9, Centene, 2015, 89.5, 16, 89.8, 17, 89.3, 18, 89.5, really consistent. And so we expect, if we tick up into the, let's say, low 90s, we would expect to get that mismatch that we're building into guidance for 2024 sort of back into that high 89s obviously mix of business will will adjust that to some degree with complex populations having a little bit higher hbrs and low rest gna but we think we think that's the sweet spot and that's what we expect to be able to achieve as we look out over the uh the back half of the decade
spk02: Thank you. And our next question today comes from Nathan Rich at Goldman Sachs.
spk18: Please go ahead.
spk11: Great. Thanks for the question. Going back to the Medicare business, Sarah, you had talked about slowing membership growth to focus on your core members. I'm curious how that impacts your view of Medicare revenue growth longer term relative to the high single digit to 10% revenue growth guidance you laid out at the Analyst Day. And on margins for that business, Can you maybe talk about the investments that you're making in 2024 and how significant those are? And is there any change to the way you're thinking about the longer-term margins for that business? Thank you.
spk09: Yeah, thanks, Nathan, for the question. So in some ways, I think to your question in terms of rate and pace, of revenue growth, it's not dissimilar to how we're thinking about the rate and pace of STARS, which is going a little bit slower in the short term in order to ramp up in the long term. And so, you know, as we looked at all of the moving parts relative to the STARS head when we have in 24, and obviously the work we're doing to sort of rebuild the business given the decentralization of the well care operations and 21 and 22 AEP bid strategy, as well as the rates from CMS, we looked at 24 as an opportunity to kind of do a hard reset on that membership and that to create a pretty solid foundation for us to grow earnings off of over the long term. And obviously the shorter term view of that would be more around margin and then driving membership growth in the long term as we start to feather in the tailwind from the stars. And again, the revenue from getting to three and a half and then that health equity adjustment and then normal course program investments that will get more of those contracts and that membership up into four stars. And then relative to investments, let me talk about some of the investments that are more specific to Medicare, but again, they really do fit into the broader category of investments around customer experience, quality, and then sort of underlying infrastructure, particularly around data. The idea of, as Jim talked about, leveraging an own distribution channel to maximize the acquisition and onboarding experience for our members, making sure that we have the right provider enablement tools so that we can expand and optimize our value-based relationships and then increasing our self-service tools for members, as well as the quality investments around HEDIS and health equity. We think there's going to be some upfront investment, obviously, to set up those capabilities, but I think those will also layer into the overall P&L for Medicare. But because each one of those investments is high impact in terms of driving long-term value of customer, driving down the cost to manage a member, that we ultimately think that they won't have an impact on long-term margins, long-term target margins in Medicare.
spk02: Thank you. And our next question today comes from Scott Fiddle at Stevens.
spk18: Please go ahead.
spk12: Hi, thanks. I'm interested just to get your input into the debate that's going on right now just around core healthcare utilization trends and and how those are tracking, you know, excluding COVID, just looking at sort of non-COVID, how those are tracking relative to pricing expectations and maybe to give us some input into, you know, certain areas where you may see utilization running a bit higher and what some of those offsets may be in terms of what seems to be trending a bit better than expected. Thanks.
spk14: Thanks, Scott. Trends look stable in the quarter. We sort of look back to pre-COVID time periods, largely back to normalized utilizations. For instance, screenings are fully back, a little bit soft on cervical, but I think they changed the guidance on that in 2020. We keep on looking for signs of acuity increase and aren't finding any. Looking at the first few months after initial cancer diagnosis and or the cost per cancer diagnosis, those are all in check. So pretty stable. I mean, there's always watch items. Specialty pharmacy, obviously, is always a watch item. It has been for probably the last decade. We're watching behavioral health costs. They're up a little bit year over year with some substance abuse. And some of that's the waivers or some of the prior auth rules that were curbs were put in during the COVID era. But really, really pretty stable trend as we look at the quarter. And a little bit positive, as I mentioned in my script, in Medicare. Some of that was the flu was more heavily weighted, Q4 versus Q1. And inpatient is slightly better, probably a Venn diagram with the flu, less inpatient flu, but as a whole is a little bit better than Q1 of last year.
spk18: Thank you. And ladies and gentlemen, our next question comes from Sarah James at Cantor Fitzgerald. Please go ahead.
spk08: Thank you. I wanted to understand your updated marketplace assumptions for 24. So you're assuming some of the low acuity falls off on the Medicaid. I'm wondering if you're assuming any of that risk profile evolved in the marketplace as a whole in 24, and then based on some of the recent implementation changes by the state that seem to increasingly favor keeping people insured in some form, what do you have built into your new 2024 revenue guide for the overall marketplace market size?
spk09: Good morning, Sarah. Thanks for the question. We are still assuming about 200,000 to 300,000 members in that catcher's mitt opportunity. And as we've rerun all of the assumptions across that multivariate model I mentioned, that hasn't really changed. And again, it's really a result of the waterfall and assumptions about where those members go with large numbers chunks of those members going to employer-sponsored insurance or into the coverage gap. But I'll let Drew talk a little bit more about what we're building into our assumptions in terms of the acuity impact of those members.
spk14: Yes. So really pleased with the growth in the overall market. And as we've looked at data historically, as the market grows, the risk pool improves as well. I think the fortification of the enhanced APTCs, the advanced premium tax credits, was really helpful in solidifying this as sort of a market that's going to be strong for many years. So I think that's helped the risk pool. For us specifically, we're growing well beyond the market. Obviously, there was a Those members got dispersed in the free market, and we picked up a fair amount of those. But those came in at our pricing, our clinical programs, our network construct, our products, as if they were new members sort of off the street. And then we're also gaining market shares. So we expect actually to be in a pretty large payable position for risk adjustment, and we're accruing accordingly. And obviously, we will true that up once we get the first look of Wakely data in late June, early July. But pleased with some of the elements you look for when you're growing a lot. You look for signals through the data. The percentage of subsidized population is up 3% year-over-year to 95%. That's a good sign, we believe, for risk pools increasing. And, you know, we can look at stayers versus leavers. We had a 75% renewal rate in the 2023. Those, the stayers are equaling the leavers. So we're, you know, cautiously optimistic on that business and the risk pool for 2023. And as Sarah mentioned, We did layer in a couple hundred thousand of redetermined members coming into the marketplace later in the year, and so the member months aren't that significant of a driver, and we factored in some variance around that into our revenue guidance already.
spk02: Thank you. And our next question today comes from Kevin Fischbach at Bank of America.
spk18: Please go ahead.
spk03: Great. Thanks. I wanted to understand the long-term EPS guidance a little bit because it was just a little bit confusing to me because you're taking down this year's, or I should say next year's EPS number, still talking about 12% to 15%, but I think, Sarah, you said that your view about the earnings power hasn't changed. Does that mean that you think you'd be growing more like 15% off of this lower base, or is 12% to 15% the right way to be thinking about it? And then just to put a point on this PDR because the PDR is essentially taking whatever it is, 25, 30 cents of losses from next year and booking it this year. So your 660 guidance, is it right to think that that's more like a six, you know, whatever that is, 635 kind of real earning space that you have to then
spk14: overcome to grow 12 to 15 off of 660 so just trying to reconcile how you're thinking about long-term earnings power in particular the pdr and how that affects growth into 2025 thanks yeah your math on the pdr is not wrong and you're right you've got to step over that as you go into 25 and we've thought about that but i'd think of it more as not that linear because we're making bid decisions strategically and deciding where to invest and where to let go certain pockets or PBPs, as I mentioned in the script. And so it's helpful to know and to have the meaningful outperformance in 23 as yet another lever. So I wouldn't completely disconnect the PDR from, you know, us knowing that we're doing well in 2023 as you think about what 24 would have been absent the PDR. And then I'll let Sarah sort of weigh in on the 12 to 15%.
spk09: Yeah, thanks for the question and totally appreciate it. You know, when we think about the long term, and I'll roll back to, you know, even the beginning of the value creation plan, we had a lot of confidence that there was more earnings power in this organization than we were delivering back to shareholders then. I think that confidence a year ago had only grown significantly. The difference between then and now, I think, is a really more complete understanding of what it's going to take to fully unlock that value. And so we still have total confidence in that 12% to 15% long-term CAGR. I think our view is that we need to make some of these short-term both explicit and implicit investments in our business. in order to make sure that we are set up with the most strength against that long-term algorithm. And as Drew said, we see the $6.60 or greater than $6.60 floor as the right jump-off point for that 12% to 15% adjusted EPS in the long term.
spk02: Thank you. And our next question today comes from Gary Taylor at Cowen.
spk18: Please go ahead.
spk16: Good morning. Two quick questions. The first is I appreciate your commentary about receiving new data, state files from the states to update your margins assumptions around Medicaid. So the question is, is that largely complete? Have you received updated stay or lever files from all your states or is it really more from the states that are very imminently beginning the redeterminations, and we should maybe expect more material updates in that state information to come over the course of the year. The second is just on the IV&R days and dollars down a bit sequentially, I know there's some other items in that line. Just wondering if there's anything else, Drew, to call out impacting that line on the balance sheet. Thanks.
spk09: Let me – I'll hit the state files conversation and turn it over to Drew. So we have, as I mentioned, in all but five of our states, we either have received files or we have a process in place. The files that we've gotten have certainly been tilted towards the states that are already underway with their process or where their start dates are more imminent. And this actually rolls back to a conversation that we've had over the last year and a half in this forum about how we were preparing for this process and the idea that as we got data, our ability to drop that into our model and then extrapolate from that where there were common themes and whether we were seeing in those files sayer and lever analysis that was sort of in line with the macro analysis we did without the benefit of the actual files. And so getting those files is obviously helpful in order to give us a view of those specific states, but we've also been seeing trends in those files, again, largely in line with our expectations, but that have allowed us to update our extrapolations in the larger model. So that's a long-winded way of saying that we feel like the data that we've received so far is what has allowed us to update our view and conservatism in 24. but that we also think that it has given us a pretty solid view of 24 and what will come in from other states. Now, obviously, we need to see some of that, but there's been enough consistency to give us the confidence to share what we did today. And then I'll turn it over to Drew on IB&R.
spk14: Yeah, on the balance sheet, you know, liabilities are up a fair amount from year end, 1231-22. The accounts payable and accrued expenses are up, but that's $1.3 billion of state pass-throughs. So our pass-throughs, the pure pass-throughs actually don't go through medical claims liability. They go through premium tax revenue and premium tax expense sort of outside the IBNR process, so they don't really impact DCP. Now, there are state-directed payments embedded within medical claims liability, and we define those terms in our press release, and we've had for a while, but You know, IBNR is $17.5 billion or medical claims liability up from $16.7. You saw the DCP, you know, relatively flat. So feel good about the consistency of our reserving process.
spk02: Thank you. And our next question today comes from Lance Wilkes with Bernstein. Please go ahead.
spk06: Yeah, with the 55-cent decline in 2024, I think, I think you've kind of sketched out how much of that is due to the conservatism and redetermination. Could you talk a little bit about how much is from the targeted investments in MA bids or MA in your bid strategy there? And how much is investment in infrastructure? And of the investments in infrastructure, could you talk a little more about the components of that and how much of that is necessary for the Medicaid business and the core businesses as contrasted with Medicare Advantage?
spk09: Yeah, thanks, Lance. Great question. I was hoping you would ask that. Let me talk through sort of the core buckets of investment, and then I'll hand it over to Drew to delineate the bridge a little bit more precisely. So as we've gone through the transformation work, the value creation work, particularly the platform consolidation work that we launched last quarter, and then obviously the sort of updated analysis of product strategy, We see an opportunity in three main buckets for investments, and it's important to note, and I'll call out where some of them are specific to Medicare and other product lines as you ask, but it's important to note that part of the reasons we're choosing to make these investments now is because they will accrue to multiple lines of business. So these are really enterprise-wide synergistic investments. The first is under the umbrella of customer experience. And so this is where in Medicare, thinking about own distribution channels, which actually can accrue over the long term, we believe, to our marketplace business as well. Really, a business is becoming a sold business rather than one that is just purchased and influenced through brokers in a different way. Provider enablement tools, which again, will help with VBC expansion in Medicare, but also will support the VBC expansion work that we're doing in Medicaid. And then those self-service tools, which we see an opportunity across lines of business to sort of enhance our digital interaction with our members. The second major bucket is quality. And again, this is one where STARS is a piece of this, but the underlying components are really around HEDIS and health equity, which are major components of the quality programs for all three lines of business. HEDIS is going to become an increasingly important part of STARS based on the new CMS guidance, as are the health equity investments. HEDIS is a huge part of proving the quality outcomes to our state partners for Medicaid, and it will put us ahead of the curve for what we see coming in marketplace from a QRS standpoint. And then the last piece is infrastructure. And so a piece of that is really fortifying those target systems. So as we've been thinking about the platform consolidation, What are those platforms that are going to be the targets and carry the scale of the organization in the back half of the decade and making sure that we fortify those for scale? And then, of course, my favorite topic, which is data and really accelerating the work that we're doing around data liquidity across the organization, our agility and ability to invest and use that data to power the business. but also to drive innovation. So those are sort of the three major investment buckets. And again, some of those accrue to the Medicare business, but they all accrue to multiple business lines. And then I'll turn it over to you to give you the bridge.
spk14: Yeah, on the numbers, we've talked about the $200 million PDR. I know that hits 2023, so it's not part of the 55 cents, but you really need to think about that as a conscious investment. We don't take lightly spending shareholder money, but we think it's the right investments, targeting the right members, thinking about the long-term attractiveness of the Medicare market, especially in the populations that we will emphasize going forward. And then getting to the $0.55, which is in 2024, 60% of that is the 30 basis points in Medicaid, and the remaining 40%, about $150 million plus or minus, is the investments that Sarah just covered.
spk18: Thank you. And ladies and gentlemen, our final question today comes from Calvin Turnick with JP Morgan. Please go ahead.
spk04: Thanks. Just a couple of clarifications. I know you're being conservative on the STARS assumption for next year. You know, if you do get minimal improvement for 25, is the expectation that that comes back to you in 26? such that you kind of keep with that 2020-20 ramp that you talked about over the next three years. And then on Medicaid, I know you've mentioned, you know, having more member months this year and a little more visibility into the timing when members could roll off. Just wondering if there's anything you're anticipating in terms of HBR or earnings seasonality. Thanks.
spk09: Yeah, thanks, Cal. Let me hit the stars question. So if we, as I said, we are sort of assuming a downside scenario out of conservatism, partly because caps tends to be the longest pole in the tent to recover in stars. And so if we see minimal improvement year over year, the important thing to look at will be the progression into three and a half stars of our membership because, again, that's, as Drew talked about, where we get the economic benefit and the ability to continue to invest as we move through the progression. We, again, will look at the three-and-a-half-star threshold and movement of membership across that threshold as the definition of success as we move through the next couple of years. But the 2020-20 is not really a relevant guidepost anymore because of those changes I described in the bid strategy, which is intentionally going to make the mix more complicated and shift the denominator, and the fact that the CMS program rules really suggests a different, more methodical approach contract by contract to the levers that we use to get to four-star. And then I'll turn it over to Drew for the second part.
spk14: Yeah, earning seasonality, we expect to be pushing about 65% of adjusted EPS for 2023 in the first half of the year, so maybe 35 or slightly under 35 for the back half of the year. That back half does include the fourth quarter assumption around the PDR. And I think you were also referring to HBR seasonality and Medicaid. Think of it, you know, as like a checkmark. So we expect to be down a little bit in Q2 relative to the 90.0 and then rising in the back half of the year.
spk18: Thank you. Ladies and gentlemen, that's all the time we have for questions today. So I'd like to turn the conference back over to Sarah London for closing remarks.
spk09: Thank you. I just want to close out by reiterating Drew's comments and my own that we don't take the change in the 2024 lightly, but it's not something that we would be doing if we didn't firmly believe that it was the right thing for Centene in the long term. So I appreciate the great questions, appreciate everyone joining us today, and look forward to updating you as we continue to execute in 2023 and build momentum for 2024 and the long term. Thanks so much.
spk18: Thank you, ma'am. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
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