General (Tables)

3 Months Ended

Mar. 31, 2020

General

Schedule of disaggregation of revenue by major service line, type of customer and timing of revenue recognition

	Three Months Ended March 31, 2019
	Healthcare		Pharmacy Management		Elimination		Total
Major Service Lines
Behavioral & Specialty Health
Risk-based, non-EAP	$	361,808	$	—	$	(78)	$	361,730
EAP risk-based		89,617		—		—		89,617
ASO		55,203		8,143		(91)		63,255
Magellan Complete Care
Risk-based, non-EAP		642,571		—		—		642,571
ASO		15,054		—		—		15,054
PBM, including dispensing		—		493,224		(41,055)		452,169
Medicare Part D		—		63,341		—		63,341
PBA		—		33,977		—		33,977
Formulary management		—		17,183		—		17,183
Other		—		592		—		592
Total net revenue	$	1,164,253	$	616,460	$	(41,224)	$	1,739,489
Type of Customer
Government	$	888,492	$	203,271	$	—	$	1,091,763
Non-government		275,761		413,189		(41,224)		647,726
Total net revenue	$	1,164,253	$	616,460	$	(41,224)	$	1,739,489
Timing of Revenue Recognition
Transferred at a point in time	$	—	$	556,565	$	(41,055)	$	515,510
Transferred over time		1,164,253		59,895		(169)		1,223,979
Total net revenue	$	1,164,253	$	616,460	$	(41,224)	$	1,739,489

	Three Months Ended March 31, 2020
	Healthcare		Pharmacy Management		Elimination		Total
Major Service Lines
Behavioral & Specialty Health
Risk-based, non-EAP	$	349,580	$	—	$	(90)	$	349,490
EAP risk-based		79,939		—		—		79,939
ASO		59,122		11,533		(83)		70,572
Magellan Complete Care
Risk-based, non-EAP		703,369		—		—		703,369
ASO		16,664		—		—		16,664
PBM, including dispensing		—		518,112		(52,407)		465,705
Medicare Part D		—		55,666		—		55,666
PBA		—		30,128		—		30,128
Formulary management		—		22,161		—		22,161
Other		—		613		—		613
Total net revenue	$	1,208,674	$	638,213	$	(52,580)	$	1,794,307
Type of Customer
Government	$	947,136	$	203,957	$	—	$	1,151,093
Non-government		261,538		434,256		(52,580)		643,214
Total net revenue	$	1,208,674	$	638,213	$	(52,580)	$	1,794,307
Timing of Revenue Recognition
Transferred at a point in time	$	—	$	573,778	$	(52,407)	$	521,371
Transferred over time		1,208,674		64,435		(173)		1,272,936
Total net revenue	$	1,208,674	$	638,213	$	(52,580)	$	1,794,307

Schedule of accounts receivable, contract assets and contract liabilities

Accounts receivable, contract assets and contract liabilities consisted of the following (in thousands, except percentages):

	December 31,		March 31,
	2019		2020		$ Change		% Change
Accounts receivable	$	915,656	$	961,441	$	45,785		5.0%
Contract assets		2,231		12,333		10,102		452.8%
Contract liabilities - current		6,728		38,687		31,959		475.0%
Contract liabilities - long-term		11,099		10,895		(204)		(1.8%)

Schedule of customers generating in excess of ten percent of net revenues for respective segment

In addition to the Massachusetts Contract, New York Contract and Virginia Contract previously discussed, the following customers generated in excess of ten percent of net revenues for the respective segment for the three months ended March 31, 2019 and 2020 (in thousands):

Segment	Term Date	2019		2020
Healthcare
None
Pharmacy Management
Customer A	March 31, 2021	$	89,340	$	98,617

Schedule of leases

The following table shows the components of lease expenses for the three months ended March 31, 2020 (in thousands):

	Three Months Ended March 31, 2020
Operating lease cost	$	3,835
Finance lease cost:
Amortization of right-of-use asset		1,332
Interest on lease liabilities		214
Total finance lease cost		1,546
Short-term lease cost		124
Variable lease cost		789
Total lease cost		6,294
Sublease income		(112)
Net lease cost	$	6,182

The following table shows the components of the lease assets and liabilities as of March 31, 2020 (in thousands):

	March 31, 2020
Operating leases:
Other long-term assets	$	46,778
Accrued liabilities	$	13,787
Deferred credits and other long-term liabilities		40,987
Total operating lease liabilities	$	54,774
Finance leases:
Property and equipment, net	$	15,479
Current debt, finance lease and deferred financing obligations	$	5,136
Long-term debt, finance lease and deferred financing obligations		15,138
Total finance lease liabilities	$	20,274

The following table shows the weighted average remaining lease term and discount rate as of March 31, 2020:

	March 31, 2020
Weighted average remaining lease term
Operating leases		4.20
Finance leases		4.29
Weighted average discount rate
Operating leases		4.79%
Finance leases		4.40%

Supplemental cash flow information relating to leases is as follows (in thousands):

	Three months ended March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,277
Operating cash flows from finance leases		1,402
Financing cash flows from finance leases		214
Right-of-use asset obtained in exchange for new lease obligation
Operating leases		902
Finance leases		3,599

Schedule of maturity dates of leases

	March 31, 2020
2020	$	14,695
2021		18,349
2022		17,297
2023		11,922
2024		10,040
2025 and beyond		4,658
Total lease payments		76,961
Less interest		(1,913)
Present value of lease liabilities	$	75,048

Schedule of fair value of financial assets and liabilities

In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company’s assets and liabilities that are required to be measured at fair value as of December 31, 2019 and March 31, 2020 (in thousands):

	December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents (1)	$	—	$	313,509	$	—	$	313,509
Investments:
U.S. Government and agency securities		104,159		—		—		104,159
Corporate debt securities		—		239,693		—		239,693
Certificates of deposit		—		1,305		—		1,305
Total assets held at fair value	$	104,159	$	554,507	$	—	$	658,666

	March 31, 2020
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents (2)	$	—	$	189,556	$	—	$	189,556
Investments:
U.S. Government and agency securities		90,714		—		—		90,714
Corporate debt securities		—		264,462		—		264,462
Certificates of deposit		—		1,305		—		1,305
Total assets held at fair value	$	90,714	$	455,323	$	—	$	546,037

(1) Excludes $11.7 million of cash held in bank accounts by the Company.

(2) Excludes $194.4 million of cash held in bank accounts by the Company.

Summary of short-term and long-term investments

	December 31, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
U.S. Government and agency securities	$	104,096	$	75	$	(12)	$	104,159
Corporate debt securities		239,564		175		(46)		239,693
Certificates of deposit		1,305		—		—		1,305
Total investments at December 31, 2019	$	344,965	$	250	$	(58)	$	345,157

	March 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
U.S. Government and agency securities	$	90,166	$	554	$	(7)	$	90,713
Corporate debt securities		265,086		26		(649)		264,463
Certificates of deposit		1,305		—		—		1,305
Total investments at March 31, 2020	$	356,557	$	580	$	(656)	$	356,481

Summary of maturity dates of investments

The maturity dates of the Company’s investments as of March 31, 2020 are summarized below (in thousands):

	Amortized		Estimated
	Cost		Fair Value
2020	$	321,201	$	321,197
2021		35,356		35,284
Total investments at March 31, 2020	$	356,557	$	356,481

Schedule of stock option activity

Summarized information related to the Company’s stock options for the three months ended March 31, 2020 is as follows:

		Weighted
		Average
		Exercise
	Options	Price
Outstanding, beginning of period	2,125,861	$	69.22
Granted	50,271		67.90
Forfeited	(3,333)		83.55
Exercised	(216,734)		51.97
Outstanding, end of period	1,956,065	$	71.07
Vested and expected to vest at end of period	1,947,250	$	71.07
Exercisable, end of period	1,613,491	$	70.48

Schedule of nonvested restricted stock award activity

Summarized information related to the Company’s nonvested restricted stock awards (“RSAs”) for the three months ended March 31, 2020 is as follows:

		Weighted
		Average
		Grant Date
	Shares	Fair Value
Outstanding, beginning of period	39,761	$	65.40
Awarded	—		—
Vested	—		—
Forfeited	—		—
Outstanding, ending of period	39,761		65.40

Schedule of nonvested restricted stock units

Summarized information related to the Company’s nonvested restricted stock units (“RSUs”) for the three months ended March 31, 2020 is as follows:

		Weighted
		Average
		Grant Date
	Shares	Fair Value
Outstanding, beginning of period	256,430	$	74.12
Awarded	307,892		60.88
Vested	(98,165)		75.12
Forfeited	(2,524)		72.92
Outstanding, ending of period	463,633		65.12

Schedule of nonvested restricted performance stock units

Summarized information related to the Company’s nonvested restricted performance stock units (“PSUs”) for the three months ended March 31, 2020 is as follows:

		Weighted
		Average
		Grant Date
	Shares	Fair Value
Outstanding, beginning of period	248,559	$	104.27
Awarded	133,752		75.65
Vested	(52,861)		76.24
Forfeited	(29,735)		76.24
Outstanding, end of period	299,715		99.22