Molina Healthcare Announces First Quarter 2018 Results and Increases Fiscal Year 2018 Guidance

Date : 04/30/2018 @ 6:00AM
Source : Business Wire
Stock : Molina Healthcare (MOH)
Quote : 84.89  0.35 (0.41%) @ 4:02PM

Molina Healthcare Announces First Quarter 2018 Results and Increases Fiscal Year 2018 Guidance

Molina Healthcare (NYSE:MOH)
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Molina Healthcare, Inc. (NYSE: MOH):

  • Net income increases to $1.64 per diluted share from $1.37 in the first quarter of 2017.
  • First quarter results include a net benefit of $0.38 per diluted share for the net impact of the reconciliation of 2017 Marketplace cost sharing reduction (CSR) subsidies and other items not included in the Company’s preliminary 2018 guidance. First quarter 2017 results had included a benefit of $0.84 per diluted share from the termination fee for a proposed acquisition.
  • Premium revenue decreases 7.0% compared with the first quarter of 2017, as expected with the Company’s repositioning of Marketplace operations.
  • Medical care ratio decreases to 86.1% from 88.4% in the first quarter of 2017.
  • General and administrative expense ratio decreases to 7.6% from 8.9% in the first quarter of 2017.
  • 2018 guidance increased by $1.00 per diluted share to a range of $4.00–$4.50 net income per diluted share and $4.24–$4.74 adjusted net income per diluted share.
  • Revised 2018 guidance includes the net benefit of $0.38 per diluted share for items noted above that were not included in the Company’s preliminary 2018 guidance and $0.62 per diluted share in improved performance against the Company’s original internal estimates for the full year of 2018.

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the first quarter of 2018 and provided its revised guidance for fiscal year 2018.

“The financial results that we announced today reflect the progress we are making towards our goal of sustainable margin recovery,” said Joe Zubretsky, President and CEO. “First quarter results of $1.64 net income per diluted share are a significant improvement over 2017 and favorable to our expectations. Whether measured by key operating metrics, product line or health plan geography, we met or exceeded our expectations in most areas.”

 

First Quarter 2018 Highlights

  Three Months Ended March 31, 2018   2017 (In millions, except per-share amounts) Premium revenue $ 4,323 $ 4,648 Operating income $ 222 $ 82 Net income $ 107 $ 77 Net income per diluted share $ 1.64 $ 1.37   Diluted weighted average shares outstanding 65.2 56.2   Operating Statistics: Medical care ratio (1) 86.1 % 88.4 % G&A ratio (2) 7.6 % 8.9 % Premium tax ratio (1) 2.3 % 2.3 % Effective income tax expense rate 40.3 % 41.6 % Net profit margin (2) 2.3 % 1.6 %   __________________ (1)   Medical care ratio represents medical care costs as a percentage of premium revenue; premium tax ratio represents premium tax expenses as a percentage of premium revenue plus premium tax revenue.   (2) G&A ratio represents general and administrative expenses as a percentage of total revenue. Net profit margin represents net income as a percentage of total revenue.  

Summary of Significant Items Affecting Comparative First Quarter Financial Results

The table below summarizes the impact of certain items significant to the Company’s financial performance in the periods presented. The individual items presented below increase (decrease) income before income tax expense.

  Three Months Ended March 31, 2018   2017  

Per

 

Per

Diluted

Diluted

Amount

Share(1)

Amount

Share(1)

(In millions, except per diluted share amounts) Reimbursement of Marketplace CSR subsidies, for 2017 dates of service $ 70 $ 0.83 $ — $ — Restructuring costs (25 ) (0.30 ) — — Loss on debt extinguishment (10 ) (0.15 ) — — Fee received for terminated acquisition —   —   75   0.84 $ 35   $ 0.38   $ 75   $ 0.84   __________________ (1)   Except for certain items that are not deductible for tax purposes, per diluted share amounts are generally calculated at statutory income tax rates of 22% and 37% for the first quarters of 2018 and 2017, respectively.  

First Quarter of 2018 Compared With First Quarter of 2017

Net income for the first quarter of 2018 was $107 million, compared with net income of $77 million for the first quarter of 2017. Net income per diluted share was $1.64 for the first quarter of 2018 compared with $1.37 reported for the first quarter of 2017. Improved performance in the first quarter of 2018 resulted from improved medical and administrative cost efficiency.

Net income for the first quarter of 2018 included a net benefit of $35 million ($0.38 per diluted share) for items not included in the Company’s preliminary 2018 guidance. Net income for the first quarter of 2017 included a benefit of $75 million ($0.84 per diluted share) for the receipt of an acquisition termination fee.

Premium revenue decreased approximately 7% when compared with the first quarter of 2017. Lower premium revenue was driven by a decrease in Marketplace membership of over 50%, partially offset by Marketplace premium rate increases. As previously disclosed, the Company has increased premium rates and reduced its Marketplace presence effective January 1, 2018, as part of its overall program to improve profitability.

Overall, the medical care ratio decreased to 86.1%, from 88.4% in the first quarter of 2017. Excluding the benefit of the 2017 CSR reimbursement, the consolidated medical care ratio was 87.7% in the first quarter of 2018.

  • The medical care ratio for the Medicaid and Medicare programs combined decreased to 90.0%, from 91.0% in the first quarter of 2017. Improved performance at the Florida, Illinois, Ohio and South Carolina health plans, partially offset by a decline in performance at the Washington health plan, drove the decrease in the consolidated medical care ratio for Medicaid and Medicare combined. The 2017 CSR reimbursement had no impact on the medical care ratio for the Company’s Medicaid and Medicare programs.
  • The medical care ratio for the Company’s Marketplace operations was 50.6% for the first quarter of 2018. Excluding the impact of the 2017 Marketplace CSR adjustment noted below, the medical care ratio for Marketplace operations decreased to approximately 67%, from 75% in the first quarter of 2017. Improved profitability in Marketplace operations is primarily the result of premium increases implemented effective January 1, 2018.

The general and administrative (G&A) expense ratio decreased to 7.6%, from 8.9% in the first quarter of 2017. Excluding the impact of Marketplace broker commissions and exchange fees in both periods, the G&A ratio decreased to 6.8%, from 7.5% in the first quarter of 2017.

The Company recognized a benefit of approximately $70 million ($0.83 per diluted share) in reduced medical expense related to 2017 dates of service as a result of the federal government’s confirmation that the reconciliation of 2017 Marketplace CSR subsidies would be performed on an annual basis. In the fourth quarter of 2017, the Company had assumed a nine-month reconciliation of this item pending confirmation of the time period to which the 2017 reconciliation would be applied.

Approximately $25 million ($0.30 per diluted share) of restructuring costs were recognized in the first quarter, primarily relating to the write-off of prepaid and other assets in connection with the continuing re-design of core processes.

Approximately $10 million ($0.15 per diluted share) loss on debt extinguishment was recognized in the first quarter in connection with the issuance of 1.8 million common shares in exchange for $97 million principal amount of the Company’s 1.625% convertible senior notes.

2018 Revised Guidance

The following table summarizes 2018 Revised Guidance (1):

    Revised Preliminary Premium revenue ~ $17.4B ~ $17.5B Service revenue ~ $525M ~ $525M Premium tax revenue ~ $425M ~ $410M Health insurer fees reimbursed ~ $280M ~ $295M Investment income and other revenue   ~ $110M ~ $85M Total revenue ~ $18.7B ~ $18.8B Medical care costs ~$15.4B ~$15.6B Medical care ratio (2) 88% - 89% ~ 89% Cost of service revenue ~ $480M ~ $480M General and administrative expenses ~ $1.4B ~ $1.4B G&A ratio (3) ~ 7.4% ~ 7.3% Premium tax expenses ~$425M ~$410M Health insurer fees ~ $300M ~ $310M Depreciation and amortization ~ $115M ~ $115M Restructuring and separation costs ~ $25M — Interest expense and other income, net ~ $135M ~ $125M Income before income taxes $450M - $495M $355M - $400M Net income $272M - $306M $202M - $236M EBITDA (4) $724M - $768M $632M - $676M Effective tax rate 38% - 40% 41% - 43% Net profit margin (3) 1.5% - 1.6% 1.1% - 1.3% Diluted weighted average shares ~ 68.0M ~ 67.3M Net income per share $4.00 - $4.50 $3.00 - $3.50 Adjusted net income per share (4) $4.24 - $4.74 $3.23 - $3.73 End-of-year Marketplace membership 356,000 303,000 End-of-year Non-Marketplace membership 3,674,000 3,738,000   __________________ (1)   All amounts are estimates; actual results may differ materially. See the Company’s risk factors as discussed in its 2017 Form 10-K and other filings and the statements below in this press release after the heading “Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995.” (2) Medical care ratio represents medical care costs as a percentage of premium revenue. (3) G&A ratio represents general and administrative expenses as a percentage of total revenue. Net profit margin represents net income as a percentage of total revenue. (4) See reconciliation of non-GAAP financial measures at the end of this release.  

Conference Call

Management will host a conference call and webcast to discuss Molina Healthcare’s first quarter 2018 results at 8:30 a.m. Eastern time on Monday, April 30, 2018. The number to call for the interactive teleconference is (877) 270-2148 and entering confirmation number 7249375. A telephonic replay of the conference call will be available through Friday, May 4, 2018, by dialing (877) 344-7529 and entering confirmation number 10118429. A live audio broadcast of this conference call will be available on Molina Healthcare’s website, molinahealthcare.com. A 30-day online replay will be available approximately an hour following the conclusion of the live broadcast.

About Molina Healthcare

Molina Healthcare, Inc., a FORTUNE 500 company, provides managed health care services under the Medicaid and Medicare programs and through the state insurance marketplaces. Through its locally operated health plans, Molina Healthcare served approximately 4.1 million members as of March 31, 2018. For more information about Molina Healthcare, please visit molinahealthcare.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This earnings release contains “forward-looking statements” regarding the Company’s 2018 revised guidance, as well as its plans, expectations, and anticipated future events. Actual results could differ materially due to numerous known and unknown risks and uncertainties. Those known risks and uncertainties include, but are not limited to, the following:

  • the success of the Company’s profit improvement and maintenance initiatives, including the timing and amounts of the benefits realized, and administrative savings achieved;
  • the numerous political and market-based uncertainties associated with the Affordable Care Act (the “ACA”) or “Obamacare;”
  • the market dynamics surrounding the ACA Marketplaces, including but not limited to uncertainties associated with risk transfer requirements, the potential for disproportionate enrollment of higher acuity members, the discontinuation of premium tax credits, and the adequacy of agreed rates;
  • subsequent adjustments to reported premium revenue based upon subsequent developments or new information, including changes to estimated amounts payable or receivable related to Marketplace risk adjustment/risk transfer;
  • effective management of the Company’s medical costs;
  • the Company’s ability to predict with a reasonable degree of accuracy utilization rates, including utilization rates associated with seasonal flu patterns or other newly emergent diseases;
  • significant budget pressures on state governments and their potential inability to maintain current rates, to implement expected rate increases, or to maintain existing benefit packages or membership eligibility thresholds or criteria;
  • the full reimbursement of the ACA health insurer fee, or HIF;
  • the success of the Company’s efforts to retain existing government contracts, including those in Florida, New Mexico, Puerto Rico, Texas, and Washington, including the success of any protest filings;
  • the Company’s ability to manage its operations, including maintaining and creating adequate internal systems and controls relating to authorizations, approvals, provider payments, and the overall success of its care management initiatives;
  • the Company’s ability to consummate and realize benefits from acquisitions or divestitures;
  • the Company’s receipt of adequate premium rates to support increasing pharmacy costs, including costs associated with specialty drugs and costs resulting from formulary changes that allow the option of higher-priced non-generic drugs;
  • the Company’s ability to operate profitably in an environment where the trend in premium rate increases lags behind the trend in increasing medical costs;
  • the interpretation and implementation of federal or state medical cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit sharing arrangements, and risk adjustment provisions and requirements;
  • the Company’s estimates of amounts owed for such cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit-sharing arrangements, and risk adjustment provisions;
  • the Medicaid expansion cost corridors in California, New Mexico, and Washington, and any other retroactive adjustment to revenue where methodologies and procedures are subject to interpretation or dependent upon information about the health status of participants other than Molina members;
  • the interpretation and implementation of at-risk premium rules and state contract performance requirements regarding the achievement of certain quality measures, and the Company’s ability to recognize revenue amounts associated therewith;
  • cyber-attacks or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;
  • the success of the Company’s health plan in Puerto Rico, including the resolution of the Puerto Rico debt crisis, payment of all amounts due under the Company’s Medicaid contract, the effect of the PROMESA law, the impact of Hurricane Maria and the Company’s efforts to better manage the health care costs of its Puerto Rico health plan;
  • the success and renewal of the Company’s duals demonstration programs in California, Illinois, Michigan, Ohio, South Carolina, and Texas;
  • the accurate estimation of incurred but not reported or paid medical costs across the Company’s health plans;
  • efforts by states to recoup previously paid and recognized premium amounts;
  • complications, member confusion, or enrollment backlogs related to the annual renewal of Medicaid coverage;
  • government audits and reviews, or potential investigations, and any fine, sanction, enrollment freeze, monitoring program, or premium recovery that may result therefrom;
  • changes with respect to the Company’s provider contracts and the loss of providers;
  • approval by state regulators of dividends and distributions by the Company’s health plan subsidiaries;
  • changes in funding under the Company’s contracts as a result of regulatory changes, programmatic adjustments, or other reforms;
  • high dollar claims related to catastrophic illness;
  • the favorable resolution of litigation, arbitration, or administrative proceedings;
  • the relatively small number of states in which we operate health plans, including the greater scale and revenues of the Company’s California, Ohio, Texas, and Washington health plans;
  • the availability of adequate financing on acceptable terms to fund and capitalize the Company’s expansion and growth, repay the Company’s outstanding indebtedness at maturity and meet its liquidity needs, including the interest expense and other costs associated with such financing;
  • the Company’s failure to comply with the financial or other covenants in its credit agreements or the indentures governing its outstanding notes;
  • the sufficiency of the Company’s funds on hand to pay the amounts due upon conversion or maturity of its outstanding notes;
  • the failure of a state in which we operate to renew its federal Medicaid waiver;
  • changes generally affecting the managed care or Medicaid management information systems industries;
  • increases in government surcharges, taxes, and assessments, including but not limited to the deductibility of certain compensation costs;
  • newly emergent viruses or widespread epidemics, public catastrophes or terrorist attacks, and associated public alarm;
  • increasing competition and consolidation in the Medicaid industry;

and numerous other risk factors, including those discussed in the Company’s periodic reports and filings with the Securities and Exchange Commission. These reports can be accessed under the investor relations tab of the Company’s website or on the SEC’s website at sec.gov. Given these risks and uncertainties, the Company can give no assurances that its forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by its forward-looking statements will in fact occur, and the Company cautions investors not to place undue reliance on these statements. All forward-looking statements in this release represent the Company’s judgment as of April 30, 2018, and the Company disclaims any obligation to update any forward-looking statements to conform the statement to actual results or changes in its expectations.

  MOLINA HEALTHCARE, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME   Three Months Ended March 31, 2018   2017 (Dollar amounts in millions, except per-share amounts) Revenue: Premium revenue $ 4,323 $ 4,648 Service revenue 134 131 Premium tax revenue 104 111 Health insurer fees reimbursed 61 — Investment income and other revenue 24   14   Total revenue 4,646   4,904   Operating expenses: Medical care costs 3,722 4,111 Cost of service revenue 120 122 General and administrative expenses 352 439 Premium tax expenses 104 111 Health insurer fees 75 — Depreciation and amortization 26 39 Restructuring and separation costs 25   —   Total operating expenses 4,424   4,822   Operating income 222   82   Other expenses (income), net: Interest expense 33 26 Other expense (income), net 10   (75 ) Total other expenses (income), net 43   (49 ) Income before income tax expense 179 131 Income tax expense 72   54   Net income $ 107   $ 77     Net income per diluted share $ 1.64   $ 1.37     Diluted weighted average shares outstanding 65.2   56.2     Operating Statistics: Medical care ratio 86.1 % 88.4 % G&A ratio 7.6 % 8.9 % Premium tax ratio 2.3 % 2.3 % Effective income tax expense rate 40.3 % 41.6 % Net profit margin 2.3 % 1.6 %       MOLINA HEALTHCARE, INC. UNAUDITED CONSOLIDATED BALANCE SHEETS   March 31, December 31, 2018 2017 (In millions,except per-share data) ASSETS Current assets: Cash and cash equivalents $ 3,729 $ 3,186 Investments 2,444 2,524 Restricted investments 77 169 Receivables 950 871 Prepaid expenses and other current assets 411 239 Derivative asset 585   522   Total current assets 8,196 7,511 Property, equipment, and capitalized software, net 318 342 Goodwill and intangible assets, net 250 255 Restricted investments 120 119 Deferred income taxes 114 103 Other assets 135   141   $ 9,133   $ 8,471     LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Medical claims and benefits payable $ 2,023 $ 2,192 Amounts due government agencies 1,714 1,542 Accounts payable and accrued liabilities 713 366 Deferred revenue 404 282 Current portion of long-term debt 566 653 Derivative liability 585   522   Total current liabilities 6,005 5,557 Long-term debt 1,318 1,318 Lease financing obligations 198 198 Other long-term liabilities 59   61   Total liabilities 7,580   7,134   Stockholders’ equity: Common stock, $0.001 par value, 150 shares authorized; outstanding: 62 shares at March 31, 2018 and 60 shares at December 31, 2017 — — Preferred stock, $0.001 par value; 20 shares authorized, no shares issued and outstanding — — Additional paid-in capital 1,153 1,044 Accumulated other comprehensive loss (12 ) (5 ) Retained earnings 412   298   Total stockholders’ equity 1,553   1,337   $ 9,133   $ 8,471       MOLINA HEALTHCARE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   Three Months Ended March 31, 2018   2017 (In millions) Operating activities: Net income $ 107 $ 77 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 37 49 Deferred income taxes (6 ) (5 ) Share-based compensation 6 6 Non-cash restructuring charges 17 — Amortization of convertible senior notes and lease financing obligations 7 8 Loss on debt extinguishment 10 — Other, net 2 3 Changes in operating assets and liabilities: Receivables (83 ) (32 ) Prepaid expenses and other current assets (239 ) (12 ) Medical claims and benefits payable (163 ) (3 ) Amounts due government agencies 172 373 Accounts payable and accrued liabilities 319 50 Deferred revenue 130 146 Income taxes 78   59   Net cash provided by operating activities 394   719   Investing activities: Purchases of investments (389 ) (733 ) Proceeds from sales and maturities of investments 543 433 Purchases of property, equipment, and capitalized software (4 ) (26 ) Increase in restricted investments held-to-maturity — (5 ) Other, net (5 ) (6 ) Net cash provided by (used in) investing activities 145   (337 ) Financing activities: Cash paid for financing transaction fees (5 ) — Proceeds from employee stock plans — 1 Other, net —   (2 ) Net cash used in financing activities (5 ) (1 ) Net increase in cash, cash equivalents, and restricted cash and cash equivalents 534 381 Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period 3,290   2,912   Cash, cash equivalents, and restricted cash and cash equivalents at end of period $ 3,824   $ 3,293           MOLINA HEALTHCARE, INC. UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP   March 31, December 31, March 31, 2018 2017 2017 Ending Membership by Program: Temporary Assistance for Needy Families (TANF) and Children’s Health Insurance Program (CHIP) 2,435,000 2,457,000 2,548,000 Medicaid Expansion 662,000 668,000 684,000 Aged, Blind or Disabled (ABD) 411,000   412,000   401,000 Total Medicaid 3,508,000   3,537,000   3,633,000 Medicare-Medicaid Plan (MMP) - Integrated 56,000 57,000 55,000 Medicare Special Needs Plans 44,000   44,000   43,000 Total Medicare 100,000   101,000   98,000 Excluding Marketplace 3,608,000   3,638,000   3,731,000 Marketplace 453,000   815,000   1,035,000 4,061,000   4,453,000   4,766,000   Ending Membership by Health Plan: California 656,000 746,000 765,000 Florida 414,000 625,000 711,000 Idaho (1) 2,000 — — Illinois 151,000 165,000 194,000 Michigan 388,000 398,000 417,000 New Mexico 250,000 253,000 270,000 New York 32,000 32,000 34,000 Ohio 328,000 327,000 351,000 Puerto Rico 316,000 314,000 326,000 South Carolina 117,000 116,000 111,000 Texas 476,000 430,000 493,000 Utah 90,000 152,000 172,000 Washington 779,000 777,000 785,000 Wisconsin 62,000   118,000   137,000 4,061,000   4,453,000   4,766,000   __________________ (1)   Idaho operations commenced January 1, 2018.     MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA

(In millions, except percentages and per-member per-month amounts)

    Three Months Ended March 31, 2018

Member

Months (1)

  Premium Revenue   Medical Care Costs   MCR (2)  

Medical

Margin

Total   PMPM Total   PMPM TANF and CHIP 7.4 $ 1,373 $ 185.14 $ 1,272 $ 171.56 92.7 % $ 101 Medicaid Expansion 2.0 752 372.75 641 317.46 85.2 111 ABD 1.2   1,254   1,014.23 1,155   934.55 92.1 99 Total Medicaid 10.6   3,379   316.69 3,068   287.56 90.8 311 MMP 0.2 357 2,137.88 305 1,824.21 85.3 52 Medicare 0.1   157   1,188.97 131   994.81 83.7 26 Total Medicare 0.3   514   1,718.61 436   1,457.75 84.8 78 Non-Marketplace 10.9   3,893   354.94 3,504   319.48 90.0 389 Marketplace 1.4   430   312.87 218   158.40 50.6 212 12.3   $ 4,323   $ 350.25 $ 3,722   $ 301.55 86.1 % $ 601   Three Months Ended March 31, 2017

Member

Months (1)

Premium Revenue Medical Care Costs MCR (2)

Medical

Margin

Total PMPM Total PMPM TANF and CHIP 7.7 $ 1,402 $ 182.69 $ 1,304 $ 170.02 93.1 % $ 98 Medicaid Expansion 2.0 817 398.70 689 336.51 84.4 128 ABD 1.2   1,196   1,006.84 1,130   951.32 94.5 66 Total Medicaid 10.9   3,415   312.98 3,123   286.35 91.5 292 MMP 0.2 344 2,088.96 307 1,859.41 89.0 37 Medicare 0.1   138   1,068.20 117   902.67 84.5 21 Total Medicare 0.3   482   1,640.63 424   1,439.20 87.7 58 Non-Marketplace 11.2   3,897   347.84 3,547   316.62 91.0 350 Marketplace 2.9   751   262.16 564   196.72 75.0 187 14.1   $ 4,648   $ 330.39 $ 4,111   $ 292.20 88.4 % $ 537   __________________ (1)   A member month is defined as the aggregate of each month’s ending membership for the period presented. (2) The MCR represents medical costs as a percentage of premium revenue.     MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—NON-MARKETPLACE

(In millions, except percentages and per-member per-month amounts)

  Three Months Ended March 31, 2018

Member

Months

  Premium Revenue   Medical Care Costs   MCR  

Medical

Margin

Total   PMPM Total   PMPM California 1.8 $ 494 $ 272.61 $ 412 $ 227.31 83.4 % $ 82 Florida 1.0 382 351.58 345 317.41 90.3 37 Idaho (1) — 4 960.33 4 977.00 101.8 — Illinois 0.5 141 298.17 122 257.50 86.4 19 Michigan 1.1 376 336.64 331 296.19 88.0 45 New Mexico 0.7 319 466.17 310 453.30 97.2 9 New York 0.1 46 468.91 39 396.76 84.6 7 Ohio 0.9 551 576.60 460 481.26 83.5 91 Puerto Rico 1.0 186 193.13 174 181.39 93.9 12 South Carolina 0.3 122 348.08 104 297.52 85.5 18 Texas 0.7 562 809.90 519 747.53 92.3 43 Utah 0.3 92 339.71 77 284.61 83.8 15 Washington 2.3 584 256.66 574 252.41 98.3 10 Wisconsin 0.2 34 183.97 29 154.53 84.0 5 Other (2) —   —   — 4   — — (4 ) 10.9   $ 3,893   $ 354.94 $ 3,504   $ 319.48 90.0 % $ 389       Three Months Ended March 31, 2017

Member

Months

Premium Revenue Medical Care Costs MCR

Medical

Margin

Total PMPM Total PMPM California 1.8 $ 572 $ 308.57 $ 484 $ 261.31 84.7 % $ 88 Florida 1.1 364 339.30 352 328.45 96.8 12 Idaho (1) — — — — — — — Illinois 0.6 161 276.58 180 310.08 112.1 (19 ) Michigan 1.2 382 327.41 333 284.58 86.9 49 New Mexico 0.7 308 422.87 299 410.75 97.1 9 New York 0.1 46 441.19 42 409.63 92.8 4 Ohio 1.0 520 527.79 462 469.04 88.9 58 Puerto Rico 1.0 183 186.51 165 168.18 90.2 18 South Carolina 0.3 105 317.07 98 293.34 92.5 7 Texas 0.7 527 751.86 489 696.43 92.6 38 Utah 0.3 89 313.20 72 253.75 81.0 17 Washington 2.2 605 273.18 535 241.77 88.5 70 Wisconsin 0.2 33 165.40 27 135.91 82.2 6 Other (2) —   2   — 9   — — (7 ) 11.2   $ 3,897   $ 347.84 $ 3,547   $ 316.62 91.0 % $ 350     __________________ (1)   Idaho operations commenced January 1, 2018. (2) “Other” medical care costs include primarily medically related administrative costs at the parent company.     MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—MARKETPLACE

(In millions, except percentages and per-member per-month amounts)

  Three Months Ended March 31, 2018

Member

Months

  Premium Revenue   Medical Care Costs   MCR  

Medical

Margin

Total   PMPM Total   PMPM California 0.2 $ 49 $ 253.93 $ 31 $ 162.64 64.0 % $ 18 Florida 0.2 45 271.12 (16 ) (95.60 ) (35.3 ) 61 Michigan 0.1 13 224.11 9 144.16 64.3 4 New Mexico 0.1 34 438.67 19 246.50 56.2 15 Ohio 0.1 26 403.44 17 262.87 65.2 9 Texas 0.7 229 308.74 146 196.89 63.8 83 Utah (1) — (3 ) NM (10 ) NM NM 7 Washington — 39 526.36 30 405.40 77.0 9 Wisconsin (1) — (2 ) NM (8 ) NM NM 6 Other —   —   — —   — — —   1.4   $ 430   $ 312.87 $ 218   $ 158.40 50.6 % $ 212       Three Months Ended March 31, 2017

Member

Months

Premium Revenue Medical Care Costs MCR

Medical

Margin

Total PMPM Total PMPM California 0.4 $ 72 $ 184.34 $ 26 $ 65.53 35.5 % $ 46 Florida 1.0 292 292.80 206 205.91 70.3 86 Michigan 0.1 11 149.23 6 95.92 64.3 5 New Mexico 0.1 22 265.06 19 232.50 87.7 3 Ohio 0.1 21 334.26 17 273.72 81.9 4 Texas 0.7 157 222.40 113 161.02 72.4 44 Utah 0.2 45 202.48 51 228.20 112.7 (6 ) Washington 0.1 37 302.51 46 365.94 121.0 (9 ) Wisconsin 0.2 94 453.39 81 389.80 86.0 13 Other —   —   — (1 ) — — 1   2.9   $ 751   $ 262.16 $ 564   $ 196.72 75.0 % $ 187    

__________________

(1)   We terminated Marketplace operations at our Utah and Wisconsin health plans effective January 1, 2018, so the ratios for 2018 periods are not meaningful for those health plans.     MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—TOTAL

(In millions, except percentages and per-member per-month amounts)

  Three Months Ended March 31, 2018

Member

Months

  Premium Revenue   Medical Care Costs   MCR  

Medical

Margin

Total   PMPM Total   PMPM California 2.0 $ 543 $ 270.80 $ 443 $ 221.03 81.6 % $ 100 Florida 1.2 427 340.91 329 262.65 77.0 98 Idaho — 4 960.33 4 977.00 101.8 — Illinois 0.5 141 298.17 122 257.50 86.4 19 Michigan 1.2 389 331.08 340 288.68 87.2 49 New Mexico 0.8 353 463.33 329 431.94 93.2 24 New York 0.1 46 468.91 39 396.76 84.6 7 Ohio 1.0 577 565.62 477 467.41 82.6 100 Puerto Rico 1.0 186 193.13 174 181.39 93.9 12 South Carolina 0.3 122 348.08 104 297.52 85.5 18 Texas 1.4 791 551.28 665 463.37 84.1 126 Utah 0.3 89 328.83 67 246.78 75.0 22 Washington 2.3 623 265.20 604 257.25 97.0 19 Wisconsin 0.2 32 172.09 21 110.91 64.4 11 Other —   —   — 4   — — (4 ) 12.3   $ 4,323   $ 350.25 $ 3,722   $ 301.55 86.1 % $ 601       Three Months Ended March 31, 2017

Member

Months

Premium Revenue Medical Care Costs MCR

Medical

Margin

Total PMPM Total PMPM California 2.2 $ 644 $ 286.92 $ 510 $ 227.19 79.2 % $ 134 Florida 2.1 656 316.86 558 269.33 85.0 98 Idaho — — — — — — — Illinois 0.6 161 276.58 180 310.08 112.1 (19 ) Michigan 1.3 393 316.80 339 273.36 86.3 54 New Mexico 0.8 330 406.90 318 392.72 96.5 12 New York 0.1 46 441.19 42 409.63 92.8 4 Ohio 1.1 541 516.00 479 457.14 88.6 62 Puerto Rico 1.0 183 186.51 165 168.18 90.2 18 South Carolina 0.3 105 317.07 98 293.34 92.5 7 Texas 1.4 684 486.96 602 428.55 88.0 82 Utah 0.5 134 264.73 123 242.57 91.6 11 Washington 2.3 642 274.74 581 248.40 90.4 61 Wisconsin 0.4 127 311.30 108 264.53 85.0 19 Other —   2   — 8   — — (6 ) 14.1   $ 4,648   $ 330.39 $ 4,111   $ 292.20 88.4 % $ 537       MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA

(In millions, except percentages and per-member per-month amounts)

 

The following tables provide the details of our medical care costs for the periods indicated:

  Three Months Ended March 31, 2018   2017     % of     % of Amount PMPM Total Amount PMPM Total Fee for service $ 2,745 $ 222.38 73.8 % $ 3,086 $ 219.32 75.1 % Pharmacy 583 47.25 15.6 616 43.76 15.0 Capitation 312 25.28 8.4 324 23.06 7.9 Other 82   6.64   2.2   85   6.06   2.0   $ 3,722   $ 301.55   100.0 % $ 4,111   $ 292.20   100.0 %      

The following table provides the details of our medical claims and benefits payable as of the dates indicated:

  March 31, December 31, 2018 2017 Fee-for-service claims incurred but not paid (IBNP) $ 1,586 $ 1,717 Pharmacy payable 127 112 Capitation payable 62 67 Other (1) 248   296 $ 2,023   $ 2,192   __________________ (1)   “Other” medical claims and benefits payable include amounts payable to certain providers for which we act as an intermediary on behalf of various state agencies without assuming financial risk. Such receipts and payments do not impact our consolidated statements of income. As of March 31, 2018 and December 31, 2017, we had recorded non-risk provider payables of approximately $146 million and $122 million, respectively.  

MOLINA HEALTHCARE, INC.UNAUDITED CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE(Dollars in millions, except per-member amounts)

Our claims liability includes a provision for adverse claims deviation based on historical experience and other factors including, but not limited to, variations in claims payment patterns, changes in utilization and cost trends, known outbreaks of disease, and large claims. Our reserving methodology is consistently applied across all periods presented. The amounts displayed for “Components of medical care costs related to: Prior period” represent the amount by which our original estimate of claims and benefits payable at the beginning of the period was (more) less than the actual amount of the liability based on information (principally the payment of claims) developed since that liability was first reported. The following table presents the components of the change in medical claims and benefits payable for the periods indicated:

    Three Months Ended March 31,

Year Ended

December 31,

2017

2018   2017 Medical claims and benefits payable, beginning balance $ 2,192 $ 1,929 $ 1,929 Components of medical care costs related to: Current period 3,963 4,253 17,037 Prior period (241 ) (142 ) 36   Total medical care costs 3,722   4,111   17,073     Change in non-risk provider payables 45   (96 ) (106 ) Payments for medical care costs related to: Current period 2,498 2,683 15,130 Prior period 1,438   1,335   1,574   Total paid 3,936   4,018   16,704   Medical claims and benefits payable, ending balance $ 2,023   $ 1,926   $ 2,192     Benefit from prior period as a percentage of: Balance at beginning of period 11.0 % 7.4 % (1.9 )% Premium revenue, trailing twelve months 1.3 % 0.8 % (0.2 )% Medical care costs, trailing twelve months 1.4 % 0.9 % (0.2 )%   Days in claims payable, fee for service (1) 53 45 54   __________________ (1)   Claims payable includes primarily IBNP. Additionally, it includes certain fee-for-service payables reported in “Other” medical claims and benefits payable amounting to $22 million, $119 million and $99 million, as of March 31, 2018, 2017 and December 31, 2017, respectively.  

MOLINA HEALTHCARE, INC.UNAUDITED NON-GAAP FINANCIAL MEASURES

We use non-generally accepted accounting principles, or non-GAAP, financial measures as supplemental metrics in evaluating our financial performance, making financing and business decisions, and forecasting and planning for future periods. For these reasons, management believes such measures are useful supplemental measures to investors in comparing our performance to the performance of other public companies in the health care industry. These non-GAAP financial measures should be considered as supplements to, and not as substitutes for or superior to, GAAP measures. See further information regarding non-GAAP measures below the tables (in millions, except per diluted share amounts).

  Three Months Ended March 31, 2018   2017   Net income $ 107 $ 77 Adjustments: Depreciation, and amortization of intangible assets and capitalized software 34 46 Interest expense 33 26 Income tax expense 72   54   EBITDA $ 246   $ 203     Three Months Ended March 31, 2018   2017 Amount  

Per

Diluted

share

Amount  

Per

Diluted

share

Net income $ 107 $ 1.64 $ 77 $ 1.37 Adjustment: Amortization of intangible assets 5 0.08 9 0.16 Income tax effect (1) (1 ) (0.01 ) (3 ) (0.06 ) Amortization of intangible assets, net of tax effect 4   0.07   6   0.10   Adjusted net income $ 111   $ 1.71   $ 83   $ 1.47     __________________ (1)   Income tax effect of adjustments calculated at the blended federal and state statutory tax rate of 22% and 37% for the first quarters of 2018 and 2017, respectively.  

The following are descriptions of the adjustments made to GAAP measures used to calculate the non-GAAP measures used in this news release:

Earnings before interest, taxes, depreciation and amortization (EBITDA): Net income (GAAP) less depreciation, and amortization of intangible assets and capitalized software, interest expense and income tax expense. We believe that EBITDA is helpful in assessing our ability to meet the cash demands of our operating units.

Adjusted net income: Net income (GAAP) less amortization of intangible assets, net of income tax effect calculated at the statutory tax rate. We believe that adjusted net income is helpful in assessing our financial performance exclusive of the non-cash impact of the amortization of purchased intangibles.

Adjusted net income per diluted share: Adjusted net income divided by weighted average common shares outstanding on a fully diluted basis.

    MOLINA HEALTHCARE, INC. 2018 REVISED GUIDANCE   Reconciliation of Non-GAAP Financial Measures

(in millions, except per-share amounts)

  Low End High End Net income $ 272 $ 306 Adjustments: Depreciation, and amortization of intangible assets and capitalized software 148 148 Interest expense 125 125 Income tax expense 179   189   EBITDA $ 724   $ 768     Low End High End Amount   Per share (2) Amount Per share (2) Net income $ 272 $ 4.00 $ 306 $ 4.50 Adjustments: Amortization of intangible assets 21 0.31 21 0.31 Income tax effect (1) (5 ) (0.07 ) (5 ) (0.07 ) Amortization of intangible assets, net of tax effect 16   0.24   16   0.24   Adjusted net income $ 288   $ 4.24   $ 322   $ 4.74     __________________ (1)   Income tax effect calculated at the statutory tax rate of 22%. (2) Computation assumes 68.0 million diluted weighted average shares outstanding.  

Molina Healthcare, Inc.Ryan Kubota, 562-435-3666, ext. 119057Investor Relations

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