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

Date : 07/31/2018 @ 4:15PM
Source : Business Wire
Stock : Molina Healthcare (MOH)
Quote : 134.65  0.73 (0.55%) @ 12:57PM

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

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

  • Net income of $3.02 per diluted share on a GAAP basis in the second quarter of 2018, compared with $1.64 per diluted share in the first quarter of 2018
  • Second quarter 2018 results include a net benefit of $0.83 per diluted share for non-run rate items, primarily relating to the 2017 Marketplace risk adjustment
  • Premium revenue increases $191 million, or 4.4%, in the second quarter of 2018 compared with the first quarter of 2018
  • Medical care ratio of 85.3% in the quarter
  • General and administrative expense ratio of 6.9% in the quarter
  • Net profit margin of 4.1% in the quarter and 3.2% year to date
  • 2018 guidance increases by $3.00 per diluted share at the midpoint to a range of $7.15 - $7.35 net income per diluted share on a GAAP basis
  • 2018 guidance includes the net benefit of $0.96 per diluted share for the non-run rate items recorded in the first half of the year

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the second quarter of 2018.

“Our second quarter results are a strong indication that the early stages of our margin recovery and sustainability plan are working,” said Joe Zubretsky, President and Chief Executive Officer. “Our focus on managed care fundamentals and a more rigorous performance management process is reflected in our improved earnings.”

We believe that the sequential comparison of our 2018 second quarter performance with our 2018 first quarter performance is the most useful indicator of our business progress. Significant items impacting the quarter are presented in a table later in this press release.

Second Quarter of 2018 Compared With First Quarter of 2018

Net income increased to $202 million, from $107 million in the first quarter of 2018. Net income per diluted share increased to $3.02, from $1.64 in the first quarter of 2018.

Overall, the medical care ratio improved to 85.3%, from 86.1% in the first quarter of 2018. Excluding the combined benefit of the 2017 Marketplace risk adjustment and cost sharing reduction (CSR) reimbursement, the medical care ratio would have been 87.0% in the second quarter of 2018, compared with 87.2% in the first quarter of 2018. The sequential improvement in the overall medical care ratio was due to a decrease in the Medicaid medical care ratio partially offset by a seasonally higher Marketplace medical care ratio.

  • The Medicaid medical care ratio decreased to 89.8%, from 90.8% in the first quarter of 2018. Improved performance at the Washington, California, Texas, New Mexico and Illinois health plans, partially offset by a decline in performance at the Ohio and Florida health plans, drove the decrease in the medical care ratio for Medicaid.
  • The Marketplace medical care ratio increased to 57.4%, from 50.6% in the first quarter of 2018. Excluding the combined net benefit of the 2017 risk adjustment and CSR, the Marketplace medical care ratio would have been 68.4% in the second quarter of 2018, compared with 63.5% in the first quarter of 2018.

The general and administrative (G&A) expense ratio decreased to 6.9%, from 7.6% in the first quarter of 2018, due to increased revenue and continuing G&A cost containment. Excluding the impact of Marketplace broker commissions and exchange fees in both periods, the G&A ratio decreased to 6.2%, from 6.8% in the first quarter of 2018.

Renewal of Medicaid Contracts

Year to date in 2018, we renewed Medicaid contracts in Washington, Florida and Puerto Rico as follows:

  • In May 2018, our Washington health plan was selected to negotiate and enter into a managed care contract for the eight remaining regions of the state’s Apple Health Integrated Managed Care program, in addition to the two regions previously awarded to us. As of June 30, 2018, we served approximately 742,000 Medicaid members in Washington.
  • In June 2018, our Florida health plan was awarded Medicaid Managed Care contracts in Regions 8 and 11 of the Florida Statewide Medicaid Managed Care Invitation to Negotiate, beginning in 2019. As of June 30, 2018, we served approximately 96,000 Medicaid members in those regions.
  • In July 2018, our Puerto Rico health plan was selected to be one of the organizations to administer the Commonwealth’s new Medicaid Managed Care contract. Services under the new contract, currently expected to begin on November 1, 2018, would cover the entire island. As of June 30, 2018, we served approximately 326,000 Medicaid members in the East and Southwest regions of Puerto Rico.

Capital Plan Progress

In the second quarter of 2018, we repaid $300 million outstanding under the revolving credit facility. In addition, we repaid $96 million aggregate principal amount of our 1.125% cash convertible senior notes due 2020 and entered into privately negotiated termination agreements to terminate the respective portions of the call options and warrants. Year to date, we have reduced the principal amount of outstanding debt by $493 million.

Sale of Molina Medicaid Solutions Segment

In June 2018, we entered into a definitive agreement to sell Molina Medicaid Solutions (MMS) to DXC Technology Company. The divestiture, expected to close in the third quarter of 2018, is subject to the satisfaction of customary closing conditions and the receipt of certain third party consents and regulatory approvals. We expect the net cash selling price for the equity interests of MMS to approximate $220 million after certain adjustments.

Second Quarter of 2018 Compared With Second Quarter of 2017

Net income for the second quarter of 2018 was $202 million, compared with a net loss of $230 million for the second quarter of 2017. Net income per diluted share was $3.02 for the second quarter of 2018 compared with net loss per diluted share of $4.10 reported for the second quarter of 2017. In the second quarter of 2017, we recorded significant medical care costs relating to prior year dates of service in excess of historical expectations, and Marketplace-related premium deficiency reserves and changes in estimates relating to prior year dates of service. In addition, we recorded significant impairment and restructuring charges.

2018 Revised Guidance

The following table summarizes 2018 Revised Guidance (1):

  Premium revenue         ~ $17.5B Service revenue ~ $475M Premium tax revenue ~ $415M Health insurer fees reimbursed ~ $325M   Investment income and other revenue         ~ $125M   Total revenue ~ $18.8B Medical care costs ~ $15.2B Medical care ratio (2) ~ 87% Cost of service revenue ~ $430M General and administrative expenses ~ $1.4B G&A ratio (3) ~ 7.4% Premium tax expenses ~ $415M Health insurer fees ~ $345M Depreciation and amortization ~ $100M Restructuring and separation costs ~ $30M Interest expense and other income, net ~ $140M Income before income taxes $730M - $745M Net income $471M - $484M EBITDA (4) $968M - $985M Effective tax rate 35% - 36% Net profit margin (3) 2.5% - 2.6% Diluted weighted average shares ~ 65.9M Net income per share $7.15 - $7.35 Adjusted net income per share (4) $7.39 - $7.59 End-of-year Marketplace membership 354,000 End-of-year Medicaid and Medicare membership 3,569,000

__________________

  (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 second quarter 2018 results at 8:00 a.m. Eastern time on Wednesday, August 1, 2018. The number to call for the interactive teleconference is (877) 883-0383 and entering confirmation number 7567890. A telephonic replay of the conference call will be available through Wednesday, August 8, 2018, by dialing (877) 344-7529 and entering confirmation number 10121865. 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 June 30, 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 and medical cost 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 adjustment 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;
  • 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 or awarded government contracts, including those in New Mexico and Texas, and those for Regions 8 and 11 in Florida, including the success of any protest filings or defenses;
  • 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 divestitures and acquisitions, including the timely closing of the MMS divestiture;
  • 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 medical 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 debt crisis and the effect of the PROMESA law, and the impact of any future significant weather events;
  • 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, including litigation involving the ACA to which we ourselves are not a direct party;
  • 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;
  • the unexpected loss of the leadership of one or more of our senior executives;
  • 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 July 31, 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 OPERATIONS

      Three Months Ended June 30,     Six Months Ended June 30, 2018     2017 2018     2017 (Dollar amounts in millions, except per-share amounts) Revenue: Premium revenue $ 4,514 $ 4,740 $ 8,837 $ 9,388 Service revenue 127 129 261 260 Premium tax revenue 106 114 210 225 Health insurer fees reimbursed 104 — 165 — Investment income and other revenue 32   16   56   30   Total revenue 4,883   4,999   9,529   9,903   Operating expenses: Medical care costs 3,850 4,491 7,572 8,602 Cost of service revenue 118 124 238 246 General and administrative expenses 335 405 687 844 Premium tax expenses 106 114 210 225 Health insurer fees 99 — 174 — Depreciation and amortization 25 37 51 76 Impairment losses — 72 — 72 Restructuring and separation costs 8   43   33   43   Total operating expenses 4,541   5,286   8,965   10,108   Operating income (loss) 342   (287 ) 564   (205 ) Other expenses (income), net: Interest expense 32 27 65 53 Other expense (income), net 5   —   15   (75 ) Total other expenses (income), net 37   27   80   (22 ) Income (loss) before income tax expense (benefit) 305 (314 ) 484 (183 ) Income tax expense (benefit) 103   (84 ) 175   (30 ) Net income (loss) $ 202   $ (230 ) $ 309   $ (153 )   Net income (loss) per diluted share $ 3.02   $ (4.10 ) $ 4.68   $ (2.74 )   Diluted weighted average shares outstanding 66.7   56.2   66.0   56.1     Operating Statistics: Medical care ratio 85.3 % 94.8 % 85.7 % 91.6 % G&A ratio 6.9 % 8.1 % 7.2 % 8.5 % Premium tax ratio 2.3 % 2.4 % 2.3 % 2.3 % Effective income tax rate 33.8 % 26.8 % 36.2 % 16.0 % Net profit (loss) margin 4.1 % (4.6 )% 3.2 % (1.5 )%    

MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

      June 30,     December 31, 2018 2017

(In millions,except per-share data)

ASSETS Current assets: Cash and cash equivalents $ 3,392 $ 3,186 Investments 2,176 2,524 Restricted investments 80 169 Receivables 1,148 871 Prepaid expenses and other current assets 344 239 Derivative asset 657 522 Assets held for sale 230   —   Total current assets 8,027 7,511 Property, equipment, and capitalized software, net 276 342 Goodwill and intangible assets, net 201 255 Restricted investments 117 119 Deferred income taxes 114 103 Other assets 28   141   $ 8,763   $ 8,471     LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Medical claims and benefits payable $ 1,920 $ 2,192 Amounts due government agencies 1,746 1,542 Accounts payable and accrued liabilities 754 366 Deferred revenue 193 282 Current portion of long-term debt 484 653 Derivative liability 657 522 Liabilities held for sale 66   —   Total current liabilities 5,820 5,557 Long-term debt 1,019 1,318 Lease financing obligations 198 198 Other long-term liabilities 68   61   Total liabilities 7,105   7,134   Stockholders’ equity: Common stock, $0.001 par value, 150 shares authorized; outstanding: 62 shares at June 30, 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 1,055 1,044 Accumulated other comprehensive loss (11 ) (5 ) Retained earnings 614   298   Total stockholders’ equity 1,658   1,337   $ 8,763   $ 8,471      

MOLINA HEALTHCARE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

      Three Months Ended     Six Months Ended June 30, June 30, 2018     2017 2018     2017 (In millions) Operating activities: Net income (loss) $ 202 $ (230 ) $ 309 $ (153 ) Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Depreciation and amortization 36 47 73 96 Impairment losses — 72 — 72 Deferred income taxes — (36 ) (6 ) (41 ) Share-based compensation 7 29 13 35 Non-cash restructuring costs — — 17 — Amortization of convertible senior notes and lease financing obligations 6 8 13 16 Loss on debt extinguishment 5 — 15 — Other, net 2 4 4 7 Changes in operating assets and liabilities: Receivables (232 ) — (315 ) (32 ) Prepaid expenses and other current assets 58 (26 ) (181 ) (38 ) Medical claims and benefits payable (104 ) 151 (267 ) 148 Amounts due government agencies 33 269 205 642 Accounts payable and accrued liabilities 30 (68 ) 349 (18 ) Deferred revenue (172 ) (178 ) (42 ) (32 ) Income taxes 49   (89 ) 127   (30 ) Net cash (used in) provided by operating activities (80 ) (47 ) 314   672   Investing activities: Purchases of investments (525 ) (903 ) (914 ) (1,636 ) Proceeds from sales and maturities of investments 792 441 1,335 874 Purchases of property, equipment, and capitalized software (10 ) (34 ) (14 ) (60 ) Other, net (4 ) (13 ) (9 ) (24 ) Net cash provided by (used in) investing activities 253   (509 ) 398   (846 ) Financing activities: Repayment of credit facility (300 ) — (300 ) — Repayment of 1.125% Convertible Notes (89 ) — (89 ) — Cash paid for partial settlement of 1.125% Conversion Option (134 ) — (134 ) — Cash received for partial termination of 1.125% Call Option 134 — 134 — Cash paid for partial termination of 1.125% Warrants (113 ) — (113 ) — Proceeds from senior notes offerings, net of issuance costs — 325 — 325 Other, net 4   9   (1 ) 8   Net cash (used in) provided by financing activities (498 ) 334   (503 ) 333   Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents (325 ) (222 ) 209 159 Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period 3,824   3,293   3,290   2,912   Cash, cash equivalents, and restricted cash and cash equivalents at end of period $ 3,499   $ 3,071   $ 3,499   $ 3,071      

MOLINA HEALTHCARE, INC.

UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP

      June 30,     December 31,     June 30, 2018 2017 2017 Ending Membership by Program: Temporary Assistance for Needy Families (TANF) and Children’s Health Insurance Program (CHIP) 2,464,000 2,457,000 2,517,000 Medicaid Expansion 675,000 668,000 678,000 Aged, Blind or Disabled (ABD) 415,000   412,000   408,000 Total Medicaid 3,554,000   3,537,000   3,603,000 Medicare-Medicaid Plan (MMP) - Integrated 55,000 57,000 54,000 Medicare Special Needs Plans 45,000   44,000   44,000 Total Medicare 100,000   101,000   98,000 Total Medicaid and Medicare 3,654,000   3,638,000   3,701,000 Marketplace 409,000   815,000   949,000 4,063,000   4,453,000   4,650,000   Ending Membership by Health Plan: California 639,000 746,000 766,000 Florida 398,000 625,000 672,000 Illinois 219,000 165,000 163,000 Michigan 397,000 398,000 414,000 New Mexico 241,000 253,000 266,000 Ohio 320,000 327,000 351,000 Puerto Rico 326,000 314,000 322,000 South Carolina 114,000 116,000 112,000 Texas 450,000 430,000 465,000 Washington 776,000 777,000 788,000 Other (1) 183,000   302,000   331,000 4,063,000   4,453,000   4,650,000

__________________

  (1)   “Other” includes the Idaho, New York, Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results.    

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA

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

      Three Months Ended June 30, 2018

MemberMonths (1)

    Premium Revenue     Medical Care Costs     MCR (2)    

MedicalMargin

Total     PMPM Total     PMPM TANF and CHIP 7.5 $ 1,393 $ 186.18 $ 1,205 $ 161.13 86.5 % $ 188 Medicaid Expansion 2.1 761 372.04 676 330.83 88.9 85 ABD 1.3   1,288   1,033.34 1,209   969.27 93.8 79   Total Medicaid 10.9   3,442   319.52 3,090   286.89 89.8 352   MMP 0.1 367 2,224.30 313 1,893.91 85.1 54 Medicare 0.2   157   1,168.40 133   989.33 84.7 24   Total Medicare 0.3   524   1,751.49 446   1,488.85 85.0 78   Total Medicaid and Medicare 11.2   3,966   358.23 3,536   319.37 89.2 430   Marketplace 1.2   548   440.93 314   253.04 57.4 234   12.4   $ 4,514   $ 366.57 $ 3,850   $ 312.68 85.3 % $ 664     Three Months Ended June 30, 2017

MemberMonths (1)

Premium Revenue Medical Care Costs MCR (2)

MedicalMargin

Total PMPM Total PMPM TANF and CHIP 7.6 $ 1,391 $ 182.47 $ 1,315 $ 172.48 94.5 % $ 76 Medicaid Expansion 2.1 786 383.07 689 335.26 87.5 97 ABD 1.2   1,285   1,053.89 1,245   1,020.85 96.9 40   Total Medicaid 10.9   3,462   317.79 3,249   298.10 93.8 213   MMP 0.1 361 2,217.44 333 2,050.20 92.5 28 Medicare 0.2   148   1,126.14 126   963.34 85.5 22   Total Medicare 0.3   509   1,730.91 459   1,565.65 90.5 50   Total Medicaid and Medicare 11.2   3,971   354.87 3,708   331.36 93.4 263   Marketplace 2.8   769   267.37 783   272.37 101.9 (14 ) 14.0   $ 4,740   $ 336.98 $ 4,491   $ 319.29 94.8 % $ 249  

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  (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

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

      Six Months Ended June 30, 2018

MemberMonths

    Premium Revenue     Medical Care Costs     MCR    

MedicalMargin

Total     PMPM Total     PMPM TANF and CHIP 14.9 $ 2,766 $ 185.66 $ 2,477 $ 166.32 89.6 % $ 289 Medicaid Expansion 4.1 1,513 372.39 1,317 324.19 87.1 196 ABD 2.5   2,542   1,023.83 2,364   951.99 93.0 178 Total Medicaid 21.5   6,821   318.11 6,158   287.22 90.3 663 MMP 0.3 724 2,180.86 618 1,858.87 85.2 106 Medicare 0.3   314   1,178.58 264   992.05 84.2 50 Total Medicare 0.6   1,038   1,735.05 882   1,473.30 84.9 156 Total Medicaid and Medicare 22.1   7,859   356.59 7,040   319.43 89.6 819 Marketplace 2.6   978   373.67 532   203.34 54.4 446 24.7   $ 8,837   $ 358.40 $ 7,572   $ 307.11 85.7 % $ 1,265   Six Months Ended June 30, 2017

MemberMonths

Premium Revenue Medical Care Costs MCR

MedicalMargin

Total PMPM Total PMPM TANF and CHIP 15.3 $ 2,793 $ 182.58 $ 2,619 $ 171.25 93.8 % $ 174 Medicaid Expansion 4.1 1,603 390.88 1,378 335.88 85.9 225 ABD 2.4   2,481   1,030.68 2,375   986.54 95.7 106 Total Medicaid 21.8   6,877   315.39 6,372   292.22 92.7 505 MMP 0.3 705 2,152.75 640 1,954.15 90.8 65 Medicare 0.3   286   1,097.36 243   933.20 85.0 43 Total Medicare 0.6   991   1,685.72 883   1,502.36 89.1 108 Total Medicaid and Medicare 22.4   7,868   351.35 7,255   323.98 92.2 613 Marketplace 5.7   1,520   264.77 1,347   234.62 88.6 173 28.1   $ 9,388   $ 333.68 $ 8,602   $ 305.74 91.6 % $ 786    

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—

MEDICAID AND MEDICARE

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

      Three Months Ended June 30, 2018

MemberMonths

    Premium Revenue     Medical Care Costs     MCR    

MedicalMargin

Total     PMPM Total     PMPM California 1.8 $ 517 $ 289.80 $ 441 $ 247.36 85.4 % $ 76 Florida 1.2 377 353.81 362 339.31 95.9 15 Illinois 0.6 203 311.60 170 261.59 84.0 33 Michigan 1.2 388 342.45 331 292.20 85.3 57 New Mexico 0.7 313 469.88 290 435.36 92.7 23 Ohio 1.0 535 571.08 482 514.57 90.1 53 Puerto Rico 0.9 184 188.26 165 168.20 89.3 19 South Carolina 0.4 123 350.22 107 304.20 86.9 16 Texas 0.7 576 835.66 510 740.55 88.6 66 Washington 2.2 571 252.61 526 232.49 92.0 45 Other (1) 0.5   179   322.99 152   274.59 85.0 27   11.2   $ 3,966   $ 358.23 $ 3,536   $ 319.37 89.2 % $ 430     Three Months Ended June 30, 2017

MemberMonths

 

Premium Revenue Medical Care Costs MCR

MedicalMargin

Total PMPM Total PMPM California 1.9 $ 598 $ 318.89 $ 539 $ 287.36 90.1 % $ 59 Florida 1.1 380 347.20 370 337.92 97.3 10 Illinois 0.5 149 289.51 174 336.76 116.3 (25 ) Michigan 1.1 390 333.26 358 305.40 91.6 32 New Mexico 0.8 321 443.13 311 428.58 96.7 10 Ohio 1.0 529 536.90 489 496.41 92.5 40 Puerto Rico 0.9 179 184.28 189 194.42 105.5 (10 ) South Carolina 0.4 111 326.57 102 304.14 93.1 9 Texas 0.7 524 752.01 473 679.43 90.3 51 Washington 2.2 618 276.90 546 244.58 88.3 72 Other (1) 0.6   172   294.15 157   268.91 91.4 15   11.2   $ 3,971   $ 354.87 $ 3,708   $ 331.36 93.4 % $ 263  

__________________

  (1)   “Other” includes the Idaho, New York, Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results.    

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—

MEDICAID AND MEDICARE

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

      Six Months Ended June 30, 2018

MemberMonths

    Premium Revenue     Medical Care Costs     MCR    

MedicalMargin

Total     PMPM Total     PMPM California 3.6 $ 1,011 $ 281.14 $ 853 $ 237.26 84.4 % $ 158 Florida 2.2 759 352.68 707 328.26 93.1 52 Illinois 1.1 344 305.94 292 259.87 84.9 52 Michigan 2.3 764 339.56 662 294.19 86.6 102 New Mexico 1.4 632 468.00 600 444.44 95.0 32 Ohio 1.9 1,086 573.87 942 497.75 86.7 144 Puerto Rico 1.9 370 190.68 339 174.74 91.6 31 South Carolina 0.7 245 349.15 211 300.87 86.2 34 Texas 1.4 1,138 822.72 1,029 744.05 90.4 109 Washington 4.5 1,155 254.64 1,100 242.48 95.2 55 Other 1.1   355   318.94 305   273.97 85.9 50   22.1   $ 7,859   $ 356.59 $ 7,040   $ 319.43 89.6 % $ 819     Six Months Ended June 30, 2017

MemberMonths

Premium Revenue Medical Care Costs MCR

MedicalMargin

Total PMPM Total PMPM California 3.7 $ 1,170 $ 313.76 $ 1,023 $ 274.42 87.5 % $ 147 Florida 2.2 744 343.29 722 333.23 97.1 22 Illinois 1.1 310 282.66 354 322.63 114.1 (44 ) Michigan 2.3 772 330.34 690 295.02 89.3 82 New Mexico 1.5 629 432.98 610 419.65 96.9 19 Ohio 2.0 1,049 532.35 951 482.73 90.7 98 Puerto Rico 1.9 362 185.40 354 181.24 97.8 8 South Carolina 0.7 216 321.85 200 298.79 92.8 16 Texas 1.4 1,051 751.94 962 687.96 91.5 89 Washington 4.4 1,223 275.05 1,081 243.18 88.4 142 Other 1.2   342   291.93 308   262.97 90.1 34   22.4   $ 7,868   $ 351.35 $ 7,255   $ 323.98 92.2 % $ 613      

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—MARKETPLACE

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

      Three Months Ended June 30, 2018

MemberMonths

    Premium Revenue     Medical Care Costs     MCR    

MedicalMargin

Total     PMPM Total     PMPM California 0.2 $ 73 $ 426.16 $ 21 $ 117.92 27.7 % $ 52 Florida 0.1 100 698.31 38 269.86 38.6 62 Michigan — 15 288.67 7 146.97 50.9 8 New Mexico — 31 418.82 18 247.06 59.0 13 Ohio — 31 518.64 23 381.46 73.6 8 Texas 0.7 222 330.12 160 238.72 72.3 62 Washington 0.2 56 787.80 41 572.48 72.7 15 Other (1) —   20   NM 6   NM NM 14   1.2   $ 548   $ 440.93 $ 314   $ 253.04 57.4 % $ 234     Three Months Ended June 30, 2017

MemberMonths

Premium Revenue Medical Care Costs MCR

MedicalMargin

Total PMPM Total PMPM California 0.5 $ 81 $ 186.90 $ 67 $ 154.23 82.5 % $ 14 Florida 0.9 269 284.60 317 336.78 118.3 (48 ) Michigan 0.1 16 204.15 10 135.89 66.6 6 New Mexico — 31 367.98 23 266.91 72.5 8 Ohio — 24 377.94 27 404.20 106.9 (3 ) Texas 0.7 177 247.49 129 180.92 73.1 48 Washington 0.2 44 317.42 49 359.87 113.4 (5 ) Other (1) 0.4   127   304.00 161   383.02 126.0 (34 ) 2.8   $ 769   $ 267.37 $ 783   $ 272.37 101.9 % $ (14 )

__________________

  (1)   “Other” includes the Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results. We terminated Marketplace operations at these plans effective January 1, 2018, so the ratios for 2018 periods are not meaningful (NM).    

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—MARKETPLACE

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

      Six Months Ended June 30, 2018

MemberMonths

    Premium Revenue     Medical Care Costs     MCR    

MedicalMargin

Total     PMPM Total     PMPM California 0.4 $ 122 $ 334.47 $ 52 $ 141.73 42.4 % $ 70 Florida 0.3 145 468.36 22 73.13 15.6 123 Michigan 0.1 28 254.69 16 145.49 57.1 12 New Mexico 0.1 65 429.19 37 246.77 57.5 28 Ohio 0.1 57 458.48 40 319.53 69.7 17 Texas 1.4 451 318.93 306 216.83 68.0 145 Washington 0.2 95 653.89 71 486.90 74.5 24 Other —   15   NM (12 ) NM NM 27   2.6   $ 978   $ 373.67 $ 532   $ 203.34 54.4 % $ 446     Six Months Ended June 30, 2017

MemberMonths

Premium Revenue Medical Care Costs MCR

MedicalMargin

Total PMPM Total PMPM California 0.9 $ 153 $ 185.68 $ 93 $ 112.20 60.4 % $ 60 Florida 1.9 561 288.81 523 269.48 93.3 38 Michigan 0.2 27 177.12 17 116.21 65.6 10 New Mexico 0.1 53 317.10 42 249.90 78.8 11 Ohio 0.1 45 356.20 44 339.26 95.2 1 Texas 1.4 334 235.07 242 171.07 72.8 92 Washington 0.3 81 310.26 95 362.78 116.9 (14 ) Other 0.8   266   313.77 291   342.88 109.3 (25 ) 5.7   $ 1,520   $ 264.77 $ 1,347   $ 234.62 88.6 % $ 173      

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—TOTAL

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

      Three Months Ended June 30, 2018

MemberMonths

    Premium Revenue     Medical Care Costs     MCR    

MedicalMargin

Total     PMPM Total     PMPM California 2.0 $ 590 $ 301.73 $ 462 $ 236.04 78.2 % $ 128 Florida 1.3 477 394.38 400 331.13 84.0 77 Illinois 0.6 203 311.60 170 261.59 84.0 33 Michigan 1.2 403 340.08 338 285.78 84.0 65 New Mexico 0.7 344 464.90 308 416.99 89.7 36 Ohio 1.0 566 567.96 505 506.66 89.2 61 Puerto Rico 0.9 184 188.26 165 168.20 89.3 19 South Carolina 0.4 123 350.22 107 304.20 86.9 16 Texas 1.4 798 585.50 670 492.23 84.1 128 Washington 2.4 627 268.84 567 242.80 90.3 60 Other (1) 0.5   199   360.90 158   285.65 79.1 41   12.4   $ 4,514   $ 366.57 $ 3,850   $ 312.68 85.3 % $ 664     Three Months Ended June 30, 2017

MemberMonths

Premium Revenue Medical Care Costs MCR

MedicalMargin

Total PMPM Total PMPM California 2.4 $ 679 $ 294.09 $ 606 $ 262.34 89.2 % $ 73 Florida 2.0 649 318.21 687 337.39 106.0 (38 ) Illinois 0.5 149 289.51 174 336.76 116.3 (25 ) Michigan 1.2 406 325.38 368 295.06 90.7 38 New Mexico 0.8 352 435.34 334 411.83 94.6 18 Ohio 1.0 553 527.14 516 490.75 93.1 37 Puerto Rico 0.9 179 184.28 189 194.42 105.5 (10 ) South Carolina 0.4 111 326.57 102 304.14 93.1 9 Texas 1.4 701 495.93 602 426.41 86.0 99 Washington 2.4 662 279.21 595 251.16 90.0 67 Other (1) 1.0   299   298.29 318   316.89 106.2 (19 ) 14.0   $ 4,740   $ 336.98 $ 4,491   $ 319.29 94.8 % $ 249  

__________________

  (1)   “Other” includes the Idaho, New York, Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results.    

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—TOTAL

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

      Six Months Ended June 30, 2018

MemberMonths

    Premium Revenue     Medical Care Costs     MCR    

MedicalMargin

Total     PMPM Total     PMPM California 4.0 $ 1,133 $ 286.07 $ 905 $ 228.44 79.9 % $ 228 Florida 2.5 904 367.18 729 296.29 80.7 175 Illinois 1.1 344 305.94 292 259.87 84.9 52 Michigan 2.4 792 335.59 678 287.23 85.6 114 New Mexico 1.5 697 464.11 637 424.58 91.5 60 Ohio 2.0 1,143 566.77 982 486.79 85.9 161 Puerto Rico 1.9 370 190.68 339 174.74 91.6 31 South Carolina 0.7 245 349.15 211 300.87 86.2 34 Texas 2.8 1,589 567.95 1,335 477.43 84.1 254 Washington 4.7 1,250 267.01 1,171 250.05 93.6 79 Other 1.1   370   333.35 293   263.24 79.0 77   24.7   $ 8,837   $ 358.40 $ 7,572   $ 307.11 85.7 % $ 1,265     Six Months Ended June 30, 2017

MemberMonths

Premium Revenue Medical Care Costs MCR

MedicalMargin

Total PMPM Total PMPM California 4.6 $ 1,323 $ 290.56 $ 1,116 $ 245.02 84.3 % $ 207 Florida 4.1 1,305 317.53 1,245 303.09 95.5 60 Illinois 1.1 310 282.66 354 322.63 114.1 (44 ) Michigan 2.5 799 321.10 707 284.24 88.5 92 New Mexico 1.6 682 421.11 652 402.27 95.5 30 Ohio 2.1 1,094 521.57 995 473.95 90.9 99 Puerto Rico 1.9 362 185.40 354 181.24 97.8 8 South Carolina 0.7 216 321.85 200 298.79 92.8 16 Texas 2.8 1,385 491.46 1,204 427.48 87.0 181 Washington 4.7 1,304 276.99 1,176 249.79 90.2 128 Other 2.0   608   301.11 599   296.58 98.5 9   28.1   $ 9,388   $ 333.68 $ 8,602   $ 305.74 91.6 % $ 786      

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 June 30, 2018     2017 Amount     PMPM    

% ofTotal

Amount     PMPM    

% ofTotal

Fee for service $ 2,861 $ 232.40 74.4 % $ 3,348 $ 238.04 74.5 % Pharmacy 567 46.05 14.7 650 46.23 14.5 Capitation 282 22.89 7.3 356 25.29 7.9 Other   140   11.34 3.6     137   9.73   3.1   $ 3,850 $ 312.68 100.0 % $ 4,491 $ 319.29   100.0 %   Six Months Ended June 30, 2018 2017 Amount PMPM

% ofTotal

Amount PMPM

% ofTotal

Fee for service $ 5,606 $ 227.38 74.1 % $ 6,434 $ 228.68 74.8 % Pharmacy 1,150 46.66 15.2 1,266 45.00 14.7 Capitation 594 24.09 7.8 680 24.17 7.9 Other   222   8.98 2.9     222   7.89   2.6   $ 7,572 $ 307.11 100.0 % $ 8,602 $ 305.74   100.0 %  

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

  June 30, December 31, 2018 2017 Fee-for-service claims incurred but not paid (IBNP) $ 1,510 $ 1,717 Pharmacy payable 116 112 Capitation payable 49 67 Other (1)   245   296   $ 1,920 $ 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 operations. As of June 30, 2018 and December 31, 2017, we had recorded non-risk provider payables of approximately $158 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:

    Six Months Ended June 30,    

Year EndedDecember 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 7,794 8,633 17,037 Prior period (1) (222 ) (31 ) 36   Total medical care costs 7,572   8,602   17,073     Change in non-risk provider payables 56   (114 ) (106 ) Payments for medical care costs related to: Current period 6,248 6,883 15,130 Prior period 1,652   1,457   1,574   Total paid 7,900   8,340   16,704   Medical claims and benefits payable, ending balance $ 1,920   $ 2,077   $ 2,192     Days in claims payable, fee for service (2) 49 46 54

__________________

  (1)   Excludes the 2018 benefit of the 2017 Marketplace CSR reimbursement. (2) Claims payable includes primarily IBNP. It also includes certain fee-for-service payables reported in “Other” medical claims and benefits payable amounting to $33 million, $157 million and $99 million, as of June 30, 2018, 2017 and December 31, 2017, respectively.    

MOLINA HEALTHCARE, INC.

UNAUDITED SUMMARY OF SIGNIFICANT ITEMS AFFECTING SECOND QUARTER AND

YEAR-TO-DATE FINANCIAL RESULTS

(In millions, except per diluted share amounts)

 

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

   

Three Months EndedJune 30, 2018

   

Six Months EndedJune 30, 2018

Amount    

PerDilutedShare (1)

Amount    

PerDilutedShare (1)

  Marketplace risk adjustment, for 2017 dates of service $ 79 $ 0.92 $ 56 $ 0.66 Marketplace CSR subsidies, for 2017 dates of service 6 0.07 76 0.90 Restructuring costs (8 ) (0.10 ) (33 ) (0.39 ) Loss on debt extinguishment (5 ) (0.06 ) (15 ) (0.21 ) $ 72   $ 0.83   $ 84   $ 0.96  

__________________

  (1)   Except for certain items that are not deductible for tax purposes, per diluted share amounts are generally calculated at the statutory income tax rate of 22%.    

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 June 30,     Six Months Ended June 30, 2018     2017 2018     2017   Net income (loss) $ 202 $ (230 ) $ 309 $ (153 ) Adjustments: Depreciation and amortization of intangible assets and capitalized software 33 44 67 90 Interest expense 32 27 65 53 Income tax expense (benefit) 103   (84 ) 175   (30 ) EBITDA $ 370   $ (243 ) $ 616   $ (40 )       Three Months Ended June 30,     Six Months Ended June 30, 2018     2017 2018     2017 Amount    

PerDilutedShare

Amount    

PerDilutedShare

Amount    

PerDilutedShare

Amount    

PerDilutedShare

Net income (loss) $ 202 $ 3.02 $ (230 ) $ (4.10 ) $ 309 $ 4.68 $ (153 ) $ (2.74 ) Adjustment: Amortization of intangible assets 5 0.08 8 0.14 10 0.16 17 0.30 Income tax effect (1) (1 ) (0.02 ) (3 ) (0.05 ) (2 ) (0.04 ) (6 ) (0.11 ) Amortization of intangible assets, net of tax effect 4   0.06   5   0.09   8   0.12   11   0.19   Adjusted net income (loss) $ 206   $ 3.08   $ (225 ) $ (4.01 ) $ 317   $ 4.80   $ (142 ) $ (2.55 )

__________________

  (1)   Income tax effect of adjustments calculated at the blended federal and state statutory tax rate of 22% and 37% for 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 (loss) (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 (loss) (GAAP) less amortization of intangible assets, net of income tax effect calculated at the statutory tax rate. We believe that adjusted net income (loss) 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 (loss) 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 $ 471 $ 484 Adjustments: Depreciation, and amortization of intangible assets and capitalized software 125 125 Interest expense 115 115 Income tax expense   257     261   EBITDA $ 968   $ 985       Low End High End Amount     Per share (2) Amount

Per share (2)

Net income $ 471 $ 7.15 $ 484 $ 7.35 Adjustments: Amortization of intangible assets 21 0.32 21 0.32 Income tax effect (1)   (5 )   (0.08 )   (5 )   (0.08 ) Amortization of intangible assets, net of tax effect   16     0.24     16     0.24   Adjusted net income $ 487   $ 7.39   $ 500   $ 7.59  

__________________

  (1)   Income tax effect calculated at the statutory tax rate of 22%.

(2)

Computation assumes 65.9 million diluted weighted average shares outstanding.

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

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