Also Announces Leadership Succession Plan
Magellan Health, Inc. (NASDAQ: MGLN) today announced financial
results for the second quarter ended June 30, 2019, as summarized
below:
Three Months Ended Year to date June 30
June 30 (In millions, except per share amounts)
2019
2018
Chg
2019
2018
Chg
Net revenue
$
1,788.3
$
1,810.9
-1.2%
$
3,527.8
$
3,616.0
-2.4%
Net income
$
13.6
$
13.6
0.5%
$
14.0
$
25.0
-43.8%
Segment profit [1]
$
62.1
$
68.0
-8.7%
$
107.7
$
123.6
-12.9%
Adjusted net income [1]
$
21.1
$
23.3
-9.5%
$
30.6
$
44.1
-30.5%
Earnings per share
$
0.56
$
0.53
5.7%
$
0.58
$
0.98
-40.8%
Adjusted earnings per share [1]
$
0.86
$
0.92
-6.5%
$
1.26
$
1.73
-27.2%
[1] Refer to the Basis of Presentation for a discussion of
non-GAAP financial measures.
Leadership Succession Plan:
- Magellan Health announced that Barry M. Smith, chairman and
chief executive officer of Magellan Health, has decided to retire.
Mr. Smith will continue to serve as chief executive officer and as
a member of the Board of Directors to ensure a smooth and orderly
transition. The Board has engaged a search firm to begin a
comprehensive search for a new CEO.
- Mr. Smith was elected to the Board in 2011 and was named chief
executive officer in January 2013 and executive chairman in January
2014. He previously served as a director from 2004 to 2008.
- Steven J. Shulman, who currently serves on the Board as a
director, has been elected Chairman of the Board. Mr. Shulman
served as chairman and chief executive officer of Magellan Health
from 2002 to 2008. He rejoined the Board as a director in March of
this year.
“I want to thank the talented, dedicated team of professionals
that I’ve had the pleasure of working with over these many years,”
said Mr. Smith. “I am proud of the work we’ve done together to help
transform healthcare and positively impact the lives of customers
and members.”
“Steve is a highly respected leader in the healthcare industry,”
continued Mr. Smith. “He is a former chief executive officer and
Board member of Magellan with a great deal of understanding of
Magellan’s specialized sector. I look forward to working with him
and the Board throughout the search and transition process.”
“We thank Barry for his commitment and dedication to Magellan
Health, its employees, members and customers,” said Mr. Shulman.
“We are grateful for his leadership of the Company during a period
of expansion through organic growth and strategic acquisitions. We
are excited about the Company’s prospects and look forward to
continuing our support of this important work as we find the right
successor to lead this great Company through the next phase of
growth.”
Second Quarter Highlights:
- Net revenue decreased 1.2 percent over the second quarter of
2018 to $1.8 billion.
- Net income increased 0.5 percent over the second quarter of
2018 to $13.6 million.
- Segment profit decreased 8.7 percent over the second quarter of
2018 to $62.1 million.
- Adjusted net income decreased 9.5 percent over the second
quarter of 2018 to $21.1 million.
- Unrestricted cash and investments were $176.5 million as of
June 30, 2019. Approximately $73.0 million of the unrestricted cash
and investments at June 30, 2019 is related to excess capital and
undistributed earnings held at regulated entities.
- The Company is maintaining its 2019 guidance from May 2,
2019.
“We made substantial progress during the second quarter in both
Healthcare and Pharmacy, and we have a clear path to achieve our
full year earnings guidance,” said Mr. Smith.
Net Revenue
For the quarter, revenue was $1.8 billion, which is roughly
consistent with the same period in 2018. Growth in MCC Virginia and
new business was essentially offset by MCC Florida and Medicare
Part D footprint reductions as well as the previously discussed PBM
healthplan contract loss due to an acquisition.
Segment Profit
Segment profit was $62.1 million for the second quarter,
compared to $68.0 million in the prior year quarter.
- For our Healthcare business, segment profit for the second
quarter of 2019 was $41.1 million, which represents a decrease of
$2.8 million over the same period last year. Results include
approximately $12 million of favorable out of period reserve
development and $6 million of favorable retroactive membership and
rate changes. This decrease in segment profit year-over-year is
largely driven by lost business including the footprint reduction
in Florida, a higher MLR in New York primarily due to the delay in
receiving rates for the current fiscal year, and higher
discretionary benefits. These decreases are partially offset by MLR
improvements in Virginia and larger favorable out of period items
in the current quarter versus the prior year quarter.
- Pharmacy Management segment profit was $30.8 million, which was
an increase of $0.9 million from the second quarter of 2018. This
year-over-year increase was a result of improved cost of goods sold
in our PBM business and strong medical pharmacy results, partially
off-set by the impact of previously discussed customer losses and
higher discretionary benefit expenses.
- Corporate costs inclusive of eliminations, but excluding stock
compensation expense, totaled $9.8 million, compared to $5.8
million in the prior year’s quarter. This change was largely due to
higher discretionary benefit expenses.
Cash Flow & Balance Sheet
Cash flow from operations for the six months ended June 30,
2019, was $29.4 million, as compared to $21.1 million in 2018. The
increase is mainly attributable to lower tax payments, partially
offset by lower segment profit.
As of June 30, 2019, the Company’s unrestricted cash and
investments totaled $176.5 million, which represents an increase of
$46.1 million from the balance at December 31, 2018. Approximately
$73.0 million of the unrestricted cash and investments at June 30,
2019 is related to excess capital and undistributed earnings held
at regulated entities.
Restricted cash and investments at June 30, 2019, of $478.4
million reflect a decrease of $49.3 million from the balance at
December 31, 2018.
“We are maintaining our guidance for full year 2019,” said
Jonathan N. Rubin, chief financial officer of Magellan Health. “As
we mentioned in the first quarter call, we expect our segment
profit will be higher in the second half of the year as a result of
estimated mid-year rate changes which are primarily in MCC of New
York, new business to be implemented throughout the year, normal
margin seasonality in our Pharmacy business, and the ongoing impact
of our medical action plans.”
Outlook
The Company is maintaining its 2019 earnings guidance
ranges.
Earnings Conference Call
Management will discuss the Company’s first quarter results on a
conference call scheduled for Tuesday, July 30, 2019 at 10:00 a.m.
Eastern. To participate in the conference call, dial 1-800-857-1812
and use passcode “2nd Quarter 2019 Earnings Call” approximately 10
minutes before the start of the call. The conference call will also
be available live via webcast at Magellan's investor relations page
at IR.MagellanHealth.com. A telephonic replay will be available
shortly after the conclusion of the call through August 30, 2019.
This replay may be accessed by dialing 1-866-485-0042 (Domestic) or
1-203-369-1614 (International). A replay of the webcast will also
be available at the site listed above for 30 days, beginning
approximately two hours after its conclusion.
Basis of Presentation
In addition to results determined under Generally Accepted
Accounting Principles (GAAP), Magellan provides certain non-GAAP
financial measures that management believes are useful in assessing
the Company’s performance. Following is a description of these
important non-GAAP measures.
Segment profit is equal to net revenue less the sum of cost of
care, cost of goods sold, direct service costs and other operating
expenses, and includes income from unconsolidated subsidiaries, but
excludes segment profit or loss from non-controlling interests held
by other parties, stock compensation expense, special charges or
benefits, as well as changes in the fair value of contingent
consideration recorded in relation to acquisitions.
Adjusted net income and adjusted earnings per share reflect
certain adjustments made for acquisitions completed after January
1, 2013, to exclude non‑cash stock compensation expense resulting
from restricted stock purchases by sellers, changes in the fair
value of contingent consideration, amortization of identified
acquisition intangibles, as well as impairment of identified
acquisition intangibles.
Included in the tables issued with this press release are the
reconciliations from GAAP measures to the corresponding non-GAAP
measures.
About Magellan Health: Magellan Health, Inc., a Fortune
500 company, is a leader in managing the fastest growing, most
complex areas of health, including special populations, complete
pharmacy benefits and other specialty areas of healthcare. Magellan
supports innovative ways of accessing better health through
technology, while remaining focused on the critical personal
relationships that are necessary to achieve a healthy, vibrant
life. Magellan's customers include health plans and other managed
care organizations, employers, labor unions, various military and
governmental agencies and third-party administrators. For more
information, visit MagellanHealth.com.
Forward-Looking Statements
This release is intended to be disclosure through methods
reasonably designed to provide broad, non-exclusionary distribution
to the public in compliance with the Securities and Exchange
Commission’s Fair Disclosure Regulation. This release contains
forward-looking statements within the meaning of the Securities
Exchange Act of 1934 and the Securities Act of 1933, as amended,
which involve a number of risks and uncertainties, many of which
are out of our control. All statements, other than statements of
historical information provided herein, may be deemed to be
forward-looking statements including, without limitation,
statements regarding 2019 guidance for net revenue, income before
income taxes, net income, earnings per share, segment profit,
adjusted net income, adjusted earnings per share; and multi-year
margin improvement plan, growth opportunities, business
environment, long term opportunities and strategy. These statements
are based on management’s analysis, judgment, belief and
expectation only as of the date hereof, and are subject to
uncertainty and changes in circumstances. Without limiting the
foregoing, the words “believes,” “anticipates,” “plans,” “expects,”
“may,” “should,” “could,” “estimate,” “intend” and other similar
expressions are intended to identify forward-looking statements.
Actual results could differ materially due to, among other things,
the possible election of certain of the Company’s customers to
manage the healthcare services of their members directly; changes
in rates paid to and/or by the Company by customers and/or
providers; higher utilization of healthcare services by the
Company’s risk members; delays, higher costs or inability to
implement new business or other Company initiatives; the impact of
changes in the contracting model for Medicaid contracts;
termination or non-renewal of customer contracts; the impact of new
or amended laws or regulations; governmental inquiries; litigation;
competition; operational issues; healthcare reform; and general
business conditions. Additional factors that could cause actual
results to differ materially from those reflected in the
forward-looking statements include, but are not limited to, the
risks discussed in the “Risk Factors” section included within the
Company’s Annual Report on Form 10-K for the year ended December
31, 2018, filed with the Securities and Exchange Commission on
February 28, 2019, and the Company’s subsequent Quarterly Reports
on Form 10-Q filed during 2019. Readers are cautioned not to place
undue reliance on these forward-looking statements. The Company
undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the
date of this release. Segment profit, adjusted net income, and
adjusted EPS information referred to herein may be considered a
non-GAAP financial measure. Further information regarding these
measures, including the reasons management considers this
information useful to investors, are included in the Company’s most
recent Annual Report on Form 10-K and on subsequent Form 10-Qs.
MAGELLAN HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS (In thousands) December
31, 2018 June 30, 2019 (unaudited) ASSETS
Current Assets: Cash and cash equivalents
$
272,308
$
260,352
Accounts receivable, net
756,059
810,431
Short-term investments
382,582
371,678
Pharmaceutical inventory
40,818
45,611
Other current assets
95,400
96,529
Total Current Assets
1,547,167
1,584,601
Property and equipment, net
150,748
145,182
Long-term investments
3,161
22,841
Deferred income taxes
3,411
3,212
Other long-term assets
24,530
107,431
Goodwill
1,018,156
1,018,156
Other intangible assets, net
231,883
196,368
Total Assets
$
2,979,056
$
3,077,791
LIABILITIES AND STOCKHOLDERS' EQUITY Current
Liabilities: Accounts payable
$
72,077
$
75,436
Accrued liabilities
231,356
260,980
Short-term contingent consideration
8,000
119
Medical claims payable
393,547
401,289
Other medical liabilities
169,639
166,226
Current debt, finance lease and deferred financing obligations
24,274
21,077
Total Current Liabilities
898,893
925,127
Long-term debt, finance lease and deferred financing obligations
728,608
712,650
Deferred income taxes
11,167
11,998
Tax contingencies
16,478
17,264
Long-term contingent consideration
2,124
-
Deferred credits and other long-term liabilities
36,483
76,482
Total Liabilities
1,693,753
1,743,521
Stockholders’ Equity: Ordinary common stock
535
541
Additional paid-in capital
1,326,645
1,364,693
Retained earnings
1,419,449
1,433,348
Accumulated other comprehensive (loss) income
(324
)
415
Ordinary common stock in treasury, at cost
(1,461,002
)
(1,464,727
)
Total Stockholders’ Equity
1,285,303
1,334,270
Total Liabilities and Stockholders’ Equity
$
2,979,056
$
3,077,791
MAGELLAN HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In
thousands, except per share amounts)
Three Months Ended Six Months Ended June 30,
June 30,
2018
2019
2018
2019
Net revenue: Managed care and other
$
1,215,340
$
1,283,143
$
2,435,103
$
2,507,122
PBM
595,583
505,193
1,180,897
1,020,703
Total net revenue
1,810,923
1,788,336
3,616,000
3,527,825
Costs and expenses: Cost of care
935,814
1,001,886
1,864,475
1,943,847
Cost of goods sold
558,419
461,187
1,118,084
950,980
Direct service costs and other operating expenses (1)(2)
259,152
266,434
528,229
538,358
Depreciation and amortization
33,848
33,490
64,255
64,198
Interest expense
8,678
9,141
17,044
18,248
Interest and other income
(3,363
)
(5,021
)
(5,839
)
(9,995
)
Total costs and expenses
1,792,548
1,767,117
3,586,248
3,505,636
Income before income taxes
18,375
21,219
29,752
22,189
(Benefit) Provision for income taxes
4,824
7,606
4,749
8,145
Net income
$
13,551
$
13,613
$
25,003
$
14,044
Weighted average number of common shares outstanding — basic
24,569
24,101
24,460
24,024
Weighted average number of common shares outstanding — diluted
25,407
24,416
25,510
24,315
Net income per common share — basic
$
0.55
$
0.56
$
1.02
$
0.58
Net income per common share — diluted
$
0.53
$
0.56
$
0.98
$
0.58
Net income
$
13,551
$
13,613
$
25,003
$
14,044
Other comprehensive income: Unrealized gains (losses) on
available-for-sale securities (3)
132
419
(187
)
739
Comprehensive income
$
13,683
$
14,032
$
24,816
$
14,783
(1) Includes stock compensation expense of $10,439 and $5,414
for the three months ended June 30, 2018 and 2019, respectively,
and $18,085 and $15,021 for the six months ended June 30, 2018 and
2019, respectively.
(2) Includes changes in fair value of contingent consideration
of $70 and $(2,149) for the three months ended June 30, 2018 and
2019, respectively, and $303 and $(2,005) for the six months ended
June 30, 2018 and 2019, respectively.
(3) Net of income tax provision (benefit) of $42 and $131 for
the three months ended June 30, 2018 and 2019, respectively, and
$(59) and $231 for the six months ended June 30, 2018 and 2019,
respectively.
MAGELLAN HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) (In
thousands) Six Months Ended June 30,
2018
2019
Cash flows from operating activities: Net income
$
25,003
$
14,044
Adjustments to reconcile net income to net cash from operating
activities: Depreciation and amortization
64,255
64,198
Non-cash interest expense
614
679
Non-cash stock compensation expense
18,085
15,021
Non-cash income tax (benefit) provision
(100)
1,026
Non-cash amortization on investments
1,171
(327)
Changes in assets and liabilities, net of effects from acquisitions
of businesses: Accounts receivable, net
(179,350)
(51,544)
Pharmaceutical inventory
(9,388)
(4,793)
Other assets
(57,398)
(23,890)
Accounts payable and accrued liabilities
50,322
20,821
Medical claims payable and other medical liabilities
89,932
4,329
Contingent consideration
303
(3,758)
Tax contingencies
721
610
Deferred credits and other long-term liabilities
16,884
(7,429)
Other
69
372
Net cash provided by operating activities
21,123
29,359
Cash flows from investing activities: Capital
expenditures
(37,132)
(27,804)
Acquisitions and investments in businesses, net of cash acquired
-
(320)
Purchases of investments
(334,250)
(295,768)
Proceeds from maturities and sales of investments
227,446
288,290
Net cash used in investing activities
(143,936)
(35,602)
Cash flows from financing activities: Payments to
acquire treasury stock
(14,323)
(4,124)
Proceeds from exercise of stock options
21,476
20,647
Payments on debt, finance lease and deferred financing obligations
(33,912)
(15,543)
Payments on contingent consideration
-
(6,247)
Other
(3,051)
(446)
Net cash used in financing activities
(29,810)
(5,713)
Net decrease in cash and cash equivalents
(152,623)
(11,956)
Cash and cash equivalents at beginning of period
398,732
272,308
Cash and cash equivalents at end of period
$
246,109
$
260,352
MAGELLAN HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED
OPERATING RESULTS BY BUSINESS SEGMENT (Unaudited) (In
thousands) Three Months Ended Six
Months Ended June 30, June 30,
2018
2019
2018
2019
Healthcare Managed care and other
revenue
$
1,154,888
$
1,220,642
$
2,312,489
$
2,384,895
Cost of care
(935,814
)
(1,001,886
)
(1,864,475
)
(1,943,847
)
Direct service costs and other
(177,990
)
(177,948
)
(364,236
)
(357,138
)
Stock compensation expense (1)
2,742
2,444
5,692
4,194
Changes in fair value of contingent consideration (1)
70
(2,149
)
303
(2,005
)
Healthcare segment profit
43,896
41,103
89,773
86,099
Pharmacy Management Managed
care and other revenue
60,603
62,648
122,910
122,543
PBM revenue
642,794
550,010
1,274,992
1,106,575
Cost of goods sold
(603,951
)
(505,203
)
(1,208,864
)
(1,035,410
)
Direct service costs and other
(70,941
)
(78,776
)
(146,527
)
(158,411
)
Stock compensation expense (1)
1,408
2,124
2,893
3,796
Pharmacy Management segment profit
29,913
30,803
45,404
39,093
Corporate and Elimination (2)
Managed care and other revenue
(151
)
(147
)
(296
)
(316
)
PBM revenue
(47,211
)
(44,817
)
(94,095
)
(85,872
)
Cost of goods sold
45,532
44,016
90,780
84,430
Direct service costs and other
(10,221
)
(9,710
)
(17,466
)
(22,809
)
Stock compensation expense (1)
6,289
846
9,500
7,031
Corporate and Elimination
(5,762
)
(9,812
)
(11,577
)
(17,536
)
Consolidated Managed care and
other revenue
1,215,340
1,283,143
2,435,103
2,507,122
PBM revenue
595,583
505,193
1,180,897
1,020,703
Cost of care
(935,814
)
(1,001,886
)
(1,864,475
)
(1,943,847
)
Cost of goods sold
(558,419
)
(461,187
)
(1,118,084
)
(950,980
)
Direct service costs and other
(259,152
)
(266,434
)
(528,229
)
(538,358
)
Stock compensation expense (1)
10,439
5,414
18,085
15,021
Changes in fair value of contingent consideration (1)
70
(2,149
)
303
(2,005
)
Consolidated segment profit
$
68,047
$
62,094
$
123,600
$
107,656
Reconciliation of income before income taxes to
segment profit: Income before income taxes
$
18,375
$
21,219
$
29,752
$
22,189
Stock compensation expense
10,439
5,414
18,085
15,021
Changes in fair value of contingent consideration
70
(2,149
)
303
(2,005
)
Depreciation and amortization
33,848
33,490
64,255
64,198
Interest expense
8,678
9,141
17,044
18,248
Interest and other income
(3,363
)
(5,021
)
(5,839
)
(9,995
)
Segment profit
$
68,047
$
62,094
$
123,600
$
107,656
(1) Stock compensation expense, changes in the fair value of
contingent consideration recorded in relation to acquisitions and
impairment of intangible assets are included in direct service
costs and other operating expenses; however, these amounts are
excluded from the computation of segment profit.
(2) Healthcare subcontracts with Pharmacy Management to provide
pharmacy benefits management services for certain of Healthcare’s
customers. In addition, Pharmacy Management provides pharmacy
benefits management for the Company’s employees covered under its
medical plan. As such, revenue, cost of goods sold and direct
service costs and other related to these arrangements are
eliminated.
MAGELLAN HEALTH, INC. AND SUBSIDIARIES NON-GAAP
MEASURES (Unaudited) (In thousands, except per share
amounts) Three Months Ended Six Months
Ended June 30, June 30,
2018
2019
2018
2019
Net income
$
13,551
$
13,613
$
25,003
$
14,044
Adjusted for acquisitions starting in 2013
Stock compensation expense
268
-
530
-
Changes in fair value of contingent consideration
70
(2,149
)
303
(2,005
)
Amortization of acquired intangibles
12,726
12,272
24,597
24,545
Tax impact
(3,344
)
(2,675
)
(6,357
)
(5,957
)
Adjusted net income
$
23,271
$
21,061
$
44,076
$
30,627
Net income per common share—diluted
$
0.53
$
0.56
$
0.98
$
0.58
Adjusted for acquisitions starting in 2013
Stock compensation expense
0.01
-
0.02
-
Changes in fair value of contingent consideration
-
(0.09
)
0.01
(0.08
)
Amortization of acquired intangibles
0.51
0.50
0.97
1.01
Tax impact
(0.13
)
(0.11
)
(0.25
)
(0.25
)
Adjusted earnings per share
$
0.92
$
0.86
$
1.73
$
1.26
(MGLN-GEN)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190730005361/en/
Media: Lilly Ackley, ackleyl@magellanhealth.com, (860)
507-1923 Investors: Joe Bogdan, jbogdan@magellanhealth.com,
(860) 507-191
Magellan Health (NASDAQ:MGLN)
Historical Stock Chart
From Mar 2024 to Apr 2024
Magellan Health (NASDAQ:MGLN)
Historical Stock Chart
From Apr 2023 to Apr 2024