Introduces Full Year 2021 Earnings Guidance
Molina Healthcare, Inc. (NYSE: MOH) today reported net income
for the fourth quarter of 2020 of $34 million, or $0.56 per diluted
share, and $673 million, or $11.23 per diluted share, for the full
year 2020. Financial results are summarized below:
Three Months Ended
Year Ended
December 31,
December 31,
2020
2019
2020
2019
(In millions, except per share
results)
Premium Revenue
$4,855
$4,123
$18,299
$16,208
Total Revenue
$5,235
$4,274
$19,423
$16,829
Pre-Tax Income
$51
$222
$961
$972
Net Income
$34
$168
$673
$737
GAAP EPS – Diluted
$0.56
$2.67
$11.23
$11.47
Adjusted EPS – Diluted (1)
($0.51)
$2.73
$10.67
$11.57
Normalized EPS - Diluted (1)
$3.29
—
$12.97
—
GAAP Ratios:
MCR
90.8
%
86.0
%
86.5
%
85.8
%
G&A Ratio
8.6
%
8.0
%
7.6
%
7.7
%
Effective Tax Rate
33.8
%
24.3
%
30.0
%
24.2
%
After-Tax Margin
0.6
%
3.9
%
3.5
%
4.4
%
(1) Description and reconciliation of non-GAAP financial
measures on pages 11-12 of this release.
Full Year Highlights
- Total revenue increased 15% to $19.4 billion for the full year
2020 compared to 2019.
- For the full year 2020, net income was $673 million, or $11.23
per diluted share, compared to net income of $737 million, or
$11.47 per diluted share, for the full year 2019.
- Results were positively impacted by adjustments of $0.56 per
diluted share for the full year 2020.
- The net effect of COVID decreased net income for the full year
2020 by $2.30 per diluted share.
- Full year 2020 normalized EPS, representing adjusted EPS and
excluding the net effect of COVID, was $12.97 per diluted
share.
- The Company issued its full year 2021 earnings guidance, with
premium revenue growth expected to be over 25% and adjusted EPS
expected to be in the range of $12.50 - $13.00.
- Included in the Company’s guidance is the effect of the
overhang from COVID and Medicare risk scores expected to soon
abate. When combined with the attainment of targeted margins on
recent acquisitions, the Company expects an increase of several
dollars in EPS in future periods.
“2020 presented an unprecedented environment, and I am proud of
our performance as we focused on delivering for all of our
stakeholders. We ensured our members had access to high quality
care, we implemented innumerable special protocols for providers
and our state customers, and we delivered growth and excellent
financial results,” said Joseph Zubretsky, president and CEO of
Molina Healthcare. “As the pandemic continues into 2021, we are
determined to do the same. We are pleased with the significant
revenue growth we expect to achieve in 2021, and look forward to
another successful year.”
Total Revenue
For the year ended December 31, 2020, total revenue increased
15% to $19.4 billion, compared to $16.8 billion for the comparable
period in 2019. The higher total revenue reflects increased
membership, primarily in Medicaid, and includes the impact from the
YourCare and Passport acquisitions.
Net Income
For the year ended December 31, 2020, net income was $673
million, or $11.23 per diluted share, compared to net income of
$737 million, or $11.47 per diluted share, for the full year
2019.
For the full year 2020, the Company’s normalized EPS was $12.97
and normalized after-tax margin was 3.9%. The Company’s results
were positively impacted by adjustments of $0.56 per diluted share
for the full year 2020. The Company estimates the net effect of
COVID decreased full year 2020 GAAP EPS by $2.30 per diluted
share.
Medical Care Ratio
The consolidated MCR for the year ended December 31, 2020, was
86.5%, compared to 85.8% for 2019. The full year 2020 normalized
MCR, which excludes adjustments and the net effect of COVID, was
85.9%. Medicaid and Medicare performed in line with expectations,
while Marketplace performance was below expectations.
General and Administrative Expense Ratio
For the year ended December 31, 2020, the G&A ratio was 7.6%
compared to 7.7% in 2019. The full year 2020 normalized G&A
ratio, which excludes adjustments and the net effect of COVID, was
7.3%. This improvement reflects disciplined cost management and the
benefits of scale produced by the Company’s growth.
Balance Sheet
Cash and investments at the parent company amounted to $644
million as of December 31, 2020, compared to $997 million as of
December 31, 2019. In November 2020, the Company closed on its
private offering of $650 million aggregate principal amount of
3.875% senior notes due November 15, 2030. The Company used a
portion of the proceeds to repay $330 million principal amount
outstanding of its 4.875% senior notes.
In September 2020, the Company’s Board of Directors authorized a
share repurchase program of up to $500 million. Through December
31, 2020, the Company purchased an aggregate of approximately
766,000 shares for $159 million, at an average cost of $208.37 per
share.
Cash Flow
Operating cash flow for the year ended December 31, 2020,
amounted to $1,890 million, and was higher compared to the year
ended December 31, 2019, primarily due to strong operating results,
cash flow timing benefits from the growth in membership in 2020,
and the net impact of timing differences in governmental
receivables and payables.
2021 Guidance
The Company issued its full year 2021 earnings guidance, with
premium revenue growth expected to be over 25% and adjusted EPS
expected to be in the range of $12.50 - $13.00. Given its recent
M&A activity and the associated non-cash impact from
amortization of intangible assets, the Company believes that
adjusted EPS has become a more relevant measure of earnings going
forward.
Full year guidance reflects the following expected positive
drivers:
- Continued strong performance in Medicaid and Medicare;
- Margin recovery and growth in the Marketplace business;
- Accretion from the Magellan Complete Care businesses and the
Kentucky and Passport installation; and,
- The elimination of the Health Insurer Fee.
Full year guidance considers the following industry-wide and
economic environment challenges that are expected to be mostly
temporary, including:
- A negative net effect of COVID due to a continuation of many of
the risk-sharing corridors that existed in 2020 and the direct
costs of COVID-related patient care;
- Medicare risk scores; and,
- Net pharmacy benefit carve-outs.
Full year guidance does not include:
- The Affinity acquisition, as the transaction has not yet
closed; and,
- The impact of potential Public Health Emergency extensions
beyond mid-April 2021.
Included in the Company’s guidance is the effect of the overhang
from COVID and Medicare risk scores expected to soon abate. When
combined with the attainment of targeted margins on recent
acquisitions, the Company expects an increase of several dollars in
EPS in future periods.
The Company has posted a presentation entitled “4Q20 Earnings
Supplement,” dated February 10, 2021, on the Company’s website,
molinahealthcare.com.
Full Year 2021 Guidance
(1)
Premium Revenue
>$23.0B
Total Revenue
>$24.0B
GAAP Net Income
$649M - $678M
Adjusted Net Income (2)
$730M - $759M
GAAP EPS – Diluted
$11.10 - $11.60
Adjusted EPS – Diluted (2)
$12.50 - $13.00
Diluted weighted average shares
~58.5M
Year End Total Membership
~3.9M
Medicaid and Medicare
~3.5M
Marketplace
~400K
MCR
~88.0%
GAAP G&A Ratio
~7.3%
Adjusted G&A Ratio (2)
~7.0%
Effective Tax Rate
~25.6%
GAAP After-tax Margin
~2.7%
Adjusted After-tax Margin (2)
~3.0%
(1) All amounts are rounded and
approximations.
(2) Reconciliations of non-GAAP financial
measures on page 13 of this release.
Conference Call
Management will host a conference call and webcast to discuss
Molina Healthcare’s fourth quarter and year-end 2020 results at
8:00 a.m. Eastern Time on Thursday, February 11, 2021. The number
to call for the interactive teleconference is (877) 883-0383 and
the confirmation number is 9566162. A telephonic replay of the
conference call will be available through Thursday, February 18,
2021, by dialing (877) 344-7529 and entering confirmation number
10150614. 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
healthcare services under the Medicaid and Medicare programs and
through the state insurance marketplaces. Through its locally
operated health plans, Molina Healthcare served approximately 4.0
million members as of December 31, 2020. 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 and the Company’s accompanying oral
remarks contain forward-looking statements regarding its 2021
guidance, as well as its plans, expectations, and the Company’s
expectations regarding future developments. Actual results could
differ materially due to numerous known and unknown risks and
uncertainties. These risks and uncertainties are discussed under
the headings “Forward-Looking Statements,” and “Risk Factors,” in
the Company’s Annual Report on Form 10-K for the year ended
December 31, 2019, and also in its Quarterly Reports on Form 10-Q
for the periods ended March 31, 2020, June 30, 2020, and September
30, 2020, which are on file with the SEC. Additional information
will also be set forth in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2020, which the Company expects to
file on or about February 12, 2021.
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 developments 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 February 10, 2021, and, except as
otherwise required by law, the Company disclaims any obligation to
update any forward-looking statement to conform the statement to
actual results or changes in its expectations.
MOLINA HEALTHCARE,
INC.
UNAUDITED CONSOLIDATED
STATEMENTS OF INCOME
Three Months Ended
Year Ended
December 31,
December 31,
2020
2019
2020
2019
(In millions, except per-share
amounts)
Revenue:
Premium revenue
$
4,855
$
4,123
$
18,299
$
16,208
Premium tax revenue
172
122
649
489
Health insurer fees reimbursed
65
—
271
—
Marketplace risk corridor judgment
128
—
128
—
Investment income and other revenue
15
29
76
132
Total revenue
5,235
4,274
19,423
16,829
Operating expenses:
Medical care costs
4,408
3,545
15,820
13,905
General and administrative expenses
450
343
1,480
1,296
Premium tax expenses
172
122
649
489
Health insurer fees
68
—
277
—
Depreciation and amortization
24
21
88
89
Other
22
1
31
6
Total operating expenses
5,144
4,032
18,345
15,785
Operating income
91
242
1,078
1,044
Other expenses, net:
Interest expense
30
20
102
87
Other expense (income), net
10
—
15
(15)
Total other expenses, net
40
20
117
72
Income before income tax expense
51
222
961
972
Income tax expense
17
54
288
235
Net income
$
34
$
168
$
673
$
737
Net income per share - Diluted
$
0.56
$
2.67
$
11.23
$
11.47
Diluted weighted average shares
outstanding
59.4
63.0
59.9
64.2
Operating Statistics:
Medical care ratio
90.8
%
86.0
%
86.5
%
85.8
%
G&A ratio
8.6
%
8.0
%
7.6
%
7.7
%
Premium tax ratio
3.4
%
2.9
%
3.4
%
2.9
%
Effective income tax rate
33.8
%
24.3
%
30.0
%
24.2
%
After-tax margin
0.6
%
3.9
%
3.5
%
4.4
%
MOLINA HEALTHCARE,
INC.
CONSOLIDATED BALANCE
SHEETS
December 31,
2020
2019
Unaudited
(Dollars in millions,
except per-share amounts)
ASSETS
Current assets:
Cash and cash equivalents
$
4,154
$
2,452
Investments
1,875
1,946
Receivables
1,672
1,406
Prepaid expenses and other current
assets
175
163
Total current assets
7,876
5,967
Property, equipment, and capitalized
software, net
391
385
Goodwill and intangible assets, net
941
172
Restricted investments
136
79
Deferred income taxes
69
79
Other assets
119
105
Total assets
$
9,532
$
6,787
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Medical claims and benefits payable
$
2,696
$
1,854
Amounts due government agencies
1,253
664
Accounts payable, accrued liabilities and
other
641
502
Deferred revenue
375
249
Total current liabilities
4,965
3,269
Long-term debt
2,127
1,237
Finance lease liabilities
225
231
Other long-term liabilities
119
90
Total liabilities
7,436
4,827
Stockholders’ equity:
Common stock, $0.001 par value, 150
million shares authorized; outstanding: 59 million shares at
December 31, 2020, and 62 million shares at December 31, 2019
—
—
Preferred stock, $0.001 par value; 20
million shares authorized, no shares issued and outstanding
—
—
Additional paid-in capital
199
175
Accumulated other comprehensive income
37
4
Retained earnings
1,860
1,781
Total stockholders’ equity
2,096
1,960
Total liabilities and stockholders’
equity
$
9,532
$
6,787
MOLINA HEALTHCARE,
INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
December 31,
2020
2019
(In millions)
Operating activities:
Net income
$
673
$
737
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
88
89
Deferred income taxes
(19)
10
Share-based compensation
57
39
Loss (gain) on debt repayment
15
(15)
Other, net
12
—
Changes in operating assets and
liabilities:
Receivables
(100)
(76)
Prepaid expenses and other current
assets
(16)
28
Medical claims and benefits payable
544
(107)
Amounts due government agencies
446
(303)
Accounts payable, accrued liabilities and
other
78
2
Deferred revenue
126
38
Income taxes
(14)
(15)
Net cash provided by operating
activities
1,890
427
Investing activities:
Purchases of investments
(670)
(2,536)
Proceeds from sales and maturities of
investments
1,097
2,302
Net cash paid in business combinations
(755)
—
Purchases of property, equipment, and
capitalized software
(74)
(57)
Other, net
2
(2)
Net cash used in investing activities
(400)
(293)
Financing activities:
Proceeds from senior notes offerings, net
of issuance costs
1,429
—
Common stock purchases
(606)
(47)
Repayment of term loan facility
(600)
—
Proceeds from borrowings under term loan
facility
380
220
Repayment of senior notes
(338)
—
Cash paid for partial termination of
warrants
(30)
(514)
Cash paid for partial settlement of
conversion option
(27)
(578)
Cash received for partial settlement of
call option
27
578
Repayment of principal amount of
convertible senior notes
(12)
(240)
Other, net
2
29
Net cash provided by (used in) financing
activities
225
(552)
Net increase (decrease) in cash, cash
equivalents, and restricted cash and cash equivalents
1,715
(418)
Cash, cash equivalents, and restricted
cash and cash equivalents at beginning of period
2,508
2,926
Cash, cash equivalents, and restricted
cash and cash equivalents at end of period
$
4,223
$
2,508
MOLINA HEALTHCARE,
INC.
UNAUDITED HEALTH PLANS SEGMENT
DATA
(Dollars in millions)
As of December 31,
2020
2019
Ending Membership(1) by Government
Program:
Medicaid
3,599,000
2,956,000
Medicare
115,000
101,000
Marketplace
318,000
274,000
Total
4,032,000
3,331,000
Ending Membership(1) by Health
Plan:
California
593,000
565,000
Florida
140,000
132,000
Illinois
302,000
224,000
Kentucky
337,000
—
Michigan
400,000
362,000
Ohio
352,000
288,000
Texas
357,000
341,000
Washington
977,000
832,000
Other (2)
574,000
587,000
Total
4,032,000
3,331,000
__________________
(1) Does not include approximately 200,000
Magellan Complete Care members from the acquisition closed on
December 31, 2020.
(2) “Other” includes the Idaho,
Mississippi, New Mexico, New York, Puerto Rico, South Carolina,
Utah, and Wisconsin health plans, which were not individually
significant to the Company’s consolidated operating results for the
periods presented.
Three Months Ended December
31,
2020
2019
Premium Revenue
Medical Care Costs
MCR (1)
Premium Revenue
Medical Care Costs
MCR (1)
Medicaid
$
3,850
$
3,473
90.2
%
$
3,227
$
2,818
87.3
%
Medicare
616
598
97.1
561
480
85.5
Marketplace
389
337
86.6
335
247
73.5
Consolidated
$
4,855
$
4,408
90.8
%
$
4,123
$
3,545
86.0
%
Year Ended December
31,
2020
2019
Premium Revenue
Medical Care Costs
MCR (1)
Premium Revenue
Medical Care Costs
MCR (1)
Medicaid
$
14,265
$
12,461
87.4
%
$
12,466
$
10,969
88.0
%
Medicare
2,512
2,161
86.0
2,243
1,913
85.3
Marketplace
1,522
1,198
78.7
1,499
1,023
68.2
Consolidated
$
18,299
$
15,820
86.5
%
$
16,208
$
13,905
85.8
%
__________________
(1) The MCR represents medical costs as a
percentage of premium revenue.
MOLINA HEALTHCARE, INC. CHANGE IN MEDICAL
CLAIMS AND BENEFITS PAYABLE (Dollars in millions)
The Company’s claims liabilities include additional reserves to
account for moderately adverse conditions 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. The
Company’s reserving methodology is consistently applied across all
periods presented. The amounts displayed for “Components of medical
care costs related to: Prior year” represent the amounts by which
the original estimates of claims and benefits payable at the
beginning of the year were more than the actual liabilities based
on information (principally the payment of claims) developed since
those liabilities were first reported. The following table presents
the components of the change in medical claims and benefits payable
for the periods indicated:
Year Ended
December 31,
2020
2019
Unaudited
Medical claims and benefits payable,
beginning balance
$
1,854
$
1,961
Components of medical care costs related
to:
Current year
15,939
14,176
Prior year
(119)
(271)
Total medical care costs
15,820
13,905
Payments for medical care costs related
to:
Current year
13,871
12,554
Prior year
1,507
1,482
Total paid
15,378
14,036
Acquisition - Magellan Complete Care
294
—
Change in non-risk and other provider
payables
106
24
Medical claims and benefits payable,
ending balance
$
2,696
$
1,854
Days in claims payable, fee for service
(1)
50
50
______________________
(1) Claims payable includes primarily
claims incurred but not paid, or IBNP. It also includes certain
fee-for-service payables reported in medical claims and benefits
payable amounting to $78 million and $50 million, as of December
31, 2020, and 2019, respectively.
MOLINA HEALTHCARE, INC. RECONCILIATION OF
UNAUDITED NON-GAAP FINANCIAL MEASURES (In millions)
The Company believes that certain non-generally accepted
accounting principles, or non-GAAP, financial measures are useful
supplemental measures to investors in comparing the Company’s
performance to the performance of other public companies in the
health care industry. These non-GAAP financial measures, presented
below, should be considered as supplements to, and not as
substitutes for or superior to, GAAP measures.
Earnings before interest, taxes, depreciation and
amortization (“EBITDA”) represents GAAP net income less
depreciation and amortization, interest expense and income tax
expense. The Company believes that EBITDA is helpful to investors
in assessing the Company’s ability to meet the cash demands of its
operating units.
Three Months Ended
Year Ended
December 31,
December 31,
2020
2019
2020
2019
Net income
$
34
$
168
$
673
$
737
Adjustments:
Depreciation and amortization
24
21
88
89
Interest expense
30
20
102
87
Income tax expense
17
54
288
235
EBITDA
$
105
$
263
$
1,151
$
1,148
MOLINA HEALTHCARE, INC. RECONCILIATION OF
UNAUDITED NON-GAAP FINANCIAL MEASURES CONTINUED (In millions,
except per diluted share amounts)
Adjustments represent additions and deductions to GAAP
net income as indicated in the table below, which include the
non-cash impact of amortization of purchased intangibles and the
impact of certain expenses and other items that management believes
are not indicative of longer-term business trends and
operations.
Adjusted net income (loss) represents GAAP net income
recognizing the adjustments, net of tax. The Company believes that
adjusted net income is helpful to investors in assessing the
Company’s financial performance.
Adjusted net income (loss) per diluted share represents
adjusted net income (loss) divided by weighted average common
shares outstanding on a fully diluted basis.
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Amount
Per Diluted Share
Amount
Per Diluted Share
Amount
Per Diluted Share
Amount
Per Diluted Share
Net income
$
34
$
0.56
$
168
$
2.67
$
673
$
11.23
$
737
$
11.47
Adjustments:
Marketplace risk corridor judgment
(128)
(2.15)
—
—
(128)
(2.14)
—
—
Acquisition-related expenses (1)
18
0.31
—
—
22
0.37
—
—
Amortization of intangible assets
4
0.07
4
0.06
16
0.26
17
0.27
Loss (gain) on debt repayment
10
0.18
—
—
15
0.26
(15)
(0.24)
Charitable contribution
15
0.25
—
—
15
0.25
—
—
Restructuring costs
1
0.01
1
0.02
10
0.16
6
0.10
Premium deficiency reserve - Puerto
Rico
(4)
(0.07)
—
—
6
0.10
—
—
Subtotal, adjustments
(84)
(1.40)
5
0.08
(44)
(0.74)
8
0.13
Income tax effect
20
0.33
(1)
(0.02)
11
0.18
(2)
(0.03)
Adjustments, net of tax
(64)
(1.07)
4
0.06
(33)
(0.56)
6
0.10
Adjusted net (loss) income
$
(30)
$
(0.51)
$
172
$
2.73
$
640
$
10.67
$
743
$
11.57
__________________
(1) Beginning in the third quarter of
2020, reflects non-recurring costs associated with acquisitions,
including various transaction and integration costs.
MOLINA HEALTHCARE, INC. RECONCILIATION OF
UNAUDITED NON-GAAP FINANCIAL MEASURES CONTINUED
Normalized EPS represents adjusted EPS, as shown in the
reconciliation of GAAP EPS to non-GAAP adjusted EPS, excluding the
net effect of COVID. The net effect of COVID consists of discrete
premium refunds, reduced demand for medical services, and the cost
of COVID-related care. This non-GAAP financial measure should be
considered a supplement to, and not a substitute for, GAAP earnings
per diluted share. The Company believes this metric, which is used
by management in the operation of the business, is helpful to
investors in assessing the Company’s 2020 financial performance and
operations without the temporary distortion caused by the COVID
pandemic.
Normalized after-tax margin represents adjusted net
income, excluding the net effect of COVID, divided by total
revenue.
Three Months Ended
Year Ended
December 31, 2020
(Per diluted share)
GAAP EPS – Diluted
$
0.56
$
11.23
Less: Adjustments, net of tax
(1.07)
(0.56)
Adjusted EPS – Diluted
(0.51)
10.67
Add: Net effect of COVID
3.80
2.30
Normalized EPS – Diluted
$
3.29
$
12.97
MOLINA HEALTHCARE,
INC.
2021 GUIDANCE
RECONCILIATION OF UNAUDITED
NON-GAAP FINANCIAL MEASURES
(In millions, except per
diluted share amounts)
Low End
High End
Amount
Per Diluted Share (2)
Amount
Per Diluted Share (2)
Net income
$
649
$
11.10
$
678
$
11.60
Adjustments:
Acquisition-related expenses
62
1.06
62
1.06
Amortization of intangible assets
45
0.77
45
0.77
Subtotal, adjustments
107
1.83
107
1.83
Income tax effect (1)
(26)
(0.43)
(26)
(0.43)
Adjustments, net of tax
81
1.40
81
1.40
Adjusted net income
$
730
$
12.50
$
759
$
13.00
__________________
(1) Income tax effect calculated at the
statutory tax rate of 23.9%.
(2) Computation assumes approximately 58.5
million diluted weighted average shares outstanding.
Adjusted G&A Ratio represents the GAAP G&A ratio,
recognizing adjustments. Adjusted after-tax margin
represents adjusted net income, divided by total revenue.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210210005930/en/
Investor Contact: Julie Trudell, Julie.Trudell@molinahealthcare.com, 562-912-6720
Media Contact: Caroline Zubieta, Caroline.Zubieta@molinahealthcare.com,
562-951-1588
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