Magellan Health, Inc. (NASDAQ: MGLN) today announced financial
results for the third quarter ended September 30, 2021, as
summarized below:
Three Months Ended
Nine Months Ended Sept 30 Sept
30 (In millions, except per share amounts)
Continuing
Operations
2021
2020
Chg
2021
2020
Chg Net revenue
$
1,254.1
$
1,170.1
7.2
%
$
3,636.5
$
3,392.6
7.2
%
Net (loss) income
$
(0.1
)
$
(17.3
)
NM
$
21.9
$
28.7
-23.7
%
Segment profit [1]
$
38.0
$
34.1
11.4
%
$
145.4
$
132.7
9.6
%
Adjusted net income [1]
$
6.0
$
2.1
177.9
%
$
44.5
$
29.4
51.1
%
Earnings (loss) per share
$
(0.20
)
$
(0.68
)
NM
$
0.63
$
1.14
-44.7
%
Adjusted earnings per share [1]
$
0.03
$
0.08
NM
$
1.48
$
1.16
27.6
%
[1] Refer to the Basis of
Presentation for a discussion of non-GAAP financial measures.
NM = "not meaningful"
Third Quarter 2021 Highlights and Other Recent
Developments:
- Net revenue increased 7.2% percent over the third quarter of
2020 to $1.25 billion.
- Net loss from continuing operations decreased by $17.2 million
from the third quarter of 2020 to a net loss of $0.1 million.
- Segment profit increased 11.4% percent from the third quarter
of 2020 to $38.0 million.
- Adjusted net income and adjusted earnings per share were $6.0
million and $0.03 for the quarter as compared to the prior year
quarter of $2.1 million and $0.08, respectively.
- The Company expects the merger with Centene Corporation
(“Centene”) to close during the fourth quarter of 2021.
“I am pleased with our third quarter performance, which
demonstrates the progress we’ve made across our business to
establish a stronger foundation for growth. We remain enthusiastic
about our efforts to innovate through new solutions designed to
enable healthy vibrant lives for the members of our health plan,
employer and public sector customers. Our organization is energized
about the opportunity to join with Centene’s Health Care
Enterprises division following the completion of the pending
merger,” said Kenneth Fasola, chief executive officer, Magellan
Health.
Net Revenue
Net revenue from continuing operations was $1.25 billion for the
third quarter of 2021, an increase of 7.2% compared to third
quarter of 2020 primarily due to net new business growth in the
Healthcare segment, partially offset by a modest decline in the
Pharmacy Management segment as a result of the January 1, 2021
non-renewal of Magellan Rx’s Individual Part D Prescription Drug
Plan (PDP).
Segment Profit
Segment profit from continuing operations was $38.0 million for
third quarter of 2021, an increase of 11.4% compared to $34.1
million in the third quarter of 2020.
- Healthcare segment profit was $20.6 million, representing a
slight decrease of $0.6 million from 2020. An increase in corporate
investments, was largely off-set by favorable net business
growth.
- Pharmacy Management segment profit was $29.0 million, compared
to $31.4 million in 2020. Growth in specialty and government
coupled with the non-renewal of Magellan Rx’s Individual PDP, were
offset by an increase in corporate investments and new contract
implementation costs.
- Corporate segment costs inclusive of eliminations, but
excluding stock compensation expense, totaled $11.6 million, as
compared to $18.6 million in 2020. This decrease was primarily
driven by the reduction of stranded corporate overhead expenses
associated with discontinued operations in the prior year
quarter.
Other Items
The Company recorded a special charge of $1.9 million during the
third quarter of 2021 primarily related to non-cash lease
termination and abandonment costs for planned reductions to the
Company’s real estate footprint related to the transformation
operational initiatives.
The income from discontinued operations, net of tax, for the
third quarter of 2021 was $6.1 million, as compared to income from
discontinued operations of $28.9 million during the third quarter
of 2020. This decrease is due to the sale of Magellan Complete Care
business (“MCC Business”) to Molina Healthcare, Inc. (“Molina”)
effective December 31, 2020.
Cash Flow & Balance Sheet
Cash flow provided by operating activities from continuing
operations for the nine months ended September 30, 2021, was $60.1
million, as compared to $54.2 million for the nine months ended
September 30, 2020.
As of September 30, 2021, the Company’s unrestricted cash and
investments totaled $1.012 billion, as compared to $1.149 billion
at December 31, 2020. This decrease is largely due to voluntary
term loan repayments of $100 million in March, tax payments of
approximately $75 million which mainly relate to the gain from the
sale of the MCC business and unfavorable changes in working
capital. Approximately $37.5 million of the unrestricted cash and
investments at September 30, 2021 is related to excess capital and
undistributed earnings held at regulated entities of continuing
operations.
Earnings Conference Call
Due to the pending transaction with Centene, the Company is not
hosting a conference call in conjunction with its third quarter
2021 earnings release and does not expect to do so in future
quarters. Please direct any questions regarding this earnings
release to Magellan’s Investor Relations or Media contacts.
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 and
the settlement of a legal matter, 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 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, special charges,
and any impact related to the sale of MCC.
Included in the tables issued with this press release are the
reconciliations from GAAP measures to the corresponding non-GAAP
measures.
MCC Business Reflected as Discontinued Operations
Due to the sale of the MCC Business to Molina, the consolidated
financial statements for all periods presented reflect the MCC
Business as discontinued operations.
About Magellan Health: Magellan Health, Inc. 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 press release include statements which may constitute
forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995,
the accuracy of which are necessarily subject to risks,
uncertainties, and assumptions as to future events that may not
prove to be accurate. 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. These statements
are neither promises nor guarantees, but are subject to a variety
of risks and uncertainties, many of which are beyond our control,
which could cause actual results to differ materially from those
contemplated in these forward-looking statements. Existing and
prospective investors are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
hereof. Important proposed merger-related and other risk factors
that may cause such differences include: (i) the occurrence of any
event, change or other circumstances that could give rise to the
termination of the proposed merger; (ii) the transaction closing
conditions may not be satisfied in a timely manner or at all,
including due to the failure to obtain regulatory approvals; (iii)
the announcement and pendency of the proposed merger may disrupt
the Company’s business operations (including the threatened or
actual loss of employees, customers or suppliers); and (iv) the
Company could experience financial or other setbacks if the
transaction encounters unanticipated problems. Other important
factors that could cause actual results to differ materially from
those expressed or implied include the effectiveness of business
continuity plans during, and the risks associated with, the
COVID-19 pandemic; termination or non-renewal of customer
contracts; changes in rates paid to and/or by the Company by
customers and/or providers; our ability to develop and maintain
satisfactory relationships with providers; higher utilization of
healthcare services by the Company’s members; risks and
uncertainties associated with the pharmacy benefits management
industry; costs to maintain or upgrade our information technology
and other business systems and the effectiveness and security of
such systems; cyberattacks, other privacy/data security incidents,
and/or our failure to comply with related regulations; delays,
higher costs or inability to obtain and/or implement new business
or other Company initiatives; the impact of changes in the
contracting model for Medicaid contracts; impairment of our
goodwill and intangible assets; the impact of new or amended laws
or regulations; costs and other liabilities associated with
litigation, government investigations, audits or reviews;
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 most recent Annual Report on Form 10-K, Quarterly Report
on Form 10-Q for the quarter ended September 30, 2021, to be filed
with the Securities and Exchange Commission later today, and
subsequent reports on Forms 10-Q and 8-K. The Company undertakes no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events, or
otherwise, except as may be required under applicable securities
law.
MAGELLAN HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS (In thousands) December 31,
2020 September 30, 2021 (unaudited) ASSETS
Current Assets: Cash and cash equivalents
$
1,144,450
$
1,038,458
Accounts receivable, net
743,502
827,169
Short-term investments
140,847
155,518
Pharmaceutical inventory
43,334
39,832
Other current assets
84,264
143,442
Total Current Assets
2,156,397
2,204,419
Property and equipment, net
136,739
137,046
Long-term investments
2,612
-
Deferred income taxes
1,842
-
Other long-term assets
108,797
81,008
Goodwill
873,779
873,830
Other intangible assets, net
79,689
57,147
Total Assets
$
3,359,855
$
3,353,450
LIABILITIES AND STOCKHOLDERS' EQUITY Current
Liabilities: Accounts payable
$
137,380
$
171,774
Accrued liabilities
354,906
231,196
Medical claims payable
111,851
187,177
Other medical liabilities
126,921
162,658
Current debt, finance lease and deferred financing obligations
6,521
3,214
Total Current Liabilities
737,579
756,019
Long-term debt, finance lease and deferred financing obligations
631,855
516,368
Deferred income taxes
7,102
18,768
Tax contingencies
11,002
12,913
Deferred credits and other long-term liabilities
69,283
76,219
Total Liabilities
1,456,821
1,380,287
Redeemable non-controlling interest
33,062
39,261
Stockholders’ Equity: Ordinary common stock
555
560
Additional paid-in capital
1,477,219
1,512,919
Retained earnings
1,857,130
1,885,194
Accumulated other comprehensive loss
(205)
(44)
Ordinary common stock in treasury, at cost
(1,464,727)
(1,464,727)
Total Stockholders’ Equity
1,869,972
1,933,902
Total Liabilities and Stockholders’ Equity
$
3,359,855
$
3,353,450
MAGELLAN HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In
thousands, except per share amounts) Three Months
Ended Nine Months Ended September 30,
September 30,
2020
2021
2020
2021
Net revenue: Managed care and other
$
568,688
$
668,591
$
1,670,567
$
1,970,708
PBM
601,429
585,527
1,722,004
1,665,827
Total net revenue
1,170,117
1,254,118
3,392,571
3,636,535
Costs, expenses and other income: Cost of care
364,438
437,308
1,035,377
1,247,234
Cost of goods sold
560,269
546,337
1,621,577
1,559,221
Direct service costs and other operating expenses (1)
216,770
238,471
620,767
713,065
Legal matter settlement
-
-
-
(9,000
)
Depreciation and amortization
24,730
23,671
71,976
67,613
Interest expense
7,286
5,969
24,239
18,629
Interest and other income
(349
)
(299
)
(2,119
)
(848
)
Special charges and other
16,599
1,914
24,908
8,119
Total costs, expenses and other income
1,189,743
1,253,371
3,396,725
3,604,033
(Loss) income from continuing operations before income taxes
(19,626
)
747
(4,154
)
32,502
(Benefit) provision for income taxes
(2,330
)
861
(32,896
)
10,570
Net (loss) income from continuing operations
(17,296
)
(114
)
28,742
21,932
Income from discontinued operations, net of tax
28,943
6,050
84,660
11,165
Net income
$
11,647
$
5,936
$
113,402
$
33,097
Weighted average number of common shares outstanding — basic
25,448
26,247
25,078
26,120
Weighted average number of common shares outstanding — diluted
25,448
26,247
25,317
26,626
Net income (loss) per common share — basic (3) Continuing
operations
$
(0.68
)
$
(0.20
)
$
1.15
$
0.65
Discontinued operations
1.14
0.23
3.37
0.43
Consolidated operations
$
0.46
$
0.03
$
4.52
$
1.08
Net income (loss) per common share — diluted (3) Continuing
operations
$
(0.68
)
$
(0.20
)
$
1.14
$
0.63
Discontinued operations
1.14
0.23
3.34
0.42
Consolidated operations
$
0.46
$
0.03
$
4.48
$
1.05
Net income
$
11,647
$
5,936
$
113,402
$
33,097
Other comprehensive income: Unrealized (losses) gains on
available-for-sale securities (2)
(481
)
(24
)
(23
)
161
Comprehensive income
$
11,166
$
5,912
$
113,379
$
33,258
(1) Includes stock compensation expense of $5,442 and
$5,974 for the three months ended September 30, 2020 and 2021,
respectively, and $17,831 and $19,384 for the nine months ended
September 30, 2020 and 2021, respectively. (2) Net of income
tax (benefit) provision of $(160) and $(9) for the three months
ended September 30, 2020 and 2021, respectively, and $(8) and $60
for the nine months ended September 30, 2020 and 2021,
respectively. (3) During the three months ended September
30, 2021, the Company recorded a $5.0 million adjustment to
increase the carrying value of redeemable non-controlling interest
with an off-setting entry to retained earnings which is reflected
in the earnings per share calculation, but is not recorded as a
charge to net income from continuing operations.
MAGELLAN
HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) (In thousands)
Nine Months Ended September 30,
2020
2021
Cash flows from operating activities: Net income
$
113,402
$
33,097
Adjustments to reconcile net income to net cash from operating
activities: Depreciation and amortization
88,061
67,613
Special charges and other
24,908
8,119
Gain on sale of MCC
-
(16,713
)
Non-cash interest expense
1,297
1,066
Non-cash stock compensation expense
18,854
19,384
Non-cash income tax (benefit) provision
(26,537
)
13,883
Non-cash accretion on investments
2,371
2,271
Changes in assets and liabilities, net of effects from acquisitions
of businesses: Accounts receivable, net
(78,682
)
(30,846
)
Pharmaceutical inventory
7,325
3,502
Other assets
(66,612
)
(75,253
)
Accounts payable and accrued liabilities
110,710
(89,065
)
Medical claims payable and other medical liabilities
47,478
111,063
Tax contingencies
1,914
1,478
Deferred credits and other long-term liabilities
(11,572
)
6,936
Other
(965
)
3,521
Net cash provided by operating activities
231,952
60,056
Net cash provided by operating activities from discontinued
operations
177,800
-
Net cash used in operating activities from continuing operations
54,152
60,056
Cash flows from investing activities: Capital
expenditures
(56,006
)
(48,000
)
Acquisitions and investments in businesses, net of cash acquired
(2,066
)
(2,373
)
Purchases of investments
(661,004
)
(779,758
)
Proceeds from maturities and sales of investments
500,660
765,468
Net cash used in investing activities
(218,416
)
(64,663
)
Net cash used in investing activities from discontinued operations
(164,836
)
-
Net cash used in investing activities from continuing operations
(53,580
)
(64,663
)
Cash flows from financing activities: Proceeds from
borrowings on revolving line of credit
80,000
-
Proceeds from exercise of stock options
48,284
17,758
Payments on debt, finance lease and deferred financing obligations
(126,110
)
(117,706
)
Other
902
(1,437
)
Net cash provided by (used in) financing activities
3,076
(101,385
)
Net cash used in financing activities from discontinued operations
(32,650
)
-
Net cash provided by (used in) financing activities from continuing
operations
35,726
(101,385
)
Net increase (decrease) in cash and cash equivalents from
continuing operations
36,298
(105,992
)
Cash and cash equivalents at beginning of period
115,752
1,144,450
Cash and cash equivalents at end of period
$
152,050
$
1,038,458
MAGELLAN HEALTH, INC. AND SUBSIDIARIES CONTINUING
OPERATIONS RESULTS BY BUSINESS SEGMENT (Unaudited)
(In thousands) Three Months Ended Nine
Months Ended September 30, September 30,
2020
2021
2020
2021
Healthcare Managed care and other
revenue
$
489,451
$
580,278
$
1,459,378
$
1,698,427
Cost of care
(364,438
)
(437,308
)
(1,035,377
)
(1,247,234
)
Direct service costs and other
(104,610
)
(123,843
)
(310,996
)
(365,577
)
Stock compensation expense (1)
833
1,465
4,696
5,919
Healthcare segment profit
21,236
20,592
117,701
91,535
Pharmacy Management Managed
care and other revenue
79,382
88,488
211,684
272,761
PBM revenue
606,546
588,851
1,736,519
1,676,158
Cost of goods sold
(565,121
)
(549,472
)
(1,635,380
)
(1,568,998
)
Direct service costs and other
(91,012
)
(101,037
)
(252,960
)
(310,189
)
Legal matter settlement
-
-
-
9,000
Stock compensation expense (1)
1,615
2,125
5,661
7,167
Pharmacy Management segment profit
31,410
28,955
65,524
85,899
Corporate and Elimination (2)
Managed care and other revenue
(145
)
(175
)
(495
)
(480
)
PBM revenue
(5,117
)
(3,324
)
(14,515
)
(10,331
)
Cost of goods sold
4,852
3,135
13,803
9,777
Direct service costs and other
(21,148
)
(13,591
)
(56,811
)
(37,299
)
Stock compensation expense (1)
2,994
2,384
7,474
6,298
Corporate and Elimination
(18,564
)
(11,571
)
(50,544
)
(32,035
)
Consolidated Managed care and
other revenue
568,688
668,591
1,670,567
1,970,708
PBM revenue
601,429
585,527
1,722,004
1,665,827
Cost of care
(364,438
)
(437,308
)
(1,035,377
)
(1,247,234
)
Cost of goods sold
(560,269
)
(546,337
)
(1,621,577
)
(1,559,221
)
Direct service costs and other
(216,770
)
(238,471
)
(620,767
)
(713,065
)
Legal matter settlement
-
-
-
9,000
Stock compensation expense (1)
5,442
5,974
17,831
19,384
Segment profit from continuing operations
$
34,082
$
37,976
$
132,681
$
145,399
Reconciliation of income from continuing
operations before income taxes (GAAP) to segment profit
(non-GAAP): (Loss) income from continuing operations before
income taxes
$
(19,626
)
$
747
$
(4,154
)
$
32,502
Stock compensation expense
5,442
5,974
17,831
19,384
Depreciation and amortization
24,730
23,671
71,976
67,613
Interest expense
7,286
5,969
24,239
18,629
Interest and other income
(349
)
(299
)
(2,119
)
(848
)
Special charges and other
16,599
1,914
24,908
8,119
Segment profit from continuing operations
$
34,082
$
37,976
$
132,681
$
145,399
(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) Pharmacy Management provides pharmacy benefits management for
certain Healthcare customers, and 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
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited) (In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2020
2021
2020
2021
Net (loss) income from continuing operations
$
(17,296
)
$
(114
)
$
28,742
$
21,932
Adjustments Stock compensation expense
-
252
-
747
Amortization of acquired intangibles, net of non-controlling
interest
9,924
6,090
29,183
21,736
Special charges and other
16,599
1,914
24,908
8,119
Tax impact
(6,975
)
(2,176
)
(14,388
)
(8,064
)
Nonrecurring tax benefit - divestiture
(105
)
-
(39,012
)
-
Adjusted net income from continuing operations
$
2,147
$
5,966
$
29,433
$
44,470
Net (loss) income per common share attributable to
Magellan —Diluted (1)
$
(0.68
)
$
(0.20
)
$
1.14
$
0.63
Adjustments Stock compensation expense
-
0.01
-
0.03
Amortization of acquired intangibles, net of non-controlling
interest
0.39
0.23
1.15
0.82
Special charges and other
0.65
0.07
0.98
0.30
Tax impact
(0.27
)
(0.08
)
(0.57
)
(0.30
)
Nonrecurring tax benefit - divestiture
(0.01
)
-
(1.54
)
-
Adjusted earnings per share (1)
$
0.08
$
0.03
$
1.16
$
1.48
(1) During the three months ended September 30, 2021, the
Company recorded a $5.0 million adjustment to increase the carrying
value of redeemable non-controlling interest with an off-setting
entry to retained earnings which is reflected in the earnings per
share calculation, but is not recorded as a charge to net income
from continuing operations.
(MGLN-GEN)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211105005188/en/
Media: Lilly Ackley, ackleyl@magellanhealth.com, (860)
507-1923 Investor: Darren Lehrich,
lehrichd@magellanhealth.com, (860) 507-1814
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