MOH Molina Healthcare Inc

• Net income per diluted share was $2.99 in the first quarter of 2019 compared with $1.64 in the first quarter of 2018, which included a net benefit of $0.38 per diluted share for non-run-rate items
• After-tax margin improved to 4.8% in the first quarter of 2019 compared with 2.3% in the first quarter of 2018
• Medical care ratio was 85.3% in the first quarter, an improvement from 87.7% in the first quarter of 2018, excluding non-run-rate items in the first quarter of 2018
• Premium revenue was $4.0 billion in the first quarter of 2019, a 9% decrease compared with the first quarter of 2018, which was in line with the Company’s expectations
• The Company raised full year 2019 earnings guidance to $10.50 - $11.00 from $9.25 - $9.75, which does not include any future prior-period reserve development

Molina Healthcare, Inc. (NYSE: MOH) today reported financial results for the first quarter of 2019 and raised full year 2019 guidance.

“These results are a testament to the achievability of the second phase of our strategy, which is to sustain the attractive margin position we had built in 2018,” said Joe Zubretsky, president and CEO. “While certainly not conclusive, our first quarter results validate our position that durable financial and operational improvement can and should allow us to sustain these margins, all while we begin to grow the top line again.”

Consolidated Results

First Quarter of 2019 Compared with First Quarter of 2018

Net income increased to $198 million from $107 million in the first quarter of 2018. Net income per diluted share increased to $2.99 from $1.64 in the first quarter of 2018.

Premium revenue decreased $371 million, or 9%, in the first quarter of 2019 compared with the first quarter of 2018, as expected. The decrease was primarily due to the previously announced loss of the Company’s New Mexico Medicaid contract along with the resizing of the Company’s Florida Medicaid contract and the related transition out of all but two regions.

The medical care ratio (MCR) was 85.3% in the first quarter of 2019, an improvement compared with 86.1% in the first quarter of 2018. Excluding the $70 million benefit of the 2017 Marketplace cost-sharing reduction (CSR) reimbursement recognized in first quarter of 2018, the MCR would have been 87.7% in the first quarter of 2018. The change in the overall MCR was due to:

• The Medicaid MCR was 88.5% in the first quarter of 2019, an improvement compared with 90.8% in the first quarter of 2018. This was mainly due to improvements in the Temporary Assistance for Needy Families and Aged, Blind or Disabled programs, partially offset by an increased MCR in the Medicaid Expansion program, primarily in California and Ohio.
• The Marketplace MCR was 62.2% in the first quarter of 2019, compared with 50.6% in the first quarter of 2018. The prior year MCR was positively impacted by the benefit of the CSR, without which the Marketplace MCR would have been 66.8% in the first quarter of 2018. The year-over-year improvement primarily reflected increased premium revenue related to rate increases and risk scores that are more commensurate with the acuity of the Company’s Marketplace population.

The general and administrative (G&A) expense ratio was 7.3% in the first quarter of 2019, an improvement compared with 7.6% in the first quarter of 2018 primarily due to lower expenses and the timing of certain expenditures, which were partially offset by the impact associated with lower premium revenue.

Capital Plan Progress

In the first quarter of 2019, the Company repaid $46 million aggregate principal amount of its 1.125% Convertible Notes and entered into privately negotiated termination agreements to terminate the respective portion of the related 1.125% Call Option and 1.125% Warrants.

In April 2019, the Company repaid an additional $128 million aggregate principal amount of its 1.125% Convertible Notes and entered into privately negotiated termination agreements to terminate the respective portion of the related 1.125% Call Option and 1.125% Warrants. Following these transactions, the remaining principal amount outstanding of the Company’s 1.125% Convertible Notes is $78 million. In addition, the Company has received a conversion notice for $7 million principal amount that will be settled in August 2019.

2019 Revised Guidance

The following table summarizes 2019 Revised Guidance (1):

         

2019 RevisedGuidance

       

2019 InitialGuidance

  Premium revenue   ~$15.9B     ~$15.8B Premium tax revenue ~$425M ~$375M   Investment income and other revenue         ~$115M     ~$195M   Total revenue ~$16.4B ~$16.3B Medical care costs ~$13.6B ~$13.7B Medical care ratio (2) ~86% 86.7% - 87.0% General and administrative expenses ~$1.3B ~$1.2B G&A ratio (3) ~7.7% 7.5% - 7.7% Premium tax expenses ~$425M ~$375M Depreciation and amortization ~$90M ~$85M Interest expense and other expenses, net ~$90M ~$100M Income before income taxes $900M - $940M $790M - $840M Net income $680M - $710M $600M - $630M EBITDA (4) $1,080M - $1,120M $975M - $1,025M Effective tax rate ~24.5% 24.5% - 25.0% After-tax margin (3) 4.1% - 4.3% 3.7% - 3.9% Diluted weighted average shares ~64.7M ~64.7M Net income per share $10.50 - $11.00 $9.25 - $9.75 End-of-year membership by government program: Medicaid and Medicare ~3.1M ~3.2M Marketplace 270K - 280K 250K - 275K

__________________

(1)   All amounts are estimates and do not include non-recurring significant items. Earnings per diluted share as shown is calculated on a GAAP basis; actual results may differ materially. See the Company’s risk factors as discussed in its 2018 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. After-tax margin represents net income as a percentage of total revenue. (4) See reconciliation of non-GAAP financial measures at the end of this release.  

Conference Call

Management will host a conference call and webcast to discuss Molina Healthcare’s first quarter 2019 results at 8:30 a.m. Eastern time on Tuesday, April 30, 2019. The number to call for the interactive teleconference is (877) 883-0383 and the confirmation number is 4093086. A telephonic replay of the conference call will be available through Tuesday, May 7, 2019, by dialing (877) 344-7529 and entering confirmation number 10130214. 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 3.4 million members as of March 31, 2019. 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 revised 2019 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 risks and uncertainties are discussed in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and the section entitled “Forward-Looking Statements” in the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2019.

These reports can be accessed under the investor relations tab of the Company’s website or on the SEC’s website at sec.gov. Given these risks and uncertainties, the Company can give no assurances that its forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by its forward-looking statements will in fact occur, and the Company cautions investors not to place undue reliance on these statements. All forward-looking statements in this release represent the Company’s judgment as of April 29, 2019, and, except as otherwise required by law, the Company disclaims any obligation to update any forward-looking statements to conform the statement to actual results or changes in its expectations.

 

MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

      Three Months Ended March 31, 2019     2018

(In millions, except per-shareamounts)

Revenue: Premium revenue $ 3,952 $ 4,323 Premium tax revenue 138 104 Health insurer fees reimbursed — 61 Service revenue — 134 Investment income and other revenue   29     24   Total revenue   4,119     4,646   Operating expenses: Medical care costs 3,371 3,722 General and administrative expenses 302 352 Premium tax expenses 138 104 Health insurer fees — 75 Depreciation and amortization 25 26 Restructuring costs 3 25 Cost of service revenue   —     120   Total operating expenses   3,839     4,424   Operating income   280     222   Other expenses, net: Interest expense 23 33 Other (income) expenses, net   (3 )   10   Total other expenses, net   20     43   Income before income tax expense 260 179 Income tax expense   62     72   Net income $ 198   $ 107     Net income per diluted share $ 2.99   $ 1.64     Diluted weighted average shares outstanding   66.2     65.2     Operating Statistics: Medical care ratio 85.3 % 86.1 % G&A ratio 7.3 % 7.6 % Premium tax ratio 3.4 % 2.3 % Effective income tax expense rate 23.8 % 40.3 % After-tax margin 4.8 % 2.3 %    

MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

      March 31,     December 31, 2019 2018

(Dollars in millions,except per-share amounts)

ASSETS Current assets: Cash and cash equivalents $ 3,224 $ 2,826 Investments 1,508 1,681 Receivables 1,359 1,330 Prepaid expenses and other current assets 124 149 Derivative asset   516     476   Total current assets 6,731 6,462 Property, equipment, and capitalized software, net 376 241 Goodwill and intangible assets, net 185 190 Restricted investments 100 120 Deferred income taxes 76 117 Other assets   111     24   $ 7,579   $ 7,154     LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Medical claims and benefits payable $ 1,995 $ 1,961 Amounts due government agencies 932 967 Accounts payable and accrued liabilities 444 390 Deferred revenue 207 211 Current portion of long-term debt 198 241 Derivative liability   516     476   Total current liabilities 4,292 4,246 Long-term debt 1,121 1,020 Finance lease liabilities 234 197 Other long-term liabilities   97     44   Total liabilities   5,744     5,507   Stockholders’ equity: Common stock, $0.001 par value, 150 million shares authorized; outstanding: 63 million shares at March 31, 2019 and 62 million shares at December 31, 2018 — — Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding — — Additional paid-in capital 543 643 Accumulated other comprehensive loss (3 ) (8 ) Retained earnings   1,295     1,012   Total stockholders’ equity   1,835     1,647   $ 7,579   $ 7,154      

MOLINA HEALTHCARE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

      Three Months Ended March 31, 2019     2018 (In millions) Operating activities: Net income $ 198 $ 107 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 25 37 Deferred income taxes 15 (6 ) Share-based compensation 9 6 Amortization of convertible senior notes and finance lease liabilities 3 7 (Gain) loss on debt extinguishment (3 ) 10 Non-cash restructuring costs — 17 Other, net 3 2 Changes in operating assets and liabilities: Receivables (29 ) (83 ) Prepaid expenses and other current assets 20 (239 ) Medical claims and benefits payable 34 (163 ) Amounts due government agencies (35 ) 172 Accounts payable and accrued liabilities (30 ) 319 Deferred revenue (4 ) 130 Income taxes   43     78   Net cash provided by operating activities   249     394   Investing activities: Purchases of investments (185 ) (389 ) Proceeds from sales and maturities of investments 366 543 Purchases of property, equipment, and capitalized software (6 ) (4 ) Other, net   (4 )   (5 ) Net cash provided by investing activities   171     145   Financing activities: Repayment of principal amount of 1.125% Convertible Notes (46 ) — Cash paid for partial settlement of 1.125% Conversion Option (115 ) — Cash received for partial termination of 1.125% Call Option 115 — Cash paid for partial termination of 1.125% Warrants (103 ) — Proceeds from borrowings under Term Loan 100 — Other, net   1     (5 ) Net cash used in financing activities   (48 )   (5 ) Net increase in cash, cash equivalents, and restricted cash and cash equivalents 372 534 Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period   2,926     3,290   Cash, cash equivalents, and restricted cash and cash equivalents at end of period $ 3,298   $ 3,824      

MOLINA HEALTHCARE, INC.

UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP

     

March 31,2019

   

December 31,2018

   

March 31,2018

Ending Membership by Government Program: Temporary Assistance for Needy Families (“TANF”) and Children’s Health Insurance Program (“CHIP”) 2,016,000 2,295,000 2,435,000 Medicaid Expansion 596,000 660,000 662,000 Aged, Blind or Disabled (“ABD”) 352,000 406,000 411,000 Total Medicaid 2,964,000 3,361,000 3,508,000 Medicare-Medicaid Plan (“MMP”) - Integrated 56,000 54,000 56,000 Medicare Special Needs Plans 41,000 44,000 44,000 Total Medicare 97,000 98,000 100,000 Total Medicaid and Medicare 3,061,000 3,459,000 3,608,000 Marketplace 332,000 362,000 453,000 3,393,000 3,821,000 4,061,000   Ending Membership by Health Plan: California 600,000 608,000 656,000 Florida (1) 144,000 313,000 414,000 Illinois 219,000 224,000 151,000 Michigan 369,000 383,000 388,000 New Mexico (1) 27,000 222,000 250,000 Ohio 295,000 302,000 328,000 Puerto Rico 207,000 252,000 316,000 South Carolina 126,000 120,000 117,000 Texas 377,000 423,000 476,000 Washington 815,000 781,000 779,000 Other (2) 214,000 193,000 186,000 3,393,000 3,821,000 4,061,000 __________________ (1)   As reported throughout 2018, the Company’s Medicaid contracts in New Mexico and in all but two regions in Florida terminated in late 2018 and early 2019. During 2019, the Company continues to serve Medicare and Marketplace members in both Florida and New Mexico, as well as Medicaid members in two regions in Florida. (2) “Other” includes the Idaho, Mississippi, New York, Utah and Wisconsin health plans, which are not individually significant to the Company’s consolidated operating results.    

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—

BY GOVERNMENT PROGRAM

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

      Three Months Ended March 31, 2019

MemberMonths (1)

    Premium Revenue     Medical Care Costs     MCR (2)    

MedicalMargin

Total     PMPM Total     PMPM TANF and CHIP 6.2 $ 1,173 $ 189.36 $ 1,022 $ 165.05 87.2 % $ 151 Medicaid Expansion 1.8 664 369.62 594 330.45 89.4 70 ABD 1.1   1,167 1,068.43   1,042 953.48 89.2   125 Total Medicaid 9.1   3,004 330.75   2,658 292.60 88.5   346 MMP 0.2 388 2,355.29 333 2,026.83 86.1 55 Medicare 0.1   163 1,284.70   133 1,047.78 81.6   30 Total Medicare 0.3   551 1,889.47   466 1,600.84 84.7   85 Total Medicaid and Medicare 9.4   3,555 379.19   3,124 333.26 87.9   431 Marketplace 1.0   397 393.53   247 244.61 62.2   150 10.4 $ 3,952 $ 380.59 $ 3,371 $ 324.65 85.3 % $ 581     Three Months Ended March 31, 2018

MemberMonths

Premium Revenue Medical Care Costs MCR

MedicalMargin

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

MEDICAID AND MEDICARE BY HEALTH PLAN

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

  Three Months Ended March 31, 2019

MemberMonths

    Premium Revenue     Medical Care Costs     MCR    

MedicalMargin

Total     PMPM Total     PMPM California 1.7 $ 499 $ 299.83 $ 448 $ 269.33 89.8 % $ 51 Florida 0.4 162 387.48 127 303.05 78.2 35 Illinois 0.7 227 348.04 185 282.70 81.2 42 Michigan 1.1 395 363.04 326 299.99 82.6 69 Ohio 0.9 590 659.09 537 600.07 91.0 53 Puerto Rico 0.6 102 165.02 90 145.38 88.1 12 South Carolina 0.4 136 363.14 115 308.87 85.1 21 Texas 0.6 599 902.56 532 801.53 88.8 67 Washington 2.4 614 258.41 586 246.69 95.5 28 Other (1) (2) 0.6   231 370.26   178 285.13 77.0   53 9.4 $ 3,555 $ 379.19 $ 3,124 $ 333.26 87.9 % $ 431     Three Months Ended March 31, 2018

MemberMonths

Premium Revenue Medical Care Costs MCR

MedicalMargin

Total PMPM Total PMPM California 1.8 $ 494 $ 272.61 $ 412 $ 227.31 83.4 % $ 82 Florida 1.0 382 351.58 345 317.41 90.3 37 Illinois 0.5 141 298.17 122 257.50 86.4 19 Michigan 1.1 376 336.64 331 296.19 88.0 45 New Mexico (2) 0.7 319 466.17 310 453.30 97.2 9 Ohio 0.9 551 576.60 460 481.26 83.5 91 Puerto Rico 1.0 186 193.13 174 181.39 93.9 12 South Carolina 0.3 122 348.08 104 297.52 85.5 18 Texas 0.7 562 809.90 519 747.53 92.3 43 Washington 2.3 584 256.66 574 252.41 98.3 10 Other (1) 0.6   176 314.93   153 273.36 86.8   23 10.9 $ 3,893 $ 354.94 $ 3,504 $ 319.48 90.0 % $ 389 __________________ (1)   “Other” includes the Idaho, Mississippi, New York, Utah and Wisconsin health plans, which are not individually significant to the Company’s consolidated operating results. (2) In 2019, “Other” includes the New Mexico health plan. The New Mexico health plan’s Medicaid contract terminated on December 31, 2018, and therefore its 2019 results are not individually significant to the Company’s consolidated operating results.    

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—

MARKETPLACE BY HEALTH PLAN

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

      Three Months Ended March 31, 2019

MemberMonths

    Premium Revenue     Medical Care Costs     MCR    

MedicalMargin

Total     PMPM Total     PMPM California 0.1 $ 56 $ 342.00 $ 33 $ 201.46 58.9 % $ 23 Florida 0.2 61 421.17 26 177.31 42.1 35 Michigan — 10 467.25 5 211.50 45.3 5 Ohio — 30 853.87 15 448.51 52.5 15 Texas 0.6 148 306.36 109 226.36 73.9 39 Washington — 47 711.60 29 435.90 61.3 18 Other (1) 0.1   45   476.11   30   314.70 66.1   15 1.0 $ 397   $ 393.53 $ 247   $ 244.61 62.2 % $ 150     Three Months Ended March 31, 2018

MemberMonths

Premium Revenue Medical Care Costs MCR

MedicalMargin

Total PMPM Total PMPM California 0.2 $ 49 $ 253.93 $ 31 $ 162.64 64.0 % $ 18 Florida 0.2 45 271.12 (16 ) (95.60 ) (35.3 ) 61 Michigan 0.1 13 224.11 9 144.16 64.3 4 New Mexico 0.1 34 438.67 19 246.50 56.2 15 Ohio 0.1 26 403.44 17 262.87 65.2 9 Texas 0.7 229 308.74 146 196.89 63.8 83 Washington — 39 526.36 30 405.40 77.0 9 Other (2) —   (5 ) NM   (18 ) NM NM   13 1.4 $ 430   $ 312.87 $ 218   $ 158.40 50.6 % $ 212 __________________ (1)   “Other” includes the New Mexico, Utah and Wisconsin health plans, which are not individually significant to the Company’s consolidated operating results in 2019. (2) “Other” includes the Utah and Wisconsin health plans, where the Company did not participate in the Marketplace in 2018. Therefore, the ratios for 2018 periods are not meaningful (NM).    

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—

TOTAL BY HEALTH PLAN

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

      Three Months Ended March 31, 2019

MemberMonths

    Premium Revenue     Medical Care Costs     MCR    

MedicalMargin

Total     PMPM Total     PMPM California 1.8 $ 555 $ 303.64 $ 481 $ 263.20 86.7 % $ 74 Florida 0.6 223 396.13 153 270.76 68.4 70 Illinois 0.7 227 348.04 185 282.70 81.2 42 Michigan 1.1 405 365.09 331 298.25 81.7 74 Ohio 0.9 620 666.41 552 594.38 89.2 68 Puerto Rico 0.6 102 165.02 90 145.38 88.1 12 South Carolina 0.4 136 363.14 115 308.87 85.1 21 Texas 1.2 747 651.67 641 559.49 85.9 106 Washington 2.4 661 270.72 615 251.83 93.0 46 Other (1) (2) 0.7   276 384.08   208 288.99 75.2   68 10.4 $ 3,952 $ 380.59 $ 3,371 $ 324.65 85.3 % $ 581     Three Months Ended March 31, 2018

MemberMonths

Premium Revenue Medical Care Costs MCR

MedicalMargin

Total PMPM Total PMPM California 2.0 $ 543 $ 270.80 $ 443 $ 221.03 81.6 % $ 100 Florida 1.2 427 340.91 329 262.65 77.0 98 Illinois 0.5 141 298.17 122 257.50 86.4 19 Michigan 1.2 389 331.08 340 288.68 87.2 49 New Mexico (2) 0.8 353 463.33 329 431.94 93.2 24 Ohio 1.0 577 565.62 477 467.41 82.6 100 Puerto Rico 1.0 186 193.13 174 181.39 93.9 12 South Carolina 0.3 122 348.08 104 297.52 85.5 18 Texas 1.4 791 551.28 665 463.37 84.1 126 Washington 2.3 623 265.20 604 257.25 97.0 19 Other (1) 0.6   171 305.94   135 240.95 78.8   36 12.3 $ 4,323 $ 350.25 $ 3,722 $ 301.55 86.1 % $ 601 __________________ (1)   “Other” includes the Idaho, Mississippi, New York, Utah and Wisconsin health plans, which are not individually significant to the Company’s consolidated operating results. (2) In 2019, “Other” includes the New Mexico health plan. The New Mexico health plan’s Medicaid contract terminated on December 31, 2018, and therefore its 2019 results are not individually significant to the Company’s consolidated operating results.    

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED FINANCIAL DATA

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

 

The following table provides details of the Company’s medical care costs for the periods indicated:

      Three Months Ended March 31, 2019     2018 Amount     PMPM    

% ofTotal

Amount     PMPM    

% ofTotal

Fee for service $ 2,514 $ 242.12 74.6 % $ 2,745 $ 222.38 73.8 % Pharmacy 413 39.73 12.2 583 47.25 15.6 Capitation 285 27.46 8.5 312 25.28 8.4 Other   159   15.34 4.7     82   6.64   2.2   $ 3,371 $ 324.65 100.0 % $ 3,722 $ 301.55   100.0 %  

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

  March 31, December 31, 2019 2018 Fee-for-service claims incurred but not paid (IBNP) $ 1,411 $ 1,562 Pharmacy payable 114 115 Capitation payable 59 52 Other (1)   411   232   $ 1,995 $ 1,961   __________________ (1)   “Other” medical claims and benefits payable include amounts payable to certain providers for which the Company acts as an intermediary on behalf of various state agencies without assuming financial risk. Such receipts and payments do not impact the Company’s consolidated statements of income. As of March 31, 2019 and December 31, 2018, the Company had recorded non-risk provider payables of approximately $278 million and $107 million, respectively.  

MOLINA HEALTHCARE, INC.UNAUDITED CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE(Dollars in millions)

The Company’s 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. The Company’s 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 its original estimate of claims and benefits payable at the beginning of the period was more than the actual amount of the liability based on information (principally the payment of claims) developed since that liability was first reported. The following table presents the components of the change in medical claims and benefits payable for the periods indicated:

    Three Months Ended March 31,    

Year EndedDecember 31,2018

2019     2018 Medical claims and benefits payable, beginning balance $ 1,961 $ 2,192 $ 2,192 Components of medical care costs related to: Current period 3,560 4,033 15,478 Prior period (1)   (189 )   (311 )   (341 ) Total medical care costs   3,371     3,722     15,137     Change in non-risk provider payables   171     45     13   Payments for medical care costs related to: Current period 2,197 2,498 13,671 Prior period   1,311     1,438     1,710   Total paid   3,508     3,936     15,381   Medical claims and benefits payable, ending balance $ 1,995   $ 2,023   $ 1,961     Days in claims payable, fee for service (2) 52 53 53 __________________ (1)   March 31, 2018, includes the 2018 benefit of the 2017 Marketplace CSR reimbursement of $70 million. December 31, 2018, includes the 2018 benefit of the 2017 Marketplace CSR reimbursement of $81 million. (2) Claims payable includes primarily IBNP. It also includes certain fee-for-service payables reported in “Other” medical claims and benefits payable amounting to $51 million, $22 million and $43 million, as of March 31, 2019, March 31, 2018, and December 31, 2018, respectively.  

MOLINA HEALTHCARE, INC.UNAUDITED SUMMARY OF SIGNIFICANT ITEMS AFFECTING CURRENT QUARTER ANDYEAR-TO-DATE FINANCIAL RESULTS(In millions, except per diluted share amounts)

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

    Three Months Ended March 31, 2019     2018 Amount    

Per DilutedShare (1)

Amount    

Per DilutedShare (1)

  Marketplace CSR subsidies, for 2017 dates of service $ — $ — $ 70 $ 0.83 Restructuring costs (3 ) (0.03 ) (25 ) (0.30 ) Gain (loss) on debt extinguishment   3     0.03     (10 )   (0.15 ) $ —   $ —   $ 35   $ 0.38     __________________ (1)   Except for permanent differences between GAAP and tax (such as certain expenses that are not deductible for tax purposes), per diluted share amounts are generally calculated at the statutory income tax rate of 22.6% and 22% for the first quarter of 2019 and 2018, respectively.  

MOLINA HEALTHCARE, INC.UNAUDITED NON-GAAP FINANCIAL MEASURES(In millions, except per diluted share amounts)

The Company uses non-generally accepted accounting principles, or non-GAAP, financial measures as supplemental metrics in evaluating the Company’s 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 the Company’s 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.

    Three Months Ended March 31, 2019     2018   Net income $ 198 $ 107 Adjustments: Depreciation, and amortization of intangible assets and capitalized software 25 34 Interest expense 23 33 Income tax expense   62     72   EBITDA $ 308   $ 246         Three Months Ended March 31, 2019 2018   Amount    

Per DilutedShare

Amount

Per DilutedShare

Net income $ 198 $ 2.99 $ 107 $ 1.64 Adjustment: Amortization of intangible assets 5 0.07 5 0.08 Income tax effect (1)   (1 )   (0.02 )   (1 )   (0.01 ) Amortization of intangible assets, net of tax effect   4     0.05     4     0.07   Adjusted net income $ 202   $ 3.04   $ 111   $ 1.71     __________________ (1)   Income tax effect of adjustments calculated at the blended federal and state statutory tax rate of 22.6% and 22% for 2019 and 2018, 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 on a GAAP basis less depreciation, and amortization of intangible assets and capitalized software, interest expense and income tax expense. The Company believes that EBITDA is helpful in assessing the Company’s ability to meet the cash demands of its operating units.

Adjusted net income: Net income on a GAAP basis less amortization of intangible assets, net of income tax effect calculated at the statutory tax rate. The Company believes that adjusted net income is helpful in assessing the Company’s financial performance exclusive of the non-cash impact of the amortization of purchased intangibles.

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

 

MOLINA HEALTHCARE, INC.

2019 REVISED GUIDANCE

 

Reconciliation of Non-GAAP Financial Measures

      Low End     High End (In millions) Net income $ 680 $ 710 Adjustments: Depreciation, and amortization of intangible assets and capitalized software 90 90 Interest expense 90 90 Income tax expense   220   230 EBITDA $ 1,080 $ 1,120  

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Ryan KubotaInvestor Relations562-435-3666, ext. 119057