Reaffirms Full Year 2021 Earnings Guidance
Molina Healthcare, Inc. (NYSE: MOH) (the “Company”) today
reported third quarter of 2021 GAAP earnings per diluted share of
$2.46 and adjusted earnings per diluted share of $2.83. Financial
results are summarized below:
Quarter ended
Nine months ended
September 30,
September 30,
2021
2020
2021
2020
(In millions, except per-share
results)
Premium Revenue
$6,800
$4,768
$19,689
$13,444
Total Revenue
$7,040
$5,021
$20,362
$14,188
GAAP:
Net Income
$143
$185
$556
$639
EPS – Diluted
$2.46
$3.10
$9.51
$10.65
Medical Care Ratio (MCR)
88.9%
85.9%
88.1%
84.9%
G&A Ratio
7.5%
7.3%
7.3%
7.3%
After-tax Margin
2.0%
3.7%
2.7%
4.5%
Adjusted:
Net Income
$164
$201
$623
$670
EPS – Diluted
$2.83
$3.36
$10.66
$11.15
G&A Ratio
7.3%
7.3%
7.1%
7.2%
After-tax Margin
2.3%
4.0%
3.1%
4.7%
See the Reconciliation of Unaudited
Non-GAAP Financial Measures at the end of this release.
Quarter Highlights
- GAAP net income for the third quarter of 2021 was $143 million,
or $2.46 per diluted share.
- Adjusted net income for the third quarter of 2021 was $164
million, or $2.83 per diluted share.
- As of September 30, 2021, the Company served approximately 4.8
million members, an increase of 805,000 members, or 20%, compared
to September 30, 2020.
- Premium revenue was approximately $6.8 billion for the third
quarter of 2021, an increase of 43% compared to the third quarter
of 2020.
- The net effect of COVID decreased net income by approximately
$1.00 per diluted share in the third quarter of 2021.
- The Company increased its full year 2021 premium revenue
guidance to no less than $26.5 billion.
- The Company reaffirmed its full year 2021 adjusted earnings
guidance of no less than $13.25 per diluted share.
“We are pleased with our third quarter and year-to-date
performance. With the backdrop of a continuing pandemic, we
executed well, delivered solid operating earnings, and continued to
drive our growth strategy,” said Joseph Zubretsky, president and
CEO of Molina Healthcare. “The Nevada contract award and the
AgeWell acquisition reflect that the components of our growth
engine are well established and working.”
New York Acquisitions On October 7, 2021, the Company
announced that it has entered into a definitive agreement to
acquire the Medicaid Managed Long Term Care business of AgeWell New
York. As of August 31, 2021, AgeWell served approximately 13,000
managed long-term services and supports members, with full-year
2020 premium revenue of approximately $700 million.
On October 25, 2021, the Company announced the closing of its
acquisition of Affinity Health Plan.
Premium Revenue Premium revenue was approximately $6.8
billion for the third quarter of 2021, an increase of 43% compared
to the third quarter of 2020. The higher premium revenue reflects
increased organic membership in all lines of business, along with
the impact of acquisitions.
Net Income Net income for the third quarter was $143
million, or $2.46 per diluted share, compared to $185 million, or
$3.10 per diluted share, in the third quarter of 2020. Adjusted net
income for the third quarter was $164 million, or $2.83 per diluted
share, compared to $201 million, or $3.36 per diluted share, in the
third quarter of 2020.
The year-over-year comparison reflects the negative impact from
the net effect of COVID in the third quarter of 2021. In contrast,
the prior year third quarter was positively impacted by the net
effect of COVID.
Net income for the nine months ended September 30, 2021 was $556
million, or $9.51 per diluted share, compared to $639 million, or
$10.65 per diluted share, in the nine months ended September 30,
2020. Adjusted net income for the nine months ended September 30,
2021 was $623 million, or $10.66 per diluted share, compared to
$670 million, or $11.15 per diluted share, in the nine months ended
September 30, 2020.
Medical Care Ratio The consolidated MCR for the third
quarter was 88.9%, compared to 85.9% in the third quarter of 2020.
The net effect of COVID increased the consolidated MCR by
approximately 110 basis points and impacted all three lines of
business. In the prior year, the net effect of COVID was negligible
to slightly positive.
A year-over-year comparison is less meaningful than it would be
in a typical year due to pandemic related effects. Due to those
anomalous effects, a sequential comparison of MCR is more
relevant.
On a sequential basis, the consolidated MCR for the third
quarter was 88.9%, compared to 88.4% in the second quarter of 2021.
The net effect of COVID increased the consolidated MCR by
approximately 110 basis points in the second and third quarters of
2021 and was negligible in the first quarter of 2021.
- The Medicaid MCR increased to 89.6% in the third quarter of
2021 compared to 89.0% in the second quarter of 2021. The increase
in the MCR was primarily due to an increase in the net effect of
COVID.
- The Medicare MCR decreased to 82.8% in the third quarter of
2021 compared to 87.6% in the second quarter of 2021. The decrease
in the MCR was primarily due to the lower negative net effect of
COVID among our Medicare members.
- The Marketplace MCR increased to 91.3% in the third quarter of
2021 compared to 84.8% in the second quarter of 2021. The increase
in the MCR was primarily due to the higher net effect of COVID,
normal seasonality, and non-COVID utilization by Special Enrollment
Period members.
General and Administrative Expense Ratio The G&A
ratio for the third quarter was 7.5%, compared to 7.3% for the
third quarter of 2020. The adjusted G&A ratio for the third
quarter was 7.3% and was consistent with the third quarter of 2020
reflecting disciplined cost management, and growth investments.
Balance Sheet Cash and investments at the parent company
amounted to $703 million as of September 30, 2021, compared to $644
million as of December 31, 2020. The increase was due to dividends
received from the regulated health plan subsidiaries in the
quarter.
In September 2021, the Company’s Board of Directors authorized a
stock repurchase program of up to $500 million and continuing
through December 31, 2022. This program supersedes the stock
repurchase program approved by our Board in September 2020. As of
October 27, 2021, no shares have been purchased under this
program.
Cash Flow Operating cash flow for the nine months ended
September 30, 2021 amounted to $1.5 billion, and was higher
compared to the nine months ended September 30, 2020, primarily due
to growth in operations and the net impact of timing differences in
governmental receivables and payables.
2021 Guidance The Company expects its full year 2021
total revenue to be no less than $27.5 billion, an increase of
approximately 42% from its full year 2020.
Premium revenue for the full year 2021 is expected to be no less
than $26.5 billion, an increase of approximately 45% from the full
year 2020.
The Company reaffirmed its full year 2021 adjusted earnings per
share guidance to be no less than $13.25 per share.
Guidance reflects:
- The continuation of the Public Health Emergency period, through
mid-January, 2022 and the associated pause on Medicaid membership
redeterminations;
- Underlying outperformance;
- An offset caused by the estimated net effect of COVID which is
expected to be approximately $3.00 per share for the full year
2021; and
- Continued caution in forecasting utilization trends for the
remaining three months of the year due to the COVID pandemic.
The impact of the Cigna Texas membership acquisition is not
included in guidance. The Cigna Texas membership acquisition is
expected to close in January of 2022.
See the Reconciliation of Unaudited Non-GAAP Financial Measures
at the end of this release.
Conference Call Management is hosting a conference call
and webcast to discuss Molina Healthcare’s third quarter 2021
results at 8:00 a.m. Eastern Time on Thursday, October 28, 2021.
The number to call for the interactive teleconference is (877)
883-0383 and the confirmation number is 5108692. A telephonic
replay of the conference call will be available through Thursday,
November 11, 2021, by dialing (877) 344-7529 and entering
confirmation number 10160042. 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 4.8 million members as of September
30, 2021. 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 and 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, 2020, which is on file with the SEC, and also in its
Quarterly Report on Form 10-Q for the period ended September 30,
2021, which the Company expects to file on or about October 28,
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 October 27, 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
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
(In millions, except per-share
amounts)
Revenue:
Premium revenue
$
6,800
$
4,768
$
19,689
$
13,444
Premium tax revenue
204
170
576
477
Health insurer fees reimbursed
—
69
—
206
Investment income
20
10
39
48
Other revenue
16
4
58
13
Total revenue
7,040
5,021
20,362
14,188
Operating expenses:
Medical care costs
6,049
4,098
17,342
11,412
General and administrative expenses
532
368
1,489
1,030
Premium tax expenses
204
170
576
477
Health insurer fees
—
70
—
209
Depreciation and amortization
32
23
96
64
Other
2
3
30
9
Total operating expenses
6,819
4,732
19,533
13,201
Operating income
221
289
829
987
Other expenses, net:
Interest expense
30
27
90
72
Other expense, net
—
—
—
5
Total other expenses, net
30
27
90
77
Income before income tax expense
191
262
739
910
Income tax expense
48
77
183
271
Net income
$
143
$
185
$
556
$
639
Net income per share – Diluted
$
2.46
$
3.10
$
9.51
$
10.65
Diluted weighted average shares
outstanding
58.5
59.6
58.5
60.0
Operating Statistics:
Medical care ratio
88.9
%
85.9
%
88.1
%
84.9
%
G&A ratio
7.5
%
7.3
%
7.3
%
7.3
%
Premium tax ratio
2.9
%
3.4
%
2.8
%
3.4
%
Effective income tax rate
24.8
%
29.5
%
24.7
%
29.8
%
After-tax margin
2.0
%
3.7
%
2.7
%
4.5
%
MOLINA HEALTHCARE, INC.
CONSOLIDATED BALANCE SHEETS
September 30,
December 31,
2021
2020
Unaudited
(Dollars in millions,
except per-share
amounts)
ASSETS
Current assets:
Cash and cash equivalents
$
4,357
$
4,154
Investments
2,900
1,875
Receivables
1,912
1,672
Prepaid expenses and other current
assets
197
175
Total current assets
9,366
7,876
Property, equipment, and capitalized
software, net
385
391
Goodwill and intangible assets, net
915
941
Restricted investments
156
136
Deferred income taxes
83
69
Other assets
128
119
Total assets
$
11,033
$
9,532
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Medical claims and benefits payable
$
3,191
$
2,696
Amounts due government agencies
2,081
1,253
Accounts payable, accrued liabilities and
other
797
641
Deferred revenue
1
375
Total current liabilities
6,070
4,965
Long-term debt
2,130
2,127
Finance lease liabilities
220
225
Other long-term liabilities
95
119
Total liabilities
8,515
7,436
Stockholders’ equity:
Common stock, $0.001 par value, 150
million shares authorized; outstanding: 58 million shares at
September 30, 2021, and 59 million shares at December 31, 2020
—
—
Preferred stock, $0.001 par value; 20
million shares authorized, no shares issued and outstanding
—
—
Additional paid-in capital
205
199
Accumulated other comprehensive income
17
37
Retained earnings
2,296
1,860
Total stockholders’ equity
2,518
2,096
Total liabilities and stockholders’
equity
$
11,033
$
9,532
MOLINA HEALTHCARE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2021
2020
(in millions)
Operating activities:
Net income
$
556
$
639
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
96
64
Deferred income taxes
(8
)
(3
)
Share-based compensation
49
43
Loss on debt repayment
—
5
Other, net
9
2
Changes in operating assets and
liabilities:
Receivables
(247
)
(369
)
Prepaid expenses and other current
assets
(43
)
(98
)
Medical claims and benefits payable
522
431
Amounts due government agencies
810
(24
)
Accounts payable, accrued liabilities and
other
129
63
Deferred revenue
(374
)
(188
)
Income taxes
23
34
Net cash provided by operating
activities
1,522
599
Investing activities:
Purchases of investments
(2,018
)
(670
)
Proceeds from sales and maturities of
investments
965
891
Purchases of property, equipment, and
capitalized software
(56
)
(64
)
Net cash paid in business combinations
—
(62
)
Other, net
3
3
Net cash (used in) provided by investing
activities
(1,106
)
98
Financing activities:
Common stock purchases
(128
)
(453
)
Common stock withheld to settle employee
tax obligations
(52
)
(8
)
Contingent consideration liabilities
settled
(20
)
—
Proceeds from senior notes offering, net
of issuance costs
—
789
Repayment of term loan facility
—
(600
)
Proceeds from borrowings under term loan
facility
—
380
Other, net
(4
)
(47
)
Net cash (used in) provided by financing
activities
(204
)
61
Net increase in cash, cash equivalents,
and restricted cash and cash equivalents
212
758
Cash, cash equivalents, and restricted
cash and cash equivalents at beginning of period
4,223
2,508
Cash, cash equivalents, and restricted
cash and cash equivalents at end of period
$
4,435
$
3,266
MOLINA HEALTHCARE, INC.
UNAUDITED SEGMENT DATA (Dollars in millions)
September 30,
December 31,
September 30,
2021 (1)
2020
2020
Ending Membership by Segment:
Medicaid
3,981,000
3,599,000
3,595,000
Medicare
138,000
115,000
113,000
Marketplace
719,000
318,000
325,000
Total
4,838,000
4,032,000
4,033,000
______________________________ (1) Approximately 200,000
members, from the Magellan Complete Care acquisition that closed on
December 31, 2020, are included in the totals as of September 30,
2021, but not in prior periods.
Three Months Ended June
30,
2021
2020
Premium
Revenue
Medical
Margin
MCR (1)
Premium
Revenue
Medical
Margin
MCR (1)
Medicaid
$
5,034
$
551
89.0
%
$
3,375
$
553
83.6
%
Medicare
814
101
87.6
630
125
80.0
Marketplace
735
112
84.8
367
96
74.0
Consolidated
$
6,583
$
764
88.4
%
$
4,372
$
774
82.3
%
Three Months Ended September
30,
2021
2020
Premium
Revenue
Medical
Margin
MCR (1)
Premium
Revenue
Medical
Margin
MCR (1)
Medicaid
$
5,146
$
532
89.6
%
$
3,754
$
509
86.4
%
Medicare
875
151
82.8
632
91
85.6
Marketplace
779
68
91.3
382
70
81.6
Consolidated
$
6,800
$
751
88.9
%
$
4,768
$
670
85.9
%
Nine Months Ended September
30,
2021
2020
Premium
Revenue
Medical
Margin
MCR (1)
Premium
Revenue
Medical
Margin
MCR (1)
Medicaid
$
15,020
$
1,687
88.8
%
$
10,415
$
1,427
86.3
%
Medicare
2,488
329
86.8
1,896
333
82.4
Marketplace
2,181
331
84.8
1,133
272
76.0
Consolidated
$
19,689
$
2,347
88.1
%
$
13,444
$
2,032
84.9
%
______________________________ (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:
Nine Months Ended
September 30,
2021
2020
Unaudited
Medical claims and benefits payable,
beginning balance
$
2,696
$
1,854
Components of medical care costs related
to:
Current year
17,558
11,478
Prior year
(216
)
(66
)
Total medical care costs
17,342
11,412
Payments for medical care costs related
to:
Current year
14,880
9,500
Prior year
2,008
1,527
Total paid
16,888
11,027
Change in acquired balances
(27
)
—
Change in non-risk and other provider
payables
68
50
Medical claims and benefits payable,
ending balance
$
3,191
$
2,289
Days in claims payable, fee for service
(1)
49
52
______________________________ (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 $148 million and
$79 million, as of September 30, 2021, and 2020, respectively.
MOLINA HEALTHCARE, INC. RECONCILIATION OF
UNAUDITED NON-GAAP FINANCIAL MEASURES (In millions, except per
diluted share amounts)
The Company believes that certain non-GAAP (generally accepted
accounting principles) 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.
The non-GAAP financial measures are also used internally to enable
management to assess the Company’s performance consistently over
time. These non-GAAP financial measures, presented below, should be
considered as supplements to, and not as substitutes for or
superior to, GAAP measures.
Adjustments represent additions and deductions to GAAP
net income as indicated in the table below, which include the
non-cash impact of amortization of acquired intangible assets,
acquisition-related expenses, and the impact of certain expenses
and other items that management believes are not indicative of
longer-term business trends and operations.
Adjusted G&A Ratio represents the GAAP G&A ratio,
recognizing adjustments.
Adjusted net income 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 per diluted share represents adjusted
net income divided by weighted average common shares outstanding on
a fully diluted basis.
Adjusted after-tax margin represents adjusted net income,
divided by total revenue.
Three Months Ended September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Amount
Per
Diluted
Share
Amount
Per
Diluted
Share
Amount
Per
Diluted
Share
Amount
Per
Diluted
Share
Net income
$
143
$
2.46
$
185
$
3.10
$
556
$
9.51
$
639
$
10.65
Adjustments:
Acquisition-related expenses (1)
17
0.28
4
0.07
44
0.75
4
0.06
Amortization of intangible assets
11
0.20
4
0.06
35
0.60
12
0.19
Loss on debt repayment
—
—
—
—
—
—
5
0.08
Other (2)
—
—
13
0.21
9
0.16
19
0.32
Subtotal, adjustments
28
0.48
21
0.34
88
1.51
40
0.65
Income tax effect
(7
)
(0.11
)
(5
)
(0.08
)
(21
)
(0.36
)
(9
)
(0.15
)
Adjustments, net of tax
21
0.37
16
0.26
67
1.15
31
0.50
Adjusted net income
$
164
$
2.83
$
201
$
3.36
$
623
$
10.66
$
670
$
11.15
______________________________ (1)
Beginning in the third quarter of 2020, reflects non-recurring
costs associated with acquisitions, including various transaction
and integration costs.
(2) The nine months ended September 30,
2021 includes change in premium deficiency reserves, loss on sale
of property, and restructuring costs. The nine months ended
September 30, 2020 includes premium deficiency reserves, and
restructuring costs.
MOLINA HEALTHCARE, INC.
RECONCILIATION OF UNAUDITED NON-GAAP FINANCIAL MEASURES (CONTINUED)
2021 GUIDANCE
Net income per diluted share (1)
$
11.61
Adjustments:
Acquisition-related expenses
1.18
Amortization of intangible assets
0.81
Other
0.16
Subtotal, adjustments
2.15
Income tax effect (2)
(0.51
)
Adjustments, net of tax
1.64
Adjusted net income per diluted share
$
13.25
______________________________ (1)
Computations assume approximately 58.6 million diluted weighted
average shares outstanding.
(2) Income tax effect calculated at the
statutory tax rate of 23.8%.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211027006069/en/
Investor Contact: Joseph Krocheski,
Joseph.Krocheski@molinahealthcare.com, 562-951-8382 Media
Contact: Caroline Zubieta,
Caroline.Zubieta@molinahealthcare.com, 562-951-1588
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