Business Wire | Apr 28, 2021 04:15PM EDT

Molina Healthcare Reports First Quarter 2021 Financial Results

Apr. 28, 2021

LONG BEACH, Calif.--(BUSINESS WIRE)--Apr. 28, 2021--Molina Healthcare, Inc. (NYSE: MOH) (the "Company") today reported first quarter of 2021 GAAP earnings per diluted share of $3.89 and adjusted earnings per diluted share of $4.44, a 33% and 47% increase, respectively, compared to the first quarter of 2020. Financial results are summarized below:

Quarter ended March 31,

2021 2020



(In millions, except per-share results)

Premium Revenue $6,306 $4,304

Total Revenue $6,522 $4,549



GAAP:

Net Income $228 $178

EPS - Diluted $3.89 $2.92

Medical Care Ratio (MCR) 86.8% 86.3%

G&A Ratio 7.3% 7.0%

After-tax Margin 3.5% 3.9%



Adjusted:

Net Income $260 $184

EPS - Diluted $4.44 $3.02

G&A Ratio 7.0% 7.0%

After-tax Margin 4.0% 4.0%

See the Reconciliation of Unaudited Non-GAAP Financial Measures at the end ofthis release.

Quarter Highlights

* GAAP net income for the first quarter of 2021 was $3.89 per diluted share, a 33% increase over the first quarter of 2020. * Adjusted net income for the first quarter of 2021 was $4.44 per diluted share, a 47% increase over the first quarter of 2020. * As of March 31, 2021, the Company served approximately 4.6 million members, an increase of 1.2 million members, or 35%, compared to March 31, 2020. * Premium revenue was $6.3 billion for the first quarter of 2021, an increase of 47% compared to the first quarter of 2020. * The Company increased its full year 2021 premium revenue guidance to more than $24.0 billion, from its previous guidance of more than $23.0 billion. * The Company increased its full year 2021 adjusted earnings guidance to no less than $13.00 per diluted share, from its previous range of $12.50 - $13.00 per diluted share.

"We are very pleased with our first quarter performance as we continue to demonstrate our ability to produce excellent financial results while substantially growing top line revenue and managing through the ongoing impacts of the pandemic," said Joseph Zubretsky, president and CEO of Molina Healthcare. "The Ohio contract award and the acquisition of Cigna's Texas Medicaid business are recent examples of the continued execution and success of our growth plan and strategy."

Ohio ProcurementOn April 13, 2021, the Company announced that its Ohio health plan subsidiary was selected as an awardee in all three regions across the state pursuant to the Medicaid managed care RFA issued on September 30, 2020, by the Ohio Department of Medicaid. This new contract is expected to begin in early 2022.

Texas AcquisitionOn April 22, 2021, the Company announced that it has entered into a definitive agreement to acquire certain assets of Cigna Corporation's Texas Medicaid and MMP business. As of December 31, 2020, Cigna served approximately 48,000 members in the Texas ABD program, also known as "STAR+PLUS," in the Hidalgo, Tarrant and Northeast service areas, as well as approximately 2,000 MMP members in the Hidalgo service area, with full year 2020 premium revenue of approximately $1.0 billion.

Total RevenueTotal revenue was $6.5 billion for the first quarter of 2021, an increase of 43% compared to the first quarter of 2020. The higher total revenue reflects increased membership in Medicaid and Marketplace, and includes the impact of acquisitions that closed in the second half of 2020.

Net IncomeNet income for the first quarter was $228 million, or $3.89 per diluted share, compared to $178 million, or $2.92 per diluted share in the first quarter of 2020, a 33% increase in earnings per diluted share. Adjusted net income for the first quarter was $260 million, or $4.44 per diluted share, compared to $184 million, or $3.02 per diluted share in the first quarter of 2020, a 47% increase in adjusted earnings per diluted share.

The Company estimates the net effect of COVID had a negligible impact in the first quarter of 2021, as utilization curtailment was offset by COVID-related risk corridors and direct COVID medical costs.

Medical Care RatioThe consolidated MCR for the first quarter was 86.8%, compared to 86.3% for the first quarter of 2020. While the net effect of COVID was in line with the Company's expectations and negligible to the quarter in total, the impacts were varied across lines of business.

* Medicaid MCR: Decreased to 87.5%, compared to 88.9% for the first quarter of 2020. The MCR was positively impacted by the net effect of COVID. Lower utilization due to COVID curtailment, severe winter weather in several states, and the absence of a typical flu season, more than offset the impact of the various COVID-related risk corridors enacted in several states as previously disclosed. * Medicare MCR: Increased to 90.3%, compared to 81.7% for the first quarter of 2020. The MCR was negatively impacted by the net effect of COVID and the temporary industry-wide challenge of risk scores that do not fully reflect the acuity of the membership. * Marketplace MCR: Increased to 77.3%, compared to 72.3% for the first quarter of 2020. The MCR was negatively impacted by the net effect of COVID compared to the pre-pandemic first quarter of 2020.

The prior year reserve development in the first quarter of 2021 was modestly favorable, but its impact on earnings was absorbed by the COVID-related risk corridors.

General and Administrative Expense RatioThe G&A ratio for the first quarter was 7.3%, compared to 7.0% for the first quarter of 2020. The adjusted G&A ratio for the first quarter was 7.0%, which was unchanged compared to the first quarter of 2020.

Balance SheetCash and investments at the parent company amounted to $436 million as of March 31, 2021, compared to $644 million as of December 31, 2020. The decline was primarily due to the Company's share repurchase program and capital contributions to growing subsidiaries. In the quarter, the Company purchased approximately 577,000 shares for $122 million, at an average cost of $211.65 per share.

Cash FlowOperating cash flow for the first quarter of 2021 amounted to $568 million and was higher compared to the first quarter of 2020, primarily due to growth in operations and the net impact of timing differences in governmental receivables and payables.

2021 GuidanceThe Company now expects its full year 2021 premium revenue to be more than $24.0 billion, compared to the previous guidance of more than $23.0 billion, an increase of over 30% from the full year 2020. Total revenue guidance is now expected to be more than $25.0 billion, compared to the previous guidance of more than $24.0 billion.

The Company increased its full year 2021 adjusted earnings per share guidance to be no less than $13.00 per share from the previous range of $12.50 to $13.00 per share.

Revised guidance reflects:

* The impact of the Public Health Emergency period, and the associated pause on Medicaid membership redeterminations, which is now expected to continue through the third quarter of 2021; * Strong membership pickup in the Marketplace open enrollment coupled with slower membership attrition during the quarter; and, * The Company continues to be cautious in forecasting utilization trends in the remaining nine months of the year due to COVID pandemic.

The impact of the Affinity and the Cigna Texas membership acquisitions are not included.

See the Reconciliation of Unaudited Non-GAAP Financial Measures at the end of this release.

Conference CallManagement will host a conference call and webcast to discuss Molina Healthcare's first quarter 2021 results at 8:00 a.m. Eastern Time on Thursday, April 29, 2021. The number to call for the interactive teleconference is (877) 883-0383 and the confirmation number is 1919961. A telephonic replay of the conference call will be available through Thursday, May 6, 2021, by dialing (877) 344-7529 and entering confirmation number 10152907. 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 HealthcareMolina 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 4.6 million members as of March 31, 2021. For more information about Molina Healthcare, please visit molinahealthcare.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995This 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, 2020, which is on file with the SEC, and also in its Quarterly Report on Form 10-Q for the period ended March 31, 2021, which the Company expects to file on or about April 29, 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 April 28, 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

March 31,

2021 2020



(In millions, except per-share amounts)

Revenue:

Premium revenue $ 6,306 $ 4,304

Premium tax revenue 187 150

Health insurer fees reimbursed - 66

Investment income 9 25

Other revenue 20 4

Total revenue 6,522 4,549

Operating expenses:

Medical care costs 5,474 3,716

General and administrative expenses 473 317

Premium tax expenses 187 150

Health insurer fees - 68

Depreciation and amortization 33 20

Other 20 4

Total operating expenses 6,187 4,275

Operating income 335 274

Other expenses, net:

Interest expense 30 21

Total other expenses, net 30 21

Income before income tax expense 305 253

Income tax expense 77 75

Net income $ 228 $ 178



Net income per share - Diluted $ 3.89 $ 2.92



Diluted weighted average shares outstanding 58.6 61.0



Operating Statistics:

Medical care ratio 86.8 % 86.3 %

G&A ratio 7.3 % 7.0 %

Premium tax ratio 2.9 % 3.4 %

Effective income tax rate 25.2 % 29.8 %

After-tax margin 3.5 % 3.9 %

MOLINA HEALTHCARE, INC. CONSOLIDATED BALANCE SHEETS

March 31,

December 31,

2021

2020

Unaudited

(Dollars in millions,

except per-share amounts)

ASSETS

Current assets:

Cash and cash equivalents

$

4,431

$

4,154

Investments

1,938

1,875

Receivables

1,776

1,672

Prepaid expenses and other current assets

163

175

Total current assets

8,308

7,876

Property, equipment, and capitalized software, net

378

391

Goodwill and intangible assets, net

923

941

Restricted investments

138

136

Deferred income taxes

66

69

Other assets

137

119

Total assets

$

9,950

$

9,532

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Medical claims and benefits payable

$

2,839

$

2,696

Amounts due government agencies

1,718

1,253

Accounts payable, accrued liabilities and other

695

641

Deferred revenue

71

375

Total current liabilities

5,323

4,965

Long-term debt

2,128

2,127

Finance lease liabilities

223

225

Other long-term liabilities

112

119

Total liabilities

7,786

7,436

Stockholders' equity:

Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at March 31, 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

170

199

Accumulated other comprehensive income

26

37

Retained earnings

1,968

1,860

Total stockholders' equity

2,164

2,096

Total liabilities and stockholders' equity

$

9,950

$

9,532

MOLINA HEALTHCARE, INC.CONSOLIDATED BALANCE SHEETS



March 31, December 31,

2021 2020

Unaudited

(Dollars in millions, except per-share amounts)

ASSETS

Current assets:

Cash and cash equivalents $ 4,431 $ 4,154

Investments 1,938 1,875

Receivables 1,776 1,672

Prepaid expenses and other current assets 163 175

Total current assets 8,308 7,876

Property, equipment, and capitalized software, net 378 391

Goodwill and intangible assets, net 923 941

Restricted investments 138 136

Deferred income taxes 66 69

Other assets 137 119

Total assets $ 9,950 $ 9,532



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Medical claims and benefits payable $ 2,839 $ 2,696

Amounts due government agencies 1,718 1,253

Accounts payable, accrued liabilities and other 695 641

Deferred revenue 71 375

Total current liabilities 5,323 4,965

Long-term debt 2,128 2,127

Finance lease liabilities 223 225

Other long-term liabilities 112 119

Total liabilities 7,786 7,436

Stockholders' equity:

Common stock, $0.001 par value, 150 million sharesauthorized; outstanding: 58 million shares at March 31, - - 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 170 199

Accumulated other comprehensive income 26 37

Retained earnings 1,968 1,860

Total stockholders' equity 2,164 2,096

Total liabilities and stockholders' equity $ 9,950 $ 9,532

MOLINA HEALTHCARE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

March 31,

2021

2020

(in millions)

Operating activities:

Net income

$

228

$

178

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

33

20

Deferred income taxes

6

14

Share-based compensation

24

12

Other, net

12

(3

)

Changes in operating assets and liabilities:

Receivables

(98

)

(197

)

Prepaid expenses and other current assets

(15

)

(229

)

Medical claims and benefits payable

168

127

Amounts due government agencies

432

113

Accounts payable, accrued liabilities and other

16

254

Deferred revenue

(304

)

(206

)

Income taxes

66

60

Net cash provided by operating activities

568

143

Investing activities:

Purchases of investments

(388

)

(578

)

Proceeds from sales and maturities of investments

308

493

Purchases of property, equipment, and capitalized software

(16

)

(21

)

Other, net

9

3

Net cash used in investing activities

(87

)

(103

)

Financing activities:

Common stock purchases

(128

)

(453

)

Common stock withheld to settle employee tax obligations

(51

)

(7

)

Contingent consideration liabilities settled

(20

)

-

Proceeds from borrowings under term loan facility

-

380

Other, net

(8

)

(45

)

Net cash used in financing activities

(207

)

(125

)

Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents

274

(85

)

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

$

4,497

$

2,423

MOLINA HEALTHCARE, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



Three Months Ended

March 31,

2021 2020



(in millions)

Operating activities:

Net income $ 228 $ 178

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 33 20

Deferred income taxes 6 14

Share-based compensation 24 12

Other, net 12 (3 )

Changes in operating assets and liabilities:

Receivables (98 ) (197 )

Prepaid expenses and other current assets (15 ) (229 )

Medical claims and benefits payable 168 127

Amounts due government agencies 432 113

Accounts payable, accrued liabilities and other 16 254

Deferred revenue (304 ) (206 )

Income taxes 66 60

Net cash provided by operating activities 568 143

Investing activities:

Purchases of investments (388 ) (578 )

Proceeds from sales and maturities of investments 308 493

Purchases of property, equipment, and capitalized software (16 ) (21 )

Other, net 9 3

Net cash used in investing activities (87 ) (103 )

Financing activities:

Common stock purchases (128 ) (453 )

Common stock withheld to settle employee tax obligations (51 ) (7 )

Contingent consideration liabilities settled (20 ) -

Proceeds from borrowings under term loan facility - 380

Other, net (8 ) (45 )

Net cash used in financing activities (207 ) (125 )

Net increase (decrease) in cash, cash equivalents, and 274 (85 )restricted cash and cash equivalents

Cash, cash equivalents, and restricted cash and cash 4,223 2,508 equivalents at beginning of period

Cash, cash equivalents, and restricted cash and cash $ 4,497 $ 2,423 equivalents at end of period

MOLINA HEALTHCARE, INC. UNAUDITED SEGMENT DATA (Dollars in millions)

March 31,

December 31,

March 31,

2021 (1)

2020

2020

Ending Membership by Segment:

Medicaid

3,859,000

3,599,000

2,970,000

Medicare

126,000

115,000

105,000

Marketplace

620,000

318,000

329,000

Total

4,605,000

4,032,000

3,404,000

__________________________ (1) Approximately 200,000 members, from the Magellan Complete Care acquisition that closed on December 31, 2020, are included in the totals as of March 31, 2021, but not in prior periods.

MOLINA HEALTHCARE, INC.UNAUDITED SEGMENT DATA(Dollars in millions)



March 31, December 31, March 31,

2021 ^(1) 2020 2020

Ending Membership by Segment:

Medicaid 3,859,000 3,599,000 2,970,000

Medicare 126,000 115,000 105,000

Marketplace 620,000 318,000 329,000

Total 4,605,000 4,032,000 3,404,000

^__________________________(1) Approximately 200,000 members, from the Magellan Complete Care acquisitionthat closed on December 31, 2020, are included in the totals as of March 31,2021, but not in prior periods.

Three Months Ended March 31,

2021

2020

Premium

Revenue

Medical

Care Costs

MCR (1)

Premium

Revenue

Medical

Care Costs

MCR (1)

Medicaid

$

4,840

$

4,236

87.5

%

$

3,286

$

2,921

88.9

%

Medicare

799

722

90.3

634

517

81.7

Marketplace

667

516

77.3

384

278

72.3

Consolidated

$

6,306

$

5,474

86.8

%

$

4,304

$

3,716

86.3

%

__________________________ (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:

Three Months Ended March 31,

2021 2020

Medical Medical Premium MCR ^ Premium MCR ^ Care (1) Care (1) Revenue Costs Revenue Costs

Medicaid $ 4,840 $ 4,236 87.5 % $ 3,286 $ 2,921 88.9 %

Medicare 799 722 90.3 634 517 81.7

Marketplace 667 516 77.3 384 278 72.3

Consolidated $ 6,306 $ 5,474 86.8 % $ 4,304 $ 3,716 86.3 %

^__________________________(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:

Three Months Ended

March 31,

2021 2020



Unaudited

Medical claims and benefits payable, beginning balance $ 2,696 $ 1,854

Components of medical care costs related to:

Current year 5,668 3,817

Prior year (194 ) (101 )

Total medical care costs 5,474 3,716

Payments for medical care costs related to:

Current year 3,513 2,274

Prior year 1,781 1,305

Total paid 5,294 3,579

Change in acquired balances (25 ) -

Change in non-risk and other provider payables (12 ) (10 )

Medical claims and benefits payable, ending balance $ 2,839 $ 1,981



Days in claims payable, fee for service ^(1) 48 49

^__________________________(1) Claims payable includes primarily claims incurred but not paid, or IBNP.It also includes certain fee-for-service payables reported in medical claimsand benefits payable amounting to $100 million and $64 million, as of March31, 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 March 31, 2021 2020

Per Per

Amount Diluted Amount Diluted

Share Share

Net income $ 228 $ 3.89 $ 178 $ 2.92

Adjustments:

Acquisition-related expenses ^(1) 21 0.36 - -

Amortization of intangible assets 12 0.21 4 0.06

Other ^(2) 9 0.15 4 0.07

Subtotal, adjustments 42 0.72 8 0.13

Income tax effect (10 ) (0.17 ) (2 ) (0.03 )

Adjustments, net of tax 32 0.55 6 0.10

Adjusted net income $ 260 $ 4.44 $ 184 $ 3.02

^__________________________(1) Beginning in the third quarter of 2020, reflects non-recurring costsassociated with acquisitions, including various transaction and integrationcosts.

^(2) The first quarter of 2021 includes change in premium deficiency reserves,loss on sale of property, and restructuring costs. The first quarter of 2020includes restructuring costs.

MOLINA HEALTHCARE, INC. RECONCILIATION OF UNAUDITED NON-GAAP FINANCIAL MEASURES (CONTINUED) 2021 GUIDANCE

Net income per diluted share (1)

$

11.45

Adjustments:

Acquisition-related expenses

1.10

Amortization of intangible assets

0.79

Other

0.15

Subtotal, adjustments

2.04

Income tax effect (2)

(0.49

)

Adjustments, net of tax

1.55

Adjusted net income per diluted share

$

13.00

__________________________ (1) Computations assume approximately 58.5 million diluted weighted average shares outstanding.

(2) Income tax effect calculated at the statutory tax rate of 23.9%.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210428006013/en/

CONTACT: Investor Contact: Julie Trudell, Julie.Trudell@molinahealthcare.com, 562-912-6720 Media Contact: Caroline Zubieta, Caroline.Zubieta@molinahealthcare.com, 562-951-1588