Business Wire | Aug 5, 2021 06:30AM EDT

Magellan Health Reports Second Quarter 2021 Financial Results

Aug. 05, 2021

PHOENIX--(BUSINESS WIRE)--Aug. 05, 2021--Magellan Health, Inc. (NASDAQ: MGLN) today announced financial results for the second quarter ended June 30, 2021, as summarized below:

Three Months Ended Six Months Ended

June 30 June 30

(Inmillions, except per shareamounts)Continuing 2021 2020 Chg 2021 2020 ChgOperationsNet $ 1,220.8 $ 1,100.1 11.0 % $ 2,382.4 $ 2,222.5 7.2 %revenueNet income $ (6.5 ) $ 47.1 -113.7 % $ 22.0 $ 46.0 -52.1 %(loss)Segment $ 32.3 $ 57.0 -43.3 % $ 107.4 $ 98.6 8.9 %profit ^ [1]Adjusted $ 3.0 $ 21.3 -85.8 % $ 38.5 $ 27.3 41.1 %net income ^[1]Earnings $ (0.25 ) $ 1.86 -113.4 % $ 0.83 $ 1.84 -54.9 %(loss) per shareAdjustedearnings $ 0.11 $ 0.84 -86.9 % $ 1.45 $ 1.09 33.0 %per share^[1] [1] Refer to the Basis of Presentation for a discussion of non-GAAP financial measures.

Second Quarter 2021 Highlights and Other Recent Developments:

* Net revenue increased 11.0% percent over the second quarter of 2020 to $1.22 billion. * Net income from continuing operations decreased by $53.6 million from the second quarter of 2020 to a net loss of $6.5 million. * Segment profit decreased 43.3% percent from the second quarter of 2020 to $32.3 million. * Adjusted net income and adjusted earnings per share were $3.0 million and $0.11 for the quarter as compared to the prior year quarter adjusted net income and adjusted earnings per share of $21.3 million and $0.84, respectively. * The Company continues to expect the merger with Centene Corporation ("Centene") to close during the second half of 2021.

"I am pleased with our organization's focus during the second quarter of 2021 as we continue to execute against Magellan's Focus Forward priorities: honoring our commitments, delivering on operational transformation initiatives, strengthening our capabilities through innovation and building a robust growth engine across our businesses," said Kenneth Fasola, chief executive officer, Magellan Health.

"During the second quarter of 2021, we remained focused on building a more collaborative and integrated ecosystem of care that leverages our years of experience and customer relationships to provide members with a unique combination of digital tools complemented by high-touch clinical solutions. We recognize in these unprecedented times the growing need for solutions that can bridge behavioral and physical health to close care gaps and produce better outcomes for the members of our health plan, employer and public sector customers."

"We remain enthusiastic about the Centene transaction and are encouraged by the progress made in our integration planning efforts, which should allow us to chart a successful path for Magellan within Centene's Health Care Enterprises division following the transaction's close," said Kenneth Fasola, chief executive officer, Magellan Health.

Net Revenue

Net revenue from continuing operations was $1.22 billion for the second quarter of 2021, an increase of 11.0% compared to second quarter of 2020 primarily due to growth in the Healthcare segment, partially offset by a modest decline in the Pharmacy Management segment as a result of the January 1, 2021 exit of Medicare Part D as a plan sponsor.

Segment Profit

Segment profit from continuing operations was $32.3 million for second quarter of 2021, compared to $57.0 million in the second quarter of 2020.

* Healthcare segment profit was $29.6 million, representing a decrease of $31.2 million from 2020. This year-over-year decrease was most attributable to utilization patterns returning to pre-pandemic levels and an increase in corporate investments. * Pharmacy Management segment profit was $13.2 million, and largely in line with 2020 results. Growth in specialty and government coupled with the exit from Medicare Part D, were offset by an increase in corporate investments. * Corporate segment costs inclusive of eliminations, but excluding stock compensation expense, totaled $10.5 million, as compared to $17.1 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 charge of $5.1 million during the second quarter of 2021 primarily related to the impairment of an investment in a healthcare company that is carried at cost. In the second quarter of 2020 the company recognized a charge of $8.3 million primarily associated with non-cash lease termination and abandonment costs for planned reductions to the Company's real estate footprint and severance related to the transformation operational initiatives.

Income from discontinued operations, net of tax, for the second quarter of 2021 was $5.8 million, as compared to income from discontinued operations, net of tax, of $36.4 million during the second 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. The activity recorded in the second quarter of 2021 reflects changes to accounting estimates associated with this divestiture which were partially offset by post-closing transaction related costs .

Cash Flow & Balance Sheet

Cash flow used in operating activities from continuing operations for the six months ended June 30, 2021, was $142.7 million, as compared to cash flow used in operating activities of $7.5 million for the six months ended June 30, 2020. This year over year change is largely due to unfavorable changes in working capital and increased tax payments.

As of June 30, 2021, the Company's unrestricted cash and investments totaled $915.8 million, as compared to $1,148.8 million 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 $26.0 million of the unrestricted cash and investments at June 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 second 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 with Centene; (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 June 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 SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands) December 31, June 30, 2021 2020 (unaudited)ASSETS Current Assets:Cash and cash equivalents $ 1,144,450 $ 678,507

Accounts receivable, net 743,502 826,997

Short-term investments 140,847 325,581

Pharmaceutical inventory 43,334 38,789

Other current assets 84,264 145,156

Total Current Assets 2,156,397 2,015,030

Property and equipment, net 136,739 141,628

Long-term investments 2,612 2,985

Deferred income taxes 1,842 -

Other long-term assets 108,797 120,046

Goodwill 873,779 873,830

Other intangible assets, net 79,689 64,410

Total Assets $ 3,359,855 $ 3,217,929

LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:Accounts payable $ 137,380 $ 132,298

Accrued liabilities 354,906 208,322

Medical claims payable 111,851 147,555

Other medical liabilities 126,921 138,279

Current debt, finance lease and deferred 6,521 3,176 financing obligationsTotal Current Liabilities 737,579 629,630

Long-term debt, finance lease and deferred 631,855 521,518 financing obligationsDeferred income taxes 7,102 17,634

Tax contingencies 11,002 12,734

Deferred credits and other long-term 69,283 78,918 liabilitiesTotal Liabilities 1,456,821 1,260,434

Redeemable non-controlling interest 33,062 33,674

Stockholders' Equity:Ordinary common stock 555 559

Additional paid-in capital 1,477,219 1,503,718

Retained earnings 1,857,130 1,884,291

Accumulated other comprehensive loss (205 ) (20 )

Ordinary common stock in treasury, at cost (1,464,727 ) (1,464,727 )

Total Stockholders' Equity 1,869,972 1,923,821

Total Liabilities and Stockholders' Equity $ 3,359,855 $ 3,217,929

MAGELLAN HEALTH, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(Unaudited)(In thousands, except per share amounts)Three Months EndedSix Months EndedJune 30,June 30,2020

2021

2020

2021

Net revenue:Managed care and other$

548,711

$

676,041

$

1,101,879

$

1,302,117

PBM551,364

544,727

1,120,575

1,080,300

Total net revenue1,100,075

1,220,768

2,222,454

2,382,417

Costs, expenses and other income:Cost of care321,831

430,735

670,939

809,926

Cost of goods sold528,067

520,514

1,061,308

1,012,884

Direct service costs and other operating expenses (1)199,756

243,573

403,997

474,594

Legal matter settlement-

-

-

(9,000

)

Depreciation and amortization23,888

22,525

47,246

43,942

Interest expense7,995

6,234

16,953

12,660

Interest and other income(551

)

(208

)

(1,770

)

(549

)

Special charges and other8,309

5,054

8,309

6,205

Total costs, expenses and other income1,089,295

1,228,427

2,206,982

2,350,662

Income (loss) from continuing operations before income taxes10,780

(7,659

)

15,472

31,755

(Benefit) provision for income taxes(36,328

)

(1,196

)

(30,566

)

9,709

Net income (loss) from continuing operations47,108

(6,463

)

46,038

22,046

Income from discontinued operations, net of tax36,397

5,797

55,717

5,115

Net income (loss)$

83,505

$

(666

)

$

101,755

$

27,161

Weighted average number of common shares outstanding - basic25,054

26,162

24,891

26,056

Weighted average number of common shares outstanding - diluted25,278

26,162

25,074

26,576

Net income (loss) per common share - basicContinuing operations$

1.88

$

(0.25

)

$

1.85

$

0.85

Discontinued operations1.45

0.22

2.24

0.20

Consolidated operations$

3.33

$

(0.03

)

$

4.09

$

1.05

Net income (loss) per common share - dilutedContinuing operations$

1.86

$

(0.25

)

$

1.84

$

0.83

Discontinued operations1.44

0.22

2.22

0.19

Consolidated operations$

3.30

$

(0.03

)

$

4.06

$

1.02

Net income (loss)$

83,505

$

(666

)

$

101,755

$

27,161

Other comprehensive income (loss):Unrealized gains on available-for-sale securities (2)659

175

458

185

Comprehensive income (loss)$

84,164

$

(491

)

$

102,213

$

27,346

MAGELLAN HEALTH, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(Unaudited)(In thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2020 2021 2020 2021

Net revenue:Managed care and $ 548,711 $ 676,041 $ 1,101,879 $ 1,302,117 otherPBM 551,364 544,727 1,120,575 1,080,300

Total net revenue 1,100,075 1,220,768 2,222,454 2,382,417

Costs, expensesand other income:Cost of care 321,831 430,735 670,939 809,926

Cost of goods sold 528,067 520,514 1,061,308 1,012,884

Direct servicecosts and other 199,756 243,573 403,997 474,594 operating expenses(1)Legal matter - - - (9,000 )settlementDepreciation and 23,888 22,525 47,246 43,942 amortizationInterest expense 7,995 6,234 16,953 12,660

Interest and other (551 ) (208 ) (1,770 ) (549 )incomeSpecial charges 8,309 5,054 8,309 6,205 and otherTotal costs, 1,089,295 1,228,427 2,206,982 2,350,662 expenses and otherincomeIncome (loss) fromcontinuing 10,780 (7,659 ) 15,472 31,755 operations beforeincome taxes(Benefit) (36,328 ) (1,196 ) (30,566 ) 9,709 provision forincome taxesNet income (loss) 47,108 (6,463 ) 46,038 22,046 from continuingoperationsIncome fromdiscontinued 36,397 5,797 55,717 5,115 operations, net oftaxNet income (loss) $ 83,505 $ (666 ) $ 101,755 $ 27,161

Weighted averagenumber of common 25,054 26,162 24,891 26,056 shares outstanding- basicWeighted averagenumber of common 25,278 26,162 25,074 26,576 shares outstanding- diluted Net income (loss)per common share -basicContinuing $ 1.88 $ (0.25 ) $ 1.85 $ 0.85 operationsDiscontinued 1.45 0.22 2.24 0.20 operationsConsolidated $ 3.33 $ (0.03 ) $ 4.09 $ 1.05 operationsNet income (loss)per common share -dilutedContinuing $ 1.86 $ (0.25 ) $ 1.84 $ 0.83 operationsDiscontinued 1.44 0.22 2.22 0.19 operationsConsolidated $ 3.30 $ (0.03 ) $ 4.06 $ 1.02 operations Net income (loss) $ 83,505 $ (666 ) $ 101,755 $ 27,161

Othercomprehensiveincome (loss):Unrealized gainson 659 175 458 185 available-for-salesecurities (2)Comprehensive $ 84,164 $ (491 ) $ 102,213 $ 27,346 income (loss)(1) Includes stock compensation expense of $6,592 and $6,353 for the three months ended June 30, 2020 and 2021, respectively, and $12,389 and $13,410 for the six months ended June 30, 2020 and 2021, respectively.(2) Net of income tax provision of $219 and $65 for the three months ended June 31, 2020 and 2021, respectively, and $152 and $69 for the six months ended June 30, 2020 and 2021, respectively.(1) Includes stock compensation expense of $6,592 and $6,353 for the threemonths ended June 30, 2020 and 2021, respectively, and $12,389 and $13,410for the six months ended June 30, 2020 and 2021, respectively. (2) Net of income tax provision of $219 and $65 for the three months endedJune 31, 2020 and 2021, respectively, and $152 and $69 for the six monthsended June 30, 2020 and 2021, respectively.MAGELLAN HEALTH, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)(In thousands)Six Months EndedJune 30,2020

2021

Cash flows from operating activities:Net income$

101,755

$

27,161

Adjustments to reconcile net income to net cash from operating activities:Depreciation and amortization57,951

43,942

Special charges and other8,309

6,205

Gain on sale of MCC-

(8,000

)

Non-cash interest expense941

710

Non-cash stock compensation expense13,015

13,410

Non-cash income tax (benefit) provision(29,443

)

12,699

Non-cash accretion on investments907

1,603

Changes in assets and liabilities, net of effects from acquisitions of businesses:Accounts receivable, net(24,535

)

(75,506

)

Pharmaceutical inventory8,268

4,545

Other assets(38,322

)

(78,329

)

Accounts payable and accrued liabilities62,970

(151,549

)

Medical claims payable and other medical liabilities10,510

47,062

Tax contingencies1,343

1,339

Deferred credits and other long-term liabilities(2,537

)

9,635

Other(289

)

2,388

Net cash provided by (used in) operating activities170,843

(142,685

)

Net cash provided by operating activities from discontinued operations178,326

-

Net cash used in operating activities from continuing operations(7,483

)

(142,685

)

Cash flows from investing activities:Capital expenditures(38,305

)

(35,105

)

Acquisitions and investments in businesses, net of cash acquired(369

)

(2,372

)

Purchases of investments(417,688

)

(680,347

)

Proceeds from maturities and sales of investments288,137

493,711

Net cash used in investing activities(168,225

)

(224,113

)

Net cash used in investing activities from discontinued operations(156,800

)

-

Net cash used in investing activities from continuing operations(11,425

)

(224,113

)

Cash flows from financing activities:Proceeds from borrowings on revolving line of credit80,000

-

Proceeds from exercise of stock options29,825

14,271

Payments on debt, finance lease and deferred financing obligations(40,264

)

(112,238

)

Other(1,136

)

(1,178

)

Net cash provided by (used in) financing activities68,425

(99,145

)

Net cash provided by financing activities from discontinued operations4,850

-

Net cash provided by (used in) financing activities from continuing operations63,575

(99,145

)

Net increase (decrease) in cash and cash equivalents from continuing operations44,667

(465,943

)

Cash and cash equivalents at beginning of period115,752

1,144,450

Cash and cash equivalents at end of period$

160,419

$

678,507

MAGELLAN HEALTH, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)(In thousands) Six Months Ended June 30, 2020 2021

Cash flows from operating activities:Net income $ 101,755 $ 27,161

Adjustments to reconcile net income to net cashfrom operating activities:Depreciation and amortization 57,951 43,942

Special charges and other 8,309 6,205

Gain on sale of MCC - (8,000 )

Non-cash interest expense 941 710

Non-cash stock compensation expense 13,015 13,410

Non-cash income tax (benefit) provision (29,443 ) 12,699

Non-cash accretion on investments 907 1,603

Changes in assets and liabilities, net of effectsfrom acquisitions of businesses:Accounts receivable, net (24,535 ) (75,506 )

Pharmaceutical inventory 8,268 4,545

Other assets (38,322 ) (78,329 )

Accounts payable and accrued liabilities 62,970 (151,549 )

Medical claims payable and other medical 10,510 47,062 liabilitiesTax contingencies 1,343 1,339

Deferred credits and other long-term liabilities (2,537 ) 9,635

Other (289 ) 2,388

Net cash provided by (used in) operating 170,843 (142,685 )activitiesNet cash provided by operating activities from 178,326 - discontinued operationsNet cash used in operating activities from (7,483 ) (142,685 )continuing operations Cash flows from investing activities:Capital expenditures (38,305 ) (35,105 )

Acquisitions and investments in businesses, net of (369 ) (2,372 )cash acquiredPurchases of investments (417,688 ) (680,347 )

Proceeds from maturities and sales of investments 288,137 493,711

Net cash used in investing activities (168,225 ) (224,113 )

Net cash used in investing activities from (156,800 ) - discontinued operationsNet cash used in investing activities from (11,425 ) (224,113 )continuing operations Cash flows from financing activities:Proceeds from borrowings on revolving line of 80,000 - creditProceeds from exercise of stock options 29,825 14,271

Payments on debt, finance lease and deferred (40,264 ) (112,238 )financing obligationsOther (1,136 ) (1,178 )

Net cash provided by (used in) financing 68,425 (99,145 )activitiesNet cash provided by financing activities from 4,850 - discontinued operationsNet cash provided by (used in) financing 63,575 (99,145 )activities from continuing operations Net increase (decrease) in cash and cash 44,667 (465,943 )equivalents from continuing operationsCash and cash equivalents at beginning of period 115,752 1,144,450

Cash and cash equivalents at end of period $ 160,419 $ 678,507

MAGELLAN HEALTH, INC. AND SUBSIDIARIESCONTINUING OPERATIONS RESULTS BY BUSINESS SEGMENT(Unaudited)(In thousands)Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2021

2020

2021

HealthcareManaged care and other revenue$

481,021

$

585,139

$

969,927

$

1,118,149

Cost of care(321,831

)

(430,735

)

(670,939

)

(809,926

)

Direct service costs and other(100,450

)

(126,741

)

(206,386

)

(241,734

)

Stock compensation expense (1)2,102

1,935

3,863

4,454

Healthcare segment profit60,842

29,598

96,465

70,943

Pharmacy ManagementManaged care and other revenue67,867

91,046

132,302

184,273

PBM revenue556,195

548,335

1,129,973

1,087,307

Cost of goods sold(532,685

)

(523,933

)

(1,070,259

)

(1,019,526

)

Direct service costs and other(80,082

)

(104,556

)

(161,948

)

(209,152

)

Legal matter settlement-

-

-

9,000

Stock compensation expense (1)1,939

2,346

4,046

5,042

Pharmacy Management segment profit13,234

13,238

34,114

56,944

Corporate and Elimination (2)Managed care and other revenue(177

)

(144

)

(350

)

(305

)

PBM revenue(4,831

)

(3,608

)

(9,398

)

(7,007

)

Cost of goods sold4,618

3,419

8,951

6,642

Direct service costs and other(19,224

)

(12,276

)

(35,663

)

(23,708

)

Stock compensation expense (1)2,551

2,072

4,480

3,914

Corporate and Elimination(17,063

)

(10,537

)

(31,980

)

(20,464

)

ConsolidatedManaged care and other revenue548,711

676,041

1,101,879

1,302,117

PBM revenue551,364

544,727

1,120,575

1,080,300

Cost of care(321,831

)

(430,735

)

(670,939

)

(809,926

)

Cost of goods sold(528,067

)

(520,514

)

(1,061,308

)

(1,012,884

)

Direct service costs and other(199,756

)

(243,573

)

(403,997

)

(474,594

)

Legal matter settlement-

-

-

9,000

Stock compensation expense (1)6,592

6,353

12,389

13,410

Segment profit from continuing operations$

57,013

$

32,299

$

98,599

$

107,423

Reconciliation of income from continuing operations before income taxes (GAAP) to segment profit (non-GAAP):Income (loss) from continuing operations before income taxes$

10,780

$

(7,659

)

$

15,472

$

31,755

Stock compensation expense6,592

6,353

12,389

13,410

Depreciation and amortization23,888

22,525

47,246

43,942

Interest expense7,995

6,234

16,953

12,660

Interest and other income(551

)

(208

)

(1,770

)

(549

)

Special charges and other8,309

5,054

8,309

6,205

Segment profit from continuing operations$

57,013

$

32,299

$

98,599

$

107,423

MAGELLAN HEALTH, INC. AND SUBSIDIARIESCONTINUING OPERATIONS RESULTS BY BUSINESS SEGMENT(Unaudited)(In thousands) Three Months Ended Six Months Ended

June 30, June 30,

2020 2021 2020 2021

HealthcareManaged care $ 481,021 $ 585,139 $ 969,927 $ 1,118,149 and otherrevenueCost of care (321,831 ) (430,735 ) (670,939 ) (809,926 )

Direct service (100,450 ) (126,741 ) (206,386 ) (241,734 )costs andotherStock 2,102 1,935 3,863 4,454 compensationexpense (1)Healthcare 60,842 29,598 96,465 70,943 segment profit PharmacyManagementManaged care 67,867 91,046 132,302 184,273 and otherrevenuePBM revenue 556,195 548,335 1,129,973 1,087,307

Cost of goods (532,685 ) (523,933 ) (1,070,259 ) (1,019,526 )soldDirect service (80,082 ) (104,556 ) (161,948 ) (209,152 )costs andotherLegal matter - - - 9,000 settlementStock 1,939 2,346 4,046 5,042 compensationexpense (1)Pharmacy 13,234 13,238 34,114 56,944 Managementsegment profit Corporate andElimination(2)Managed care (177 ) (144 ) (350 ) (305 )and otherrevenuePBM revenue (4,831 ) (3,608 ) (9,398 ) (7,007 )

Cost of goods 4,618 3,419 8,951 6,642 soldDirect service (19,224 ) (12,276 ) (35,663 ) (23,708 )costs andotherStock 2,551 2,072 4,480 3,914 compensationexpense (1)Corporate and (17,063 ) (10,537 ) (31,980 ) (20,464 )Elimination ConsolidatedManaged care 548,711 676,041 1,101,879 1,302,117 and otherrevenuePBM revenue 551,364 544,727 1,120,575 1,080,300

Cost of care (321,831 ) (430,735 ) (670,939 ) (809,926 )

Cost of goods (528,067 ) (520,514 ) (1,061,308 ) (1,012,884 )soldDirect service (199,756 ) (243,573 ) (403,997 ) (474,594 )costs andotherLegal matter - - - 9,000 settlementStock 6,592 6,353 12,389 13,410 compensationexpense (1)Segment profitfrom $ 57,013 $ 32,299 $ 98,599 $ 107,423 continuingoperations Reconciliationof income fromcontinuingoperationsbefore incometaxes (GAAP)to segmentprofit(non-GAAP):Income (loss)fromcontinuing $ 10,780 $ (7,659 ) $ 15,472 $ 31,755 operationsbefore incometaxesStock 6,592 6,353 12,389 13,410 compensationexpenseDepreciation 23,888 22,525 47,246 43,942 andamortizationInterest 7,995 6,234 16,953 12,660 expenseInterest and (551 ) (208 ) (1,770 ) (549 )other incomeSpecial 8,309 5,054 8,309 6,205 charges andotherSegment profitfrom $ 57,013 $ 32,299 $ 98,599 $ 107,423 continuingoperations(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.(1) Stock compensation expense, changes in the fair value of contingentconsideration recorded in relation to acquisitions and impairment ofintangible assets are included in direct service costs and other operatingexpenses; however, these amounts are excluded from the computation ofsegment profit. (2) Pharmacy Management provides pharmacy benefits management for certainHealthcare customers, and the Company's employees covered under its medicalplan. As such, revenue, cost of goods sold and direct service costs andother related to these arrangements are eliminated.MAGELLAN HEALTH, INC. AND SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURES(Unaudited)(In thousands, except per share amounts)Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2021

2020

2021

Net income (loss) from continuing operations$

47,108

$

(6,463

)

$

46,038

$

22,046

AdjustmentsStock compensation expense-

249

-

495

Amortization of acquired intangibles9,573

7,587

19,259

15,646

Special charges and other8,309

5,054

8,309

6,205

Tax impact(4,808

)

(3,396

)

(7,413

)

(5,888

)

Nonrecurring tax benefit - divestiture(38,907

)

-

(38,907

)

-

Adjusted net income from continuing operations$

21,275

$

3,031

$

27,286

$

38,504

Net income (loss) per common share attributable to Magellan -Diluted$

1.86

$

(0.25

)

$

1.84

$

0.83

AdjustmentsStock compensation expense-

0.01

-

0.02

Amortization of acquired intangibles0.38

0.29

0.77

0.59

Special charges and other0.33

0.19

0.33

0.23

Tax impact(0.19

)

(0.13

)

(0.30

)

(0.22

)

Nonrecurring tax benefit - divestiture(1.54

)

-

(1.55

)

-

Adjusted earnings per share$

0.84

$

0.11

$

1.09

$

1.45

(MGLN-GEN)

View source version on businesswire.com: https://www.businesswire.com/news/home/20210805005219/en/

CONTACT: Media Contact: Lilly Ackley, ackleyl@magellanhealth.com, (860) 507-1923 Investor Contact: Darren Lehrich, lehrichd@magellanhealth.com, (860) 507-1814