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Molina Healthcare Reports Second Quarter 2022 Financial Results

Increases Full-Year 2022 Revenue and Earnings Guidance

Molina Healthcare, Inc. (NYSE: MOH) (the “Company”) today reported second quarter 2022 GAAP earnings per diluted share of $4.25 and adjusted earnings per diluted share of $4.55. Financial results are summarized below:

 

Quarter ended

 

Six months ended

 

June 30,

 

June 30,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

(In millions, except per-share results)

Premium Revenue

$7,799

 

$6,583

 

$15,330

 

$12,889

Total Revenue

$8,054

 

$6,800

 

$15,824

 

$13,322

 

 

 

 

 

 

 

 

GAAP:

 

 

 

 

 

 

 

Net Income

$248

 

$185

 

$506

 

$413

EPS – Diluted

$4.25

 

$3.16

 

$8.63

 

$7.05

Medical Care Ratio (MCR)

88.1%

 

88.4%

 

87.6%

 

87.6%

G&A Ratio

6.8%

 

7.1%

 

7.1%

 

7.2%

After-tax Margin

3.1%

 

2.7%

 

3.2%

 

3.1%

 

 

 

 

 

 

 

 

Adjusted:

 

 

 

 

 

 

 

Net Income

$266

 

$199

 

$554

 

$459

EPS – Diluted

$4.55

 

$3.40

 

$9.45

 

$7.83

G&A Ratio

6.8%

 

6.9%

 

6.9%

 

7.0%

After-tax Margin

3.3%

 

2.9%

 

3.5%

 

3.4%

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

Quarter Highlights

  • As of June 30, 2022, the Company served approximately 5.1 million members, an increase of 422,000 members or 9% compared to June 30, 2021.
  • Premium revenue was approximately $7.8 billion for the second quarter of 2022, an increase of 18% compared to the second quarter of 2021.
  • Second quarter 2022 GAAP earnings per diluted share were $4.25 and adjusted earnings per diluted share were $4.55. Excluding a true up to the 2021 risk adjustment payable, GAAP earnings per share were $4.69 and adjusted earnings per diluted share were $4.99.
  • The Company increased its full year 2022 premium revenue guidance to approximately $30 billion, above its previous guidance of approximately $29.25 billion.
  • The Company increased its full year 2022 adjusted earnings guidance to at least $17.60 per diluted share, above its previous guidance of at least $17.10 per diluted share. Guidance includes the Company’s Marketplace business achieving modest profitability when excluding the 2021 risk adjustment payable true-up.

“We are very pleased with our second quarter and year-to-date performance,” said Joseph Zubretsky, President and Chief Executive Officer. “We executed well, provided high quality care to our members, delivered solid operating earnings, and continued to deliver on our growth strategy.”

Premium Revenue

Premium revenue was approximately $7.8 billion for the second quarter of 2022, an increase of 18% compared to the second quarter of 2021. The higher premium revenue reflects the impact of acquisitions and increased organic membership in the Medicaid and Medicare lines of business.

Net Income

GAAP net income for the second quarter of 2022 was $4.25 per diluted share, compared to $3.16 per diluted share in the second quarter of 2021. Adjusted net income for the second quarter of 2022 was $4.55 per diluted share, compared to $3.40 per diluted share in the second quarter of 2021. The net effect of COVID decreased the second quarter of 2022 GAAP and adjusted EPS by $0.68 per diluted share. A true up to the 2021 risk adjustment payable decreased net income by approximately $0.44 per diluted share in the second quarter of 2022.

Medical Care Ratio

  • The consolidated MCR for the second quarter of 2022 was 88.1%, compared to 88.4% for second quarter of 2021. The net effect of COVID added approximately 60 basis points to the consolidated MCR. The impact varied by segment.
  • The Medicaid MCR of 88.0% was at the low end of the Company’s long-term target range. The net effect of COVID added approximately 20 basis points in the quarter.
  • The Medicare MCR of 86.9% was below the Company’s long-term target range. The net effect of COVID added approximately 370 basis points in the quarter and was more than offset by favorable risk adjustment and strong medical cost management.
  • The Marketplace MCR of 91.2% includes a true up for the 2021 risk adjustment payable. Excluding this out of period item the MCR was 85.7%, reflecting higher core utilization and approximately 50 basis points from the net effect of COVID.

General and Administrative Expense Ratio

The G&A ratio for the second quarter of 2022 was 6.8%, compared to 7.1% for the second quarter of 2021. The adjusted G&A ratio was 6.8% for the second quarter of 2022, compared to 6.9% for the second quarter of 2021.

Balance Sheet

Cash and investments at the parent company were $210 million as of June 30, 2022, compared to $348 million as of December 31, 2021.

Through June 30, 2022, the Company purchased approximately 658,000 shares for $200 million, at an average cost of $304.13 per share.

Cash Flow

Operating cash flow for the six months ended June 30, 2022, was $731 million, which was lower compared to the six months ended June 30, 2021, primarily due to the net impact of timing differences in government receivables and payables and partially offset by an increase in net earnings.

2022 Guidance

Premium revenue for full year 2022 is now expected to be approximately $30 billion, above the previous guidance of approximately $29.25 billion. The guidance increase of approximately $750 million includes the extension of the Public Health Emergency from July to October, second quarter 2022 outperformance and additional pass through revenue payments.

The Company increased its full year 2022 adjusted earnings guidance to at least $17.60 per diluted share, above the previous guidance of at least $17.10 per diluted share. Guidance includes the Company’s Marketplace business achieving modest profitability when excluding the 2021 risk adjustment payable true up.

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 second quarter 2022 results at 8:00 a.m. Eastern Time on Thursday, July 28, 2022. The number to call for the interactive teleconference is (877) 883-0383 and the confirmation number is 4270459. A telephonic replay of the conference call will be available through Thursday, August 11, 2022, by dialing (877) 344-7529 and entering confirmation number 9675380. 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 (currently ranked 125), provides managed healthcare services under the Medicaid and Medicare programs and through the state insurance marketplaces. Molina Healthcare served approximately 5.1 million members as of June 30, 2022, located across 19 states. 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 2022 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, 2021, which is on file with the SEC, and also in its Quarterly Report on Form 10-Q for the three months ended June 30, 2022, which the Company expects to file on or about July 28, 2022.

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 July 27, 2022, 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

 

Six Months Ended

 

June 30,

 

June 30,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

 

(In millions, except per-share amounts)

Revenue:

 

 

 

 

 

 

 

Premium revenue

$

7,799

 

 

$

6,583

 

 

$

15,330

 

 

$

12,889

 

Premium tax revenue

 

215

 

 

 

185

 

 

 

423

 

 

 

372

 

Investment income

 

22

 

 

 

10

 

 

 

33

 

 

 

19

 

Other revenue

 

18

 

 

 

22

 

 

 

38

 

 

 

42

 

Total revenue

 

8,054

 

 

 

6,800

 

 

 

15,824

 

 

 

13,322

 

Operating expenses:

 

 

 

 

 

 

 

Medical care costs

 

6,872

 

 

 

5,819

 

 

 

13,435

 

 

 

11,293

 

General and administrative expenses

 

551

 

 

 

484

 

 

 

1,122

 

 

 

957

 

Premium tax expenses

 

215

 

 

 

185

 

 

 

423

 

 

 

372

 

Depreciation and amortization

 

44

 

 

 

31

 

 

 

84

 

 

 

64

 

Other

 

11

 

 

 

8

 

 

 

27

 

 

 

28

 

Total operating expenses

 

7,693

 

 

 

6,527

 

 

 

15,091

 

 

 

12,714

 

Operating income

 

361

 

 

 

273

 

 

 

733

 

 

 

608

 

Other expenses, net:

 

 

 

 

 

 

 

Interest expense

 

27

 

 

 

30

 

 

 

55

 

 

 

60

 

Total other expenses, net

 

27

 

 

 

30

 

 

 

55

 

 

 

60

 

Income before income tax expense

 

334

 

 

 

243

 

 

 

678

 

 

 

548

 

Income tax expense

 

86

 

 

 

58

 

 

 

172

 

 

 

135

 

Net income

$

248

 

 

$

185

 

 

$

506

 

 

$

413

 

 

 

 

 

 

 

 

 

Net income per share – Diluted

$

4.25

 

 

$

3.16

 

 

$

8.63

 

 

$

7.05

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

58.4

 

 

 

58.4

 

 

 

58.6

 

 

 

58.5

 

 

 

 

 

 

 

 

 

Operating Statistics:

 

 

 

 

 

 

 

Medical care ratio

 

88.1

%

 

 

88.4

%

 

 

87.6

%

 

 

87.6

%

G&A ratio

 

6.8

%

 

 

7.1

%

 

 

7.1

%

 

 

7.2

%

Premium tax ratio

 

2.7

%

 

 

2.7

%

 

 

2.7

%

 

 

2.8

%

Effective income tax rate

 

25.8

%

 

 

24.2

%

 

 

25.4

%

 

 

24.7

%

After-tax margin

 

3.1

%

 

 

2.7

%

 

 

3.2

%

 

 

3.1

%

 

 

 

 

 

 

 

 

 

MOLINA HEALTHCARE, INC.

CONSOLIDATED BALANCE SHEETS

 

 

June 30,

 

December 31,

 

2022

 

2021

 

Unaudited

 

 

 

(Dollars in millions,

except per-share amounts)

ASSETS

Current assets:

 

 

 

Cash and cash equivalents

$

4,312

 

 

$

4,438

 

Investments

 

3,567

 

 

 

3,202

 

Receivables

 

2,240

 

 

 

2,177

 

Prepaid expenses and other current assets

 

213

 

 

 

247

 

Total current assets

 

10,332

 

 

 

10,064

 

Property, equipment, and capitalized software, net

 

401

 

 

 

396

 

Goodwill and intangible assets, net

 

1,286

 

 

 

1,252

 

Restricted investments

 

219

 

 

 

212

 

Deferred income taxes

 

141

 

 

 

106

 

Other assets

 

193

 

 

 

179

 

Total assets

$

12,572

 

 

$

12,209

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

 

 

 

Medical claims and benefits payable

$

3,775

 

 

$

3,363

 

Amounts due government agencies

 

2,722

 

 

 

2,472

 

Accounts payable, accrued liabilities and other

 

715

 

 

 

842

 

Deferred revenue

 

13

 

 

 

370

 

Total current liabilities

 

7,225

 

 

 

7,047

 

Long-term debt

 

2,175

 

 

 

2,173

 

Finance lease liabilities

 

216

 

 

 

219

 

Other long-term liabilities

 

126

 

 

 

140

 

Total liabilities

 

9,742

 

 

 

9,579

 

Stockholders’ equity:

 

 

 

Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at June 30, 2022 and December 31, 2021

 

 

 

 

 

Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding

 

 

 

 

 

Additional paid-in capital

 

251

 

 

 

236

 

Accumulated other comprehensive loss

 

(128

)

 

 

(5

)

Retained earnings

 

2,707

 

 

 

2,399

 

Total stockholders’ equity

 

2,830

 

 

 

2,630

 

Total liabilities and stockholders’ equity

$

12,572

 

 

$

12,209

 

 

 

 

 

 

MOLINA HEALTHCARE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Six Months Ended

 

June 30,

 

2022

 

2021

 

 

 

 

 

(In millions)

Operating activities:

 

 

 

Net income

$

506

 

 

$

413

 

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

 

 

 

Depreciation and amortization

 

84

 

 

 

64

 

Deferred income taxes

 

3

 

 

 

7

 

Share-based compensation

 

57

 

 

 

35

 

Other, net

 

(6

)

 

 

10

 

Changes in operating assets and liabilities:

 

 

 

Receivables

 

(43

)

 

 

(192

)

Prepaid expenses and other current assets

 

(64

)

 

 

(6

)

Medical claims and benefits payable

 

405

 

 

 

272

 

Amounts due government agencies

 

247

 

 

 

792

 

Accounts payable, accrued liabilities and other

 

(147

)

 

 

(15

)

Deferred revenue

 

(357

)

 

 

(333

)

Income taxes

 

46

 

 

 

14

 

Net cash provided by operating activities

 

731

 

 

 

1,061

 

Investing activities:

 

 

 

Purchases of investments

 

(1,413

)

 

 

(1,006

)

Proceeds from sales and maturities of investments

 

879

 

 

 

622

 

Purchases of property, equipment, and capitalized software

 

(50

)

 

 

(29

)

Other, net

 

(7

)

 

 

5

 

Net cash used in investing activities

 

(591

)

 

 

(408

)

Financing activities:

 

 

 

Common stock purchases

 

(200

)

 

 

(128

)

Common stock withheld to settle employee tax obligations

 

(53

)

 

 

(52

)

Contingent consideration liabilities settled

 

(20

)

 

 

(20

)

Other, net

 

5

 

 

 

 

Net cash used in financing activities

 

(268

)

 

 

(200

)

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

 

(128

)

 

 

453

 

Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period

 

4,506

 

 

 

4,223

 

Cash, cash equivalents, and restricted cash and cash equivalents at end of period

$

4,378

 

 

$

4,676

 

 

 

 

 

 

MOLINA HEALTHCARE, INC.

UNAUDITED SEGMENT DATA

(Dollars in millions)

 

 

 

June 30,

 

December 31,

 

June 30,

 

 

2022

 

2021

 

2021

Ending Membership by Segment:

 

 

 

 

 

Medicaid

4,610,000

 

4,329,000

 

3,928,000

Medicare

151,000

 

142,000

 

130,000

Marketplace

357,000

 

728,000

 

638,000

Total

5,118,000

 

5,199,000

 

4,696,000

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

2022

 

2021

 

Premium

Revenue

 

Medical

Margin

 

MCR (1)

 

Premium

Revenue

 

Medical

Margin

 

MCR (1)

 

 

 

 

 

 

Medicaid

$

6,301

 

$

755

 

88.0

%

 

$

5,034

 

$

551

 

89.0

%

Medicare

 

957

 

 

124

 

86.9

 

 

 

814

 

 

101

 

87.6

 

Marketplace

 

541

 

 

48

 

91.2

 

 

 

735

 

 

112

 

84.8

 

Consolidated

$

7,799

 

$

927

 

88.1

%

 

$

6,583

 

$

764

 

88.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

2022

 

2021

 

Premium

Revenue

 

Medical

Margin

 

MCR (1)

 

Premium

Revenue

 

Medical

Margin

 

MCR (1)

 

 

 

 

 

 

Medicaid

$

12,281

 

$

1,465

 

88.1

%

 

$

9,874

 

$

1,155

 

88.3

%

Medicare

 

1,900

 

 

252

 

86.7

 

 

 

1,613

 

 

178

 

89.0

 

Marketplace

 

1,149

 

 

178

 

84.5

 

 

 

1,402

 

 

263

 

81.2

 

Consolidated

$

15,330

 

$

1,895

 

87.6

%

 

$

12,889

 

$

1,596

 

87.6

%

 

 

 

 

 

 

 

 

 

 

 

 

(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:

 

Six Months Ended

 

June 30,

 

2022

 

2021

 

 

 

 

 

Unaudited

Medical claims and benefits payable, beginning balance

$

3,363

 

 

$

2,696

 

Components of medical care costs related to:

 

 

 

Current year

 

13,746

 

 

 

11,486

 

Prior year

 

(311

)

 

 

(193

)

Total medical care costs

 

13,435

 

 

 

11,293

 

Payments for medical care costs related to:

 

 

 

Current year

 

10,622

 

 

 

9,023

 

Prior year

 

2,411

 

 

 

1,949

 

Total paid

 

13,033

 

 

 

10,972

 

Acquired balances, net of post-acquisition adjustments

 

7

 

 

 

(26

)

Change in non-risk and other provider payables

 

3

 

 

 

(49

)

Medical claims and benefits payable, ending balance

$

3,775

 

 

$

2,942

 

 

 

 

 

Days in Claims Payable (1)

 

50

 

 

 

48

 

__________________

(1)

The Company calculates Days in Claims Payable using claims incurred but not paid, or IBNP, and other fee-for-service payables included in medical claims and benefits payable, and quarterly fee-for-service related costs included in medical care costs within the Company’s consolidated financial statements.

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 June 30,

 

Six Months Ended June 30,

2022

 

2021

 

2022

 

2021

 

Amount

 

Per

Diluted

Share

 

Amount

 

Per

Diluted

Share

 

Amount

 

Per

Diluted

Share

 

Amount

 

Per

Diluted

Share

Net income

$

248

 

 

$

4.25

 

 

$

185

 

 

$

3.16

 

 

$

506

 

 

$

8.63

 

 

$

413

 

 

$

7.05

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

19

 

 

 

0.33

 

 

 

12

 

 

 

0.20

 

 

 

37

 

 

 

0.63

 

 

 

24

 

 

 

0.40

 

Acquisition-related expenses (1)

 

7

 

 

 

0.11

 

 

 

6

 

 

 

0.11

 

 

 

26

 

 

 

0.45

 

 

 

27

 

 

 

0.46

 

Other (2)

 

(3

)

 

 

(0.04

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

0.16

 

Subtotal, adjustments

 

23

 

 

 

0.40

 

 

 

18

 

 

 

0.31

 

 

 

63

 

 

 

1.08

 

 

 

60

 

 

 

1.02

 

Income tax effect

 

(5

)

 

 

(0.10

)

 

 

(4

)

 

 

(0.07

)

 

 

(15

)

 

 

(0.26

)

 

 

(14

)

 

 

(0.24

)

Adjustments, net of tax

 

18

 

 

 

0.30

 

 

 

14

 

 

 

0.24

 

 

 

48

 

 

 

0.82

 

 

 

46

 

 

 

0.78

 

Adjusted net income

$

266

 

 

$

4.55

 

 

$

199

 

 

$

3.40

 

 

$

554

 

 

$

9.45

 

 

$

459

 

 

$

7.83

 

__________________

(1)

Reflects non-recurring costs associated with acquisitions, including various transaction and integration costs.

(2)

The first half of 2022 includes certain non-recurring costs associated with gain on lease termination and disposal of fixed assets. The first half of 2021 includes change in premium deficiency reserves, loss on sale of property, and restructuring costs.

 

MOLINA HEALTHCARE, INC.

RECONCILIATION OF UNAUDITED NON-GAAP FINANCIAL MEASURES (CONTINUED)

2022 GUIDANCE

 

 

Amount

 

Per

Diluted

Share (2)

Net income

$

937

 

 

$

16.01

 

Adjustments:

 

 

 

Acquisition-related expenses

 

47

 

 

 

0.80

 

Amortization of intangible assets

 

75

 

 

 

1.29

 

Subtotal, adjustments

 

122

 

 

 

2.09

 

Income tax effect (1)

 

(29

)

 

 

(0.50

)

Adjustments, net of tax

 

93

 

 

 

1.59

 

Adjusted net income per diluted share

$

1,030

 

 

$

17.60

 

__________________

(1)

Income tax effect calculated at the statutory tax rate of approximately 23.9%.

(2)

Computations assume approximately 58.5 million diluted weighted average shares outstanding.

 

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