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Molina Healthcare Reports Second Quarter 2023 Financial Results

Increases Full-Year 2023 Earnings Guidance

Molina Healthcare, Inc. (NYSE: MOH) (the “Company”) today reported second quarter 2023 GAAP earnings per diluted share of $5.35 and adjusted earnings per diluted share of $5.65. Financial results are summarized below:

 

Three months ended

 

Six months ended

 

June 30,

 

June 30,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

(In millions, except per-share results)

Premium Revenue

$8,042

 

$7,799

 

$15,927

 

$15,330

Total Revenue

$8,327

 

$8,054

 

$16,476

 

$15,824

 

 

 

 

 

 

 

 

GAAP:

 

 

 

 

 

 

 

Net Income

$309

 

$248

 

$630

 

$506

EPS – Diluted

$5.35

 

$4.25

 

$10.87

 

$8.63

Medical Care Ratio (MCR)

87.5%

 

88.1%

 

87.3%

 

87.6%

G&A Ratio

7.4%

 

6.8%

 

7.3%

 

7.1%

After-tax Margin

3.7%

 

3.1%

 

3.8%

 

3.2%

 

 

 

 

 

 

 

 

Adjusted:

 

 

 

 

 

 

 

Net Income

$327

 

$266

 

$664

 

$554

EPS – Diluted

$5.65

 

$4.55

 

$11.45

 

$9.45

G&A Ratio

7.4%

 

6.8%

 

7.3%

 

6.9%

After-tax Margin

3.9%

 

3.3%

 

4.0%

 

3.5%

 

 

 

 

 

 

 

 

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

Quarter Highlights

  • As of June 30, 2023, and including the early impact of Medicaid redeterminations, the Company served approximately 5.2 million members, an increase of 1% compared to June 30, 2022.
  • Premium revenue was approximately $8.0 billion for the second quarter of 2023, an increase of 3% compared to the second quarter of 2022.
  • GAAP net income was $5.35 per diluted share for the second quarter of 2023, an increase of 26% compared to the second quarter of 2022.
  • Adjusted net income was $5.65 per diluted share for the second quarter of 2023, an increase of 24% compared to the second quarter of 2022.
  • The Company increased its full year 2023 adjusted earnings guidance by $0.50 to at least $20.75 per diluted share, a 16% increase compared to 2022.

“Our performance this quarter supports our long-term outlook for revenue and earnings growth,” said Joseph Zubretsky, President and Chief Executive Officer. “We continue to build the revenue base and new store earnings profile, our operating results provide a very solid earnings base, and we have seen nothing in the early stages of the Medicaid redetermination process that changes our view of the earnings trajectory of the business.”

Premium Revenue

Premium revenue was $8.0 billion for the second quarter of 2023, an increase of 3% compared to the second quarter of 2022. The higher premium revenue reflects increased Medicaid and Medicare membership.

Net Income

GAAP net income for the second quarter of 2023 was $5.35 per diluted share, an increase of 26% compared to the second quarter of 2022. Adjusted net income for the second quarter of 2023 was $5.65 per diluted share, an increase of 24% compared to the second quarter of 2022.

Medical Care Ratio

  • The consolidated MCR for the second quarter of 2023 was 87.5%, reflecting continued strong operating performance and medical cost management.
  • The Medicaid MCR for the second quarter of 2023 was 88.3%, in line with the Company’s expectation and long-term target range.
  • The Medicare MCR for the second quarter of 2023 was 89.2%, above the Company’s long‑term target range, reflecting higher utilization of outpatient and professional services and higher MCRs associated with membership growth.
  • The Marketplace MCR for the second quarter of 2023 was 73.7%, reflecting the Company’s pricing strategy and seasonality.

General and Administrative Expense Ratio

The G&A ratio and the adjusted G&A ratio for the second quarter of 2023 were both 7.4%, reflecting new business implementation spending ahead of new contract wins commencing in July 2023 and next year.

Balance Sheet

Cash and investments at the parent company were $482 million as of June 30, 2023, compared to $375 million as of December 31, 2022.

Days in claims payable at June 30, 2023, was 47.

Cash Flow

Operating cash flow for the six months ended June 30, 2023, was $1,403 million, compared to $731 million for the six months ended June 30, 2022. The increase compared to the prior year was primarily due to the net impact of timing differences in government receivables and payables, and the growth in operations.

2023 Guidance

The Company increased its full year 2023 adjusted earnings per share guidance to at least $20.75, compared to the previous guidance of at least $20.25 per diluted share. The increase to earnings guidance reflects second quarter operating and investment income performance above the Company’s expectations and higher expected investment income in the second half of the year, partially offset by some continued conservatism.

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

Conference Call

Management will host a conference call and webcast to discuss Molina Healthcare’s second quarter 2023 results at 8:00 a.m. Eastern Time on Thursday, July 27, 2023. The number to call for the interactive teleconference is (877) 883-0383 and the confirmation number is 0165438. A telephonic replay of the conference call will be available through Thursday, August 3, 2023, by dialing (877) 344-7529 and entering confirmation number 6917541. 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 126), provides managed healthcare services under the Medicaid and Medicare programs and through the state insurance marketplaces. Molina Healthcare served approximately 5.2 million members as of June 30, 2023, 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 2023 guidance, Medicaid redeterminations, and future revenue growth. 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, 2022, which is on file with the U.S. Securities and Exchange Commission (the “SEC”), and also in its Quarterly Report on Form 10-Q for the period ended June 30, 2023, which the Company expects to file on or about July 27, 2023.

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 26, 2023, 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,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

(In millions, except per-share amounts)

Revenue:

 

 

 

 

 

 

 

Premium revenue

$

8,042

 

$

7,799

 

$

15,927

 

$

15,330

Premium tax revenue

 

169

 

 

215

 

 

341

 

 

423

Investment income

 

97

 

 

22

 

 

168

 

 

33

Other revenue

 

19

 

 

18

 

 

40

 

 

38

Total revenue

 

8,327

 

 

8,054

 

 

16,476

 

 

15,824

Operating expenses:

 

 

 

 

 

 

 

Medical care costs

 

7,038

 

 

6,872

 

 

13,909

 

 

13,435

General and administrative expenses

 

618

 

 

551

 

 

1,209

 

 

1,122

Premium tax expenses

 

169

 

 

215

 

 

341

 

 

423

Depreciation and amortization

 

42

 

 

44

 

 

86

 

 

84

Other

 

17

 

 

11

 

 

33

 

 

27

Total operating expenses

 

7,884

 

 

7,693

 

 

15,578

 

 

15,091

Operating income

 

443

 

 

361

 

 

898

 

 

733

Other expenses, net:

 

 

 

 

 

 

 

Interest expense

 

27

 

 

27

 

 

55

 

 

55

Total other expenses, net

 

27

 

 

27

 

 

55

 

 

55

Income before income tax expense

 

416

 

 

334

 

 

843

 

 

678

Income tax expense

 

107

 

 

86

 

 

213

 

 

172

Net income

$

309

 

$

248

 

$

630

 

$

506

 

 

 

 

 

 

 

 

Net income per share – Diluted

$

5.35

 

$

4.25

 

$

10.87

 

$

8.63

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

57.9

 

 

58.4

 

 

58.0

 

 

58.6

MOLINA HEALTHCARE, INC.

CONSOLIDATED BALANCE SHEETS

 

 

June 30,

 

December 31,

 

 

2023

 

 

 

2022

 

 

Unaudited

 

 

 

(Dollars in millions,

except per-share amounts)

ASSETS

Current assets:

 

 

 

Cash and cash equivalents

$

4,910

 

 

$

4,006

 

Investments

 

3,886

 

 

 

3,499

 

Receivables

 

2,385

 

 

 

2,302

 

Prepaid expenses and other current assets

 

260

 

 

 

277

 

Total current assets

 

11,441

 

 

 

10,084

 

Property, equipment, and capitalized software, net

 

285

 

 

 

259

 

Goodwill and intangible assets, net

 

1,348

 

 

 

1,390

 

Restricted investments

 

249

 

 

 

238

 

Deferred income taxes

 

220

 

 

 

220

 

Other assets

 

118

 

 

 

123

 

Total assets

$

13,661

 

 

$

12,314

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

 

 

 

Medical claims and benefits payable

$

3,677

 

 

$

3,528

 

Amounts due government agencies

 

2,589

 

 

 

2,079

 

Accounts payable, accrued liabilities and other

 

857

 

 

 

889

 

Deferred revenue

 

414

 

 

 

359

 

Total current liabilities

 

7,537

 

 

 

6,855

 

Long-term debt

 

2,178

 

 

 

2,176

 

Finance lease liabilities

 

203

 

 

 

215

 

Other long-term liabilities

 

122

 

 

 

104

 

Total liabilities

 

10,040

 

 

 

9,350

 

Stockholders’ equity:

 

 

 

Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at each of June 30, 2023 and December 31, 2022

 

 

 

 

 

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

 

 

 

 

 

Additional paid-in capital

 

341

 

 

 

328

 

Accumulated other comprehensive loss

 

(146

)

 

 

(160

)

Retained earnings

 

3,426

 

 

 

2,796

 

Total stockholders’ equity

 

3,621

 

 

 

2,964

 

Total liabilities and stockholders’ equity

$

13,661

 

 

$

12,314

 

 

 

 

 

MOLINA HEALTHCARE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Six Months Ended

 

June 30,

 

 

2023

 

 

 

2022

 

 

 

 

 

 

(In millions)

Operating activities:

 

 

 

Net income

$

630

 

 

$

506

 

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

 

 

 

Depreciation and amortization

 

86

 

 

 

84

 

Deferred income taxes

 

(4

)

 

 

3

 

Share-based compensation

 

55

 

 

 

57

 

Other, net

 

5

 

 

 

(6

)

Changes in operating assets and liabilities:

 

 

 

Receivables

 

(83

)

 

 

(43

)

Prepaid expenses and other current assets

 

6

 

 

 

(64

)

Medical claims and benefits payable

 

149

 

 

 

405

 

Amounts due government agencies

 

510

 

 

 

247

 

Accounts payable, accrued liabilities and other

 

(208

)

 

 

(147

)

Deferred revenue

 

55

 

 

 

(357

)

Income taxes

 

202

 

 

 

46

 

Net cash provided by operating activities

 

1,403

 

 

 

731

 

Investing activities:

 

 

 

Purchases of investments

 

(924

)

 

 

(1,413

)

Proceeds from sales and maturities of investments

 

546

 

 

 

879

 

Purchases of property, equipment, and capitalized software

 

(63

)

 

 

(50

)

Other, net

 

2

 

 

 

(7

)

Net cash used in investing activities

 

(439

)

 

 

(591

)

Financing activities:

 

 

 

Common stock withheld to settle employee tax obligations

 

(59

)

 

 

(53

)

Common stock purchases

 

 

 

 

(200

)

Contingent consideration liabilities settled

 

 

 

 

(20

)

Other, net

 

4

 

 

 

5

 

Net cash used in financing activities

 

(55

)

 

 

(268

)

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

 

909

 

 

 

(128

)

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

 

4,048

 

 

 

4,506

 

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

$

4,957

 

 

$

4,378

 

 

 

 

 

MOLINA HEALTHCARE, INC.

UNAUDITED SEGMENT DATA

(Dollars in millions)

 

 

 

June 30,

 

December 31,

 

June 30,

 

 

2023

 

2022

 

2022

Ending Membership by Segment:

 

 

 

 

 

Medicaid

4,741,000

 

4,754,000

 

4,610,000

Medicare

166,000

 

156,000

 

151,000

Marketplace

269,000

 

348,000

 

357,000

Total

5,176,000

 

5,258,000

 

5,118,000

 

Three Months Ended June 30,

 

2023

 

2022

 

Premium

Revenue

 

Medical

Margin

 

MCR (1)

 

Premium

Revenue

 

Medical

Margin

 

MCR (1)

 

 

 

 

 

 

Medicaid

$

6,485

 

$

756

 

88.3

%

 

$

6,301

 

$

755

 

88.0

%

Medicare

 

1,044

 

 

113

 

89.2

 

 

 

957

 

 

124

 

86.9

 

Marketplace

 

513

 

 

135

 

73.7

 

 

 

541

 

 

48

 

91.2

 

Consolidated

$

8,042

 

$

1,004

 

87.5

%

 

$

7,799

 

$

927

 

88.1

%

 

Six Months Ended June 30,

 

2023

 

2022

 

Premium

Revenue

 

Medical

Margin

 

MCR (1)

 

Premium

Revenue

 

Medical

Margin

 

MCR (1)

 

 

 

 

 

 

Medicaid

$

12,834

 

$

1,490

 

88.4

%

 

$

12,281

 

$

1,465

 

88.1

%

Medicare

 

2,090

 

 

239

 

88.6

 

 

 

1,900

 

 

252

 

86.7

 

Marketplace

 

1,003

 

 

289

 

71.2

 

 

 

1,149

 

 

178

 

84.5

 

Consolidated

$

15,927

 

$

2,018

 

87.3

%

 

$

15,330

 

$

1,895

 

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,

 

 

2023

 

 

 

2022

 

 

 

 

 

 

Unaudited

Medical claims and benefits payable, beginning balance

$

3,528

 

 

$

3,363

 

Components of medical care costs related to:

 

 

 

Current year

 

14,180

 

 

 

13,746

 

Prior year

 

(271

)

 

 

(311

)

Total medical care costs

 

13,909

 

 

 

13,435

 

Payments for medical care costs related to:

 

 

 

Current year

 

11,166

 

 

 

10,622

 

Prior year

 

2,650

 

 

 

2,411

 

Total paid

 

13,816

 

 

 

13,033

 

Acquired balances, net of post-acquisition adjustments

 

 

 

 

7

 

Change in non-risk and other provider payables

 

56

 

 

 

3

 

Medical claims and benefits payable, ending balance

$

3,677

 

 

$

3,775

 

 

 

 

 

Days in Claims Payable (1)

 

47

 

 

 

50

 

__________________

(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,

2023

 

2022

 

2023

 

2022

 

Amount

 

Per Diluted Share

 

Amount

 

Per Diluted Share

 

Amount

 

Per Diluted Share

 

Amount

 

Per Diluted Share

GAAP Net income

$

309

 

 

$

5.35

 

 

$

248

 

 

$

4.25

 

 

$

630

 

 

$

10.87

 

 

$

506

 

 

$

8.63

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

$

22

 

 

$

0.36

 

 

$

19

 

 

$

0.33

 

 

$

43

 

 

$

0.73

 

 

$

37

 

 

$

0.63

 

Acquisition-related expenses (1)

 

2

 

 

 

0.03

 

 

 

7

 

 

 

0.11

 

 

 

2

 

 

 

0.03

 

 

 

26

 

 

 

0.45

 

Other (2)

 

 

 

 

 

 

 

(3

)

 

 

(0.04

)

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal, adjustments

 

24

 

 

 

0.39

 

 

 

23

 

 

 

0.40

 

 

 

45

 

 

 

0.76

 

 

 

63

 

 

 

1.08

 

Income tax effect

 

(6

)

 

 

(0.09

)

 

 

(5

)

 

 

(0.10

)

 

 

(11

)

 

 

(0.18

)

 

 

(15

)

 

 

(0.26

)

Adjustments, net of tax

 

18

 

 

 

0.30

 

 

 

18

 

 

 

0.30

 

 

 

34

 

 

 

0.58

 

 

 

48

 

 

 

0.82

 

Adjusted net income

$

327

 

 

$

5.65

 

 

$

266

 

 

$

4.55

 

 

$

664

 

 

$

11.45

 

 

$

554

 

 

$

9.45

 

__________________

(1)

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

(2)

The first half of 2022 includes certain non-recurring costs associated with gain on lease termination and disposal of fixed assets.

MOLINA HEALTHCARE, INC.

RECONCILIATION OF UNAUDITED NON-GAAP FINANCIAL MEASURES (CONTINUED)

2023 GUIDANCE

 

 

Amount

 

Per Diluted Share (2)

GAAP Net income

$

1,137

 

 

$

19.51

 

Adjustments:

 

 

 

Amortization of intangible assets

 

87

 

 

 

1.50

 

Acquisition-related expenses

 

3

 

 

 

0.05

 

Subtotal, adjustments

 

90

 

 

 

1.55

 

Income tax effect (1)

 

(21

)

 

 

(0.31

)

Adjustments, net of tax

 

69

 

 

 

1.24

 

Adjusted net income

$

1,206

 

 

$

20.75

 

__________________

(1)

Income tax effect calculated at the statutory tax rate of approximately 25.3%.

(2)

Computations assume approximately 58.1 million diluted weighted average shares outstanding.

 

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