Molina Healthcare Reports Third Quarter 2023 Financial Results

Affirms Full Year 2023 Earnings Guidance

Molina Healthcare, Inc. (NYSE: MOH) (the “Company”) today reported third quarter 2023 GAAP earnings per diluted share of $4.21 and adjusted earnings per diluted share of $5.05. Financial results are summarized below: 

 

Three months ended

 

Nine months ended

 

September 30,

 

September 30,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

(In millions, except per-share results)

Premium Revenue

$8,240

 

$7,636

 

$24,167

 

$22,966

Total Revenue

$8,548

 

$7,927

 

$25,024

 

$23,751

 

 

 

 

 

 

 

 

GAAP:

 

 

 

 

 

 

 

Net Income

$245

 

$230

 

$875

 

$736

EPS – Diluted

$4.21

 

$3.95

 

$15.08

 

$12.58

Medical Care Ratio (MCR)

88.7%

 

88.4%

 

87.8%

 

87.9%

G&A Ratio

7.1%

 

7.1%

 

7.3%

 

7.1%

After-tax Margin

2.9%

 

2.9%

 

3.5%

 

3.1%

 

 

 

 

 

 

 

 

Adjusted:

 

 

 

 

 

 

 

Net Income

$294

 

$254

 

$958

 

$808

EPS – Diluted

$5.05

 

$4.36

 

$16.50

 

$13.81

G&A Ratio

7.1%

 

6.9%

 

7.2%

 

6.9%

After-tax Margin

3.4%

 

3.2%

 

3.8%

 

3.4%

 

 

 

 

 

 

 

 

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

Quarter Highlights

  • As of September 30, 2023, the Company served approximately 5.2 million members, an increase of 1% year over year.
  • Premium revenue was approximately $8.2 billion for the third quarter of 2023, an increase of 8% year over year.
  • GAAP net income was $4.21 per diluted share for the third quarter of 2023, an increase of 7% year over year.
  • Adjusted net income was $5.05 per diluted share for the third quarter of 2023, an increase of 16% year over year.
  • The Company affirms its full-year 2023 adjusted earnings guidance of at least $20.75 per diluted share, an increase of 16% year over year.

“We are very pleased with our third-quarter performance,” said Joseph Zubretsky, President and Chief Executive Officer. “We have maintained our attractive margin profile during this unprecedented industry-wide redetermination process while continuing to generate double-digit growth.”

Premium Revenue

Premium revenue was $8.2 billion for the third quarter of 2023, an increase of 8% year over year. The higher premium revenue reflects changing member mix year over year.

Net Income

GAAP net income for the third quarter of 2023 was $4.21 per diluted share, an increase of 7% year over year. The GAAP EPS includes a $0.54 per share nonrecurring credit loss charge for a Marketplace risk adjustment receivable in the Company’s Texas health plan. Adjusted net income for the third quarter of 2023 was $5.05 per diluted share, an increase of 16% year over year.

Medical Care Ratio (MCR)

  • The consolidated MCR for the third quarter of 2023 was 88.7%.
  • The Medicaid MCR for the third quarter of 2023 was 88.8%, in line with the Company’s expectation and long-term target range.
  • The Medicare MCR for the third quarter of 2023 was 92.4%, above the Company’s long‑term target range, reflecting higher utilization of outpatient, professional, and in-home services.
  • The Marketplace MCR for the third quarter of 2023 was 78.9%, reflecting the Company’s pricing strategy and improved risk adjustment results.

General and Administrative Expense Ratio

The G&A ratio and the adjusted G&A ratio for the third quarter of 2023 were both 7.1%, reflecting new business implementation spending relating to new contract wins.

Balance Sheet

Cash and investments at the parent company were $481 million as of September 30, 2023 compared to $375 million as of December 31, 2022.

Days in claims payable at September 30, 2023 was 51.

Cash Flow

Operating cash flow for the nine months ended September 30, 2023 was $2,352 million, compared to $985 million for the nine months ended September 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 affirms its full-year 2023 adjusted earnings per share guidance of at least $20.75, reflecting third quarter results that were largely consistent with the Company’s expectations, in addition to considerations of seasonality and conservatism.

Conference Call

Management will host a conference call and webcast to discuss Molina Healthcare’s third quarter 2023 results at 8:00 a.m. Eastern Time on Thursday, October 26, 2023. The number to call for the interactive teleconference is (877) 883-0383 and the confirmation number is 2183620. A telephonic replay of the conference call will be available through Thursday, November 2, 2023, by dialing (877) 344-7529 and entering confirmation number 3586044. A live audio broadcast of this conference call will be available on Molina Healthcare’s website, molinahealthcare.com. A 30-day online replay will be available approximately an hour following the conclusion of the live broadcast.

About Molina Healthcare

Molina Healthcare, Inc., a FORTUNE 500 company, provides managed healthcare services under the Medicaid and Medicare programs and through the state insurance marketplaces. 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. The Company intends such forward-looking statements to be covered under the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements provide current expectations of future events based on certain assumptions, and all statements other than statements of historical fact contained in this earnings release and the Company’s accompanying oral remarks may be forward-looking statements. In some cases, you can identify forward-looking statements by words such as “guidance,” “future,” “anticipates,” “believes,” “embedded,” “estimates,” “expects,” “growth,” “intends,” “plans,” “predicts,” “projects,” “will,” “would,” “could,” “can,” “may,” or the negative of these terms or other similar expressions. Forward-looking statements contained in this earnings release and the Company’s accompanying oral remarks include, but are not limited to, 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 in the Company’s other filings with the SEC, including its Quarterly Report on Form 10-Q for the period ended September 30, 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 October 25, 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

 

Nine Months Ended

 

September 30,

 

September 30,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

(In millions, except per-share amounts)

Revenue:

 

 

 

 

 

 

 

Premium revenue

$

8,240

 

$

7,636

 

$

24,167

 

$

22,966

Premium tax revenue

 

176

 

 

223

 

 

517

 

 

646

Investment income

 

112

 

 

49

 

 

280

 

 

82

Other revenue

 

20

 

 

19

 

 

60

 

 

57

Total revenue

 

8,548

 

 

7,927

 

 

25,024

 

 

23,751

Operating expenses:

 

 

 

 

 

 

 

Medical care costs

 

7,306

 

 

6,748

 

 

21,215

 

 

20,183

General and administrative expenses

 

608

 

 

560

 

 

1,817

 

 

1,682

Premium tax expenses

 

176

 

 

223

 

 

517

 

 

646

Depreciation and amortization

 

42

 

 

45

 

 

128

 

 

129

Other

 

57

 

 

16

 

 

90

 

 

43

Total operating expenses

 

8,189

 

 

7,592

 

 

23,767

 

 

22,683

Operating income

 

359

 

 

335

 

 

1,257

 

 

1,068

Other expenses, net:

 

 

 

 

 

 

 

Interest expense

 

27

 

 

28

 

 

82

 

 

83

Total other expenses, net

 

27

 

 

28

 

 

82

 

 

83

Income before income tax expense

 

332

 

 

307

 

 

1,175

 

 

985

Income tax expense

 

87

 

 

77

 

 

300

 

 

249

Net income

$

245

 

$

230

 

$

875

 

$

736

 

 

 

 

 

 

 

 

Net income per share – Diluted

$

4.21

 

$

3.95

 

$

15.08

 

$

12.58

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

58.1

 

 

58.3

 

 

58.1

 

 

58.5

 
 
 
 

MOLINA HEALTHCARE, INC.

CONSOLIDATED BALANCE SHEETS
 

 

 

September 30,

 

December 31,

 

2023

 

2022

 

Unaudited

 

 

 

(Dollars in millions,

except per-share amounts)

ASSETS

Current assets:

 

 

 

Cash and cash equivalents

$

5,565

 

 

$

4,006

 

Investments

 

4,111

 

 

 

3,499

 

Receivables

 

2,460

 

 

 

2,302

 

Prepaid expenses and other current assets

 

332

 

 

 

277

 

Total current assets

 

12,468

 

 

 

10,084

 

Property, equipment, and capitalized software, net

 

290

 

 

 

259

 

Goodwill and intangible assets, net

 

1,471

 

 

 

1,390

 

Restricted investments

 

261

 

 

 

238

 

Deferred income taxes

 

255

 

 

 

220

 

Other assets

 

125

 

 

 

123

 

Total assets

$

14,870

 

 

$

12,314

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

 

 

 

Medical claims and benefits payable

$

4,235

 

 

$

3,528

 

Amounts due government agencies

 

2,476

 

 

 

2,079

 

Accounts payable, accrued liabilities and other

 

1,090

 

 

 

889

 

Deferred revenue

 

691

 

 

 

359

 

Total current liabilities

 

8,492

 

 

 

6,855

 

Long-term debt

 

2,179

 

 

 

2,176

 

Finance lease liabilities

 

199

 

 

 

215

 

Other long-term liabilities

 

121

 

 

 

104

 

Total liabilities

 

10,991

 

 

 

9,350

 

Stockholders’ equity:

 

 

 

Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at each of September 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

 

373

 

 

 

328

 

Accumulated other comprehensive loss

 

(165

)

 

 

(160

)

Retained earnings

 

3,671

 

 

 

2,796

 

Total stockholders’ equity

 

3,879

 

 

 

2,964

 

Total liabilities and stockholders’ equity

$

14,870

 

 

$

12,314

 

 
 
 

MOLINA HEALTHCARE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 

 

 

Nine Months Ended

 

September 30,

 

2023

 

2022

 

 

 

 

 

(In millions)

Operating activities:

 

 

 

Net income

$

875

 

 

$

736

 

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

 

 

 

Depreciation and amortization

 

128

 

 

 

129

 

Deferred income taxes

 

(33

)

 

 

(35

)

Share-based compensation

 

88

 

 

 

80

 

Other, net

 

3

 

 

 

(3

)

Changes in operating assets and liabilities:

 

 

 

Receivables

 

(132

)

 

 

(15

)

Prepaid expenses and other current assets

 

(69

)

 

 

(110

)

Medical claims and benefits payable

 

611

 

 

 

251

 

Amounts due government agencies

 

377

 

 

 

(360

)

Accounts payable, accrued liabilities and other

 

(137

)

 

 

(40

)

Deferred revenue

 

332

 

 

 

293

 

Income taxes

 

309

 

 

 

59

 

Net cash provided by operating activities

 

2,352

 

 

 

985

 

Investing activities:

 

 

 

Purchases of investments

 

(1,295

)

 

 

(1,764

)

Proceeds from sales and maturities of investments

 

670

 

 

 

1,082

 

Net cash paid in business combinations

 

(3

)

 

 

(134

)

Purchases of property, equipment, and capitalized software

 

(89

)

 

 

(81

)

Other, net

 

(2

)

 

 

(41

)

Net cash used in investing activities

 

(719

)

 

 

(938

)

Financing activities:

 

 

 

Common stock withheld to settle employee tax obligations

 

(60

)

 

 

(53

)

Common stock purchases

 

 

 

 

(200

)

Contingent consideration liabilities settled

 

 

 

 

(20

)

Other, net

 

(1

)

 

 

15

 

Net cash used in financing activities

 

(61

)

 

 

(258

)

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

 

1,572

 

 

 

(211

)

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

$

5,620

 

 

$

4,295

 

 
 
 
 

MOLINA HEALTHCARE, INC.

UNAUDITED SEGMENT DATA

(Dollars in millions)
 

 

 

September 30,

 

December 31,

 

September 30,

 

2023

 

2022

 

2022

Ending Membership by Segment:

 

 

 

 

 

Medicaid

4,757,000

 

4,754,000

 

4,667,000

Medicare

173,000

 

156,000

 

155,000

Marketplace

276,000

 

348,000

 

353,000

Total

5,206,000

 

5,258,000

 

5,175,000

 

 

Three Months Ended September 30,

 

2023

 

2022

 

Premium

Revenue

 

Medical

Margin

 

MCR (1)

 

Premium

Revenue

 

Medical

Margin

 

MCR (1)

 

 

 

 

 

 

Medicaid

$

6,711

 

$

752

 

88.8

%

 

$

6,125

 

$

703

 

88.5

%

Medicare

 

1,032

 

 

78

 

92.4

 

 

 

947

 

 

108

 

88.7

 

Marketplace

 

497

 

 

104

 

78.9

 

 

 

564

 

 

77

 

86.3

 

Consolidated

$

8,240

 

$

934

 

88.7

%

 

$

7,636

 

$

888

 

88.4

%

 

 

Nine Months Ended September 30,

 

2023

 

2022

 

Premium

Revenue

 

Medical

Margin

 

MCR (1)

 

Premium

Revenue

 

Medical

Margin

 

MCR (1)

 

 

 

 

 

 

Medicaid

$

19,545

 

$

2,242

 

88.5

%

 

$

18,406

 

$

2,168

 

88.2

%

Medicare

 

3,122

 

 

317

 

89.8

 

 

 

2,847

 

 

360

 

87.4

 

Marketplace

 

1,500

 

 

393

 

73.8

 

 

 

1,713

 

 

255

 

85.1

 

Consolidated

$

24,167

 

$

2,952

 

87.8

%

 

$

22,966

 

$

2,783

 

87.9

%

 

 

 

 

 

 

 

 

 

 

 

 

______________________________________

(1)
The MCR represents medical costs as a percentage of premium revenue.

 

 

 
 
 
 

MOLINA HEALTHCARE, INC.

CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE

(Dollars in millions)
 

 

The Company’s claims liabilities include additional reserves to account for moderately adverse conditions based on historical experience and other factors including, but not limited to, variations in claims payment patterns, changes in utilization and cost trends, known outbreaks of disease, and large claims. The Company’s reserving methodology is consistently applied across all periods presented. The amounts displayed for “Components of medical care costs related to: Prior year” represent the amounts by which the original estimates of claims and benefits payable at the beginning of the year were more than the actual liabilities based on information (principally the payment of claims) developed since those liabilities were first reported. The following table presents the components of the change in medical claims and benefits payable for the periods indicated:

 

 

Nine Months Ended

 

September 30,

 

2023

 

2022

 

 

 

 

 

Unaudited

Medical claims and benefits payable, beginning balance

$

3,528

 

 

$

3,363

 

Components of medical care costs related to:

 

 

 

Current year

 

21,573

 

 

 

20,521

 

Prior year

 

(358

)

 

 

(338

)

Total medical care costs

 

21,215

 

 

 

20,183

 

Payments for medical care costs related to:

 

 

 

Current year

 

18,228

 

 

 

17,538

 

Prior year

 

2,707

 

 

 

2,481

 

Total paid

 

20,935

 

 

 

20,019

 

Acquired balances, net of post-acquisition adjustments

 

96

 

 

 

8

 

Change in non-risk and other provider payables

 

331

 

 

 

87

 

Medical claims and benefits payable, ending balance

$

4,235

 

 

$

3,622

 

 

 

 

 

Days in Claims Payable (1)

 

51

 

 

 

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 September 30,

 

Nine Months Ended September 30,

2023

 

2022

 

2023

 

2022

 

Amount

 

Per

Diluted

Share

 

Amount

 

Per

Diluted

Share

 

Amount

 

Per

Diluted

Share

 

Amount

 

Per

Diluted

Share

GAAP Net income

$

245

 

 

$

4.21

 

 

$

230

 

 

$

3.95

 

 

$

875

 

 

$

15.08

 

 

$

736

 

 

$

12.58

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

$

20

 

 

$

0.36

 

 

$

19

 

 

$

0.33

 

 

$

63

 

 

$

1.09

 

 

$

56

 

 

$

0.96

 

Acquisition-related expenses (1)

 

2

 

 

 

0.04

 

 

 

12

 

 

 

0.21

 

 

 

4

 

 

 

0.07

 

 

 

38

 

 

 

0.65

 

Other (2)

 

41

 

 

 

0.70

 

 

 

 

 

 

 

 

 

41

 

 

 

0.70

 

 

 

 

 

 

 

Subtotal, adjustments

 

63

 

 

 

1.10

 

 

 

31

 

 

 

0.54

 

 

 

108

 

 

 

1.86

 

 

 

94

 

 

 

1.61

 

Income tax effect

 

(14

)

 

 

(0.26

)

 

 

(7

)

 

 

(0.13

)

 

 

(25

)

 

 

(0.44

)

 

 

(22

)

 

 

(0.38

)

Adjustments, net of tax

 

49

 

 

 

0.84

 

 

 

24

 

 

 

0.41

 

 

 

83

 

 

 

1.42

 

 

 

72

 

 

 

1.23

 

Adjusted net income

$

294

 

 

$

5.05

 

 

$

254

 

 

$

4.36

 

 

$

958

 

 

$

16.50

 

 

$

808

 

 

$

13.81

 

_______________________

(1)

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

(2)

The three and nine months ended September 30, 2023, reflect a credit loss on 2022 Marketplace risk adjustment receivables due to the insolvency of an issuer in the Texas risk pool. The nine months ended September 30, 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

$

1,099

 

 

$

18.92

 

Adjustments:

 

 

 

Amortization of intangible assets

 

87

 

 

 

1.50

 

Acquisition-related expenses

 

5

 

 

 

0.08

 

Other

 

48

 

 

 

0.82

 

Subtotal, adjustments

 

140

 

 

 

2.40

 

Income tax effect (1)

 

(33

)

 

 

(0.57

)

Adjustments, net of tax

 

107

 

 

 

1.83

 

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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