News Release

Raises Full Year 2019 Earnings Guidance

LONG BEACH, Calif.--(BUSINESS WIRE)--Oct. 29, 2019-- Molina Healthcare, Inc. (NYSE: MOH) today reported net income for the third quarter of 2019 of $175 million, or $2.75 per diluted share, compared to net income of $197 million, or $2.90 per diluted share, in the third quarter of 2018. Financial results for the third quarter of 2019 are summarized below:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(In millions, except per share results)
Premium Revenue	$4,084		$4,337		$12,085		$13,174
Total Revenue	$4,243		$4,697		$12,555		$14,226
Pre-Tax Income	$233		$259		$750		$743
Net Income	$175		$197		$569		$506
EPS - Diluted	$2.75		$2.90		$8.80		$7.60
MCR	86.3%		87.4%		85.7%		86.2%
G&A Ratio	7.6%		6.6%		7.6%		7.0%
Pre-Tax Margin	5.5%		5.5%		6.0%		5.2%
Effective Tax Rate	24.7%		24.0%		24.1%		31.9%
After-Tax Margin	4.1%		4.2%		4.5%		3.6%

Highlights include:

• Premium revenue was $4.1 billion in the third quarter of 2019, a 5.8% decrease compared to the third quarter of 2018.
• Medical care ratio (MCR) was 86.3% in the third quarter of 2019 compared to 87.4% for the third quarter of 2018.
• General and administrative (G&A) expense ratio increased to 7.6% in the third quarter of 2019 compared to 6.6% for the third quarter of 2018.
• The third quarter results include a charge of $2 million, or a $0.03 net loss per diluted share, for the repayment of convertible notes.
• After-tax margin was 4.1% for the third quarter of 2019 compared to 4.2% in the third quarter of 2018.
• Cash and investments at the parent company amounted to $796 million as of September 30, 2019.
• Operating cash flows for the nine months ended September 30, 2019, were $398 million.
• Raised full year 2019 earnings guidance to $11.30 - $11.55 from $11.20 - $11.50, which does not include any future prior-period reserve development.
• On October 10, 2019, the Company entered into a definitive agreement to acquire certain assets of YourCare Health Plan, Inc. Through this transaction, expected to close early next year, the Company will serve approximately 46,000 Medicaid members in seven counties in Western New York.

   

“We are pleased with our performance this quarter as we sustained our margin profile, produced significant excess capital, and increased our full year 2019 guidance,” said Joe Zubretsky, president and CEO. “We have accomplished this in the backdrop of commencing our pivot to growth.”

Premium Revenue

Premium revenue for the third quarter of 2019 decreased 5.8% to $4.1 billion compared to $4.3 billion in the third quarter of 2018, which was in line with the Company’s expectations.

For the nine months ended September 30, 2019, premium revenue decreased 8.3% to $12.1 billion, from $13.2 billion for the comparable period in 2018. In both periods, the lower premium revenue is primarily a result of previously announced losses of Medicaid membership in New Mexico and Florida.

Medical Care Ratio

The consolidated MCR for the third quarter of 2019 was 86.3% compared to 87.4% in the third quarter of 2018. Prior period reserve development in the quarter was negligible.

The MCR for the nine months ended September 30, 2019, improved to 85.7% compared to 86.2% for the comparable period in 2018, due to a combination of the following:

• The Medicaid MCR improved to 88.2% compared to 90.4% for the nine months ended September 30, 2018, due to improvement in all programs.

• The Medicare MCR improved to 85.2% compared to 85.7% for the nine months ended September 30, 2018.
• The Marketplace MCR was 66.7% compared to 57.5% for the nine months ended September 30, 2018. The 2018 period was positively impacted by reduced medical care costs from Cost Sharing Reduction (CSR) subsidies related to 2017 dates of service. In addition, the current year was impacted by a relatively smaller benefit from prior-year Marketplace risk adjustment compared to 2018.

General and Administrative Expense Ratio

The general and administrative expenses were 7.6% of total revenues in the third quarter of 2019 compared to 6.6% in the third quarter of 2018.

For the nine months ended September 30, 2019, the G&A ratio was 7.6% compared to 7.0% in the comparable prior-year period. In both periods, the year-over-year increases are due mainly to the year-over-year decline in total revenues.

Interest Expense

Interest expense was $22 million in the third quarter of 2019 compared to $26 million in the third quarter of 2018. The decline was due to continued repayment of convertible notes.

Other Expenses

The third quarter results included a $2 million charge on the repayment of convertible notes, resulting in a $0.03 net loss per diluted share.

Balance Sheet

Cash and investments at the parent company amounted to $796 million as of September 30, 2019, compared to $467 million as of June 30, 2019.

During the third quarter of 2019, the parent company received $430 million of dividends from the regulated health plan subsidiaries.

The Company repaid $55 million of principal on the convertible notes during the quarter, and $240 million since the beginning of the year. The impact of capital deployment actions in the quarter resulted in lower interest expense, a slight loss on repayment of the convertible notes, and a lower share count.

Cash Flow

Operating cash flows for the nine months ended September 30, 2019, amounted to $398 million and were higher compared to the nine months ended September 30, 2018, primarily due to the normal fluctuations of working capital.

Outlook

The Company raised its full year 2019 earnings guidance range to $11.30 - $11.55 per diluted share, from previously issued guidance of $11.20 - $11.50.

Guidance is based on the following:

• Assumes no future restructuring or non-run rate significant items; and
• Assumes no future prior period development.

		October 29, 2019 (1)		July 30, 2019 (1)
		(current)		(previous)
Premium revenue		$16.1B		$16.1B
Medicaid		$12.4B		$12.3B
Medicare		$2.2B		$2.2B
Marketplace		$1.5B		$1.6B
Premium tax revenue		$565M		$450M
Investment income and other revenue		$135M		$115M
Total revenue		$16.8B		$16.7B
Medical care costs		$13.8B		$13.8B
General and administrative expenses		$1.3B		$1.3B
Premium tax expenses		$565M		$450M
EBITDA (2)		$1,140M - $1,160M		$1,135M - $1,160M
Depreciation and amortization		$90M		$90M
Interest expense and other expenses, net		$90M		$90M
Income before income taxes		$960M - $980M		$955M - $980M
Net income		$725M - $740M		$725M - $740M
Net income per share		$11.30 - $11.55		$11.20 - $11.50
Diluted weighted average shares		64.2M		64.5M
End-of-year membership:
Medicaid and Medicare		3.1M		3.1M
Marketplace		270K		270K - 280K
Operating Statistics:
Medical care ratio		86%		86%
G&A ratio		7.7%		7.7%
Effective income tax expense rate		24.3%		24.2%
After-tax margin		4.3% - 4.4%		4.2% - 4.4%
Medicaid		3%		3%
Medicare		7%		7%
Marketplace		11%		11%
__________________
(1) All amounts are rounded and approximations.
(2) See reconciliation of 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 third quarter 2019 results at 8:00 a.m. Eastern time on Wednesday, October 30, 2019. The number to call for the interactive teleconference is (877) 883-0383 and the confirmation number is 5680857. A telephonic replay of the conference call will be available through Wednesday, November 6, 2019, by dialing (877) 344-7529 and entering confirmation number 10135133. 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. Through its locally operated health plans, Molina Healthcare served approximately 3.3 million members as of September 30, 2019. 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 contains forward-looking statements regarding the Company’s revised 2019 guidance, as well as its plans, expectations, and anticipated future events. Actual results could differ materially due to numerous known and unknown risks and uncertainties. Those risks and uncertainties are discussed in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and the section entitled “Forward-Looking Statements” in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2019.

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 events 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 29, 2019, and, except as otherwise required by law, the Company disclaims any obligation to update any forward-looking statements to conform the statement to actual results or changes in its expectations.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2019				2018				2019				2018
	(In millions, except per-share amounts)
Revenue:
Premium revenue	$	4,084			$	4,337			$	12,085			$	13,174
Premium tax revenue	119				110				367				320
Health insurer fees reimbursed	—				83				—				248
Service revenue	—				130				—				391
Investment income and other revenue	40				37				103				93
Total revenue	4,243				4,697				12,555				14,226
Operating expenses:
Medical care costs	3,523				3,790				10,360				11,362
General and administrative expenses	323				311				953				998
Premium tax expenses	119				110				367				320
Health insurer fees	—				87				—				261
Depreciation and amortization	21				25				68				76
Restructuring costs	—				5				5				38
Cost of service revenue	—				111				—				349
Total operating expenses	3,986				4,439				11,753				13,404
Gain on sale of subsidiary	—				37				—				37
Operating income	257				295				802				859
Other expenses, net:
Interest expense	22				26				67				91
Other expenses (income), net	2				10				(15		)		25
Total other expenses, net	24				36				52				116
Income before income tax expense	233				259				750				743
Income tax expense	58				62				181				237
Net income	$	175			$	197			$	569			$	506
Net income per share, diluted	$	2.75			$	2.90			$	8.80			$	7.60
Diluted weighted average shares outstanding	63.6				67.9				64.6				66.6
Operating Statistics:
Medical care ratio	86.3		%		87.4		%		85.7		%		86.2		%
G&A ratio	7.6		%		6.6		%		7.6		%		7.0		%
Premium tax ratio	2.8		%		2.5		%		2.9		%		2.4		%
Effective income tax rate	24.7		%		24.0		%		24.1		%		31.9		%
After-tax margin	4.1		%		4.2		%		4.5		%		3.6		%
Medicaid	3.4		%		2.8		%		3.1		%		2.0		%
Medicare	6.4		%		1.4		%		7.0		%		3.7		%
Marketplace	8.1		%		15.3		%		11.9		%		16.7		%

CONSOLIDATED BALANCE SHEETS
	September 30,				December 31,
	2019				2018
	Unaudited
	(Dollars in millions, except per-share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	2,679			$	2,826
Investments	1,757				1,681
Receivables	1,280				1,330
Prepaid expenses and other current assets	140				149
Derivative asset	21				476
Total current assets	5,877				6,462
Property, equipment, and capitalized software, net	379				241
Goodwill and intangible assets, net	176				190
Restricted investments	79				120
Deferred income taxes	82				117
Other assets	108				24
	$	6,701			$	7,154
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable	$	1,975			$	1,961
Amounts due government agencies	612				967
Accounts payable and accrued liabilities	478				390
Deferred revenue	207				211
Current portion of long-term debt	15				241
Derivative liability	21				476
Total current liabilities	3,308				4,246
Long-term debt	1,239				1,020
Finance lease liabilities	233				197
Other long-term liabilities	90				44
Total liabilities	4,870				5,507
Stockholders’ equity:
Common stock, $0.001 par value, 150 million shares authorized; outstanding: 63 million shares at September 30, 2019 and 62 million shares at December 31, 2018	—				—
Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding	—				—
Additional paid-in capital	160				643
Accumulated other comprehensive income (loss)	5				(8		)
Retained earnings	1,666				1,012
Total stockholders’ equity	1,831				1,647
	$	6,701			$	7,154

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2019				2018				2019				2018
	(In millions)
Operating activities:
Net income	$	175			$	197			$	569			$	506
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	21				31				68				104
Deferred income taxes	(12		)		(26		)		7				(32		)
Share-based compensation	10				7				29				20
Amortization of convertible senior notes and finance lease liabilities	1				5				5				18
Loss (gain) on debt repayment	2				10				(15		)		25
Gain on sale of subsidiary	—				(37		)		—				(37		)
Non-cash restructuring costs	—				—				—				17
Other, net	(8		)		2				(5		)		6
Changes in operating assets and liabilities:
Receivables	(41		)		(192		)		50				(507		)
Prepaid expenses and other current assets	(24		)		64				(6		)		(117		)
Medical claims and benefits payable	208				123				14				(144		)
Amounts due government agencies	(372		)		(716		)		(355		)		(511		)
Accounts payable and accrued liabilities	98				49				37				398
Deferred revenue	177				(13		)		(4		)		(55		)
Income taxes	7				(9		)		4				118
Net cash provided by (used in) operating activities	242				(505		)		398				(191		)
Investing activities:
Purchases of investments	(776		)		(288		)		(1,938		)		(1,202		)
Proceeds from sales and maturities of investments	1,099				735				1,890				2,070
Purchases of property, equipment, and capitalized software	(10		)		(10		)		(30		)		(24		)
Other, net	—				(14		)		(2		)		(23		)
Net cash provided by (used in) investing activities	313				423				(80		)		821
Financing activities:
Repayment of principal amount of 1.125% Convertible Notes	(55		)		(140		)		(240		)		(236		)
Cash paid for partial settlement of 1.125% Conversion Option	(105		)		(343		)		(578		)		(477		)
Cash received for partial termination of 1.125% Call Option	105				343				578				477
Cash paid for partial termination of 1.125% Warrants	(90		)		(306		)		(514		)		(419		)
Proceeds from borrowings under Term Loan Facility	—				—				220				—
Repayment of Credit Facility	—				—				—				(300		)
Repayment of 1.625% Convertible Notes	—				(64		)		—				(64		)
Other, net	(3		)		1				24				7
Net cash used in financing activities	(148		)		(509		)		(510		)		(1,012		)
Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents	407				(591		)		(192		)		(382		)
Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period	2,327				3,499				2,926				3,290
Cash, cash equivalents, and restricted cash and cash equivalents at end of period	$	2,734			$	2,908			$	2,734			$	2,908

HEALTH PLANS SEGMENT MEMBERSHIP
	September 30, 2019			December 31, 2018			September 30, 2018
Ending Membership by Government Program:
TANF and CHIP	1,993,000			2,295,000			2,436,000
Medicaid Expansion	598,000			660,000			664,000
ABD	364,000			406,000			415,000
Total Medicaid	2,955,000			3,361,000			3,515,000
MMP - Integrated	58,000			54,000			55,000
Medicare Special Needs Plans	44,000			44,000			45,000
Total Medicare	102,000			98,000			100,000
Total Medicaid and Medicare	3,057,000			3,459,000			3,615,000
Marketplace	289,000			362,000			384,000
	3,346,000			3,821,000			3,999,000
Ending Membership by Health Plan:
California	580,000			608,000			623,000
Florida (1)	136,000			313,000			395,000
Illinois	224,000			224,000			223,000
Michigan	361,000			383,000			394,000
New Mexico (1)	24,000			222,000			234,000
Ohio	292,000			302,000			315,000
Puerto Rico	186,000			252,000			320,000
South Carolina	134,000			120,000			117,000
Texas	350,000			423,000			436,000
Washington	818,000			781,000			770,000
Other (2)	241,000			193,000			172,000
	3,346,000			3,821,000			3,999,000
__________________
(1) The Company’s Medicaid contracts in New Mexico and in all but two regions in Florida terminated in late 2018 and early 2019. During 2019, the Company continues to serve Medicare and Marketplace members in both Florida and New Mexico, as well as Medicaid members in two regions in Florida.
(2) “Other” includes the Idaho, Mississippi, New York, Utah and Wisconsin health plans, which are not individually significant to the Company’s consolidated operating results.

UNAUDITED SELECTED FINANCIAL DATA (In millions, except percentages and per-member per-month amounts) HEALTH PLANS SEGMENT FINANCIAL DATA — BY GOVERNMENT PROGRAM
	Member Months (1)			Premium Revenue								Medical Care Costs								MCR (2)			Medical Margin
				Total				PMPM				Total				PMPM
	Three Months Ended September 30, 2019
TANF and CHIP	6.0			$	1,225			$	202.46			$	1,071			$	176.88			87.4	%		$	154
Medicaid Expansion	1.8			696				385.63				622				345.25				89.5			74
ABD	1.1			1,247				1,136.67				1,097				1,000.56				88.0			150
Total Medicaid	8.9			3,168				353.81				2,790				311.70				88.1			378
MMP	0.2			399				2,328.70				345				2,010.50				86.3			54
Medicare	0.1			160				1,230.01				134				1,029.75				83.7			26
Total Medicare	0.3			559				1,854.96				479				1,587.61				85.6			80
Total Medicaid and Medicare	9.2			3,727				402.76				3,269				353.31				87.7			458
Marketplace	0.9			357				410.23				254				292.21				71.2			103
	10.1			$	4,084			$	403.40			$	3,523			$	348.06			86.3	%		$	561

	Three Months Ended September 30, 2018
TANF and CHIP	7.4			$	1,379			$	187.03			$	1,228			$	166.41			89.0	%		$	151
Medicaid Expansion	2.0			671				333.11				640				317.62				95.3			31
ABD	1.2			1,322				1,054.92				1,186				946.38				89.7			136
Total Medicaid	10.6			3,372				316.86				3,054				286.86				90.5			318
MMP	0.2			353				2,159.72				323				1,981.45				91.7			30
Medicare	0.1			156				1,157.71				121				895.25				77.3			35
Total Medicare	0.3			509				1,706.95				444				1,490.63				87.3			65
Total Medicaid and Medicare	10.9			3,881				354.70				3,498				319.63				90.1			383
Marketplace	1.2			456				394.02				292				252.61				64.1			164
	12.1			$	4,337			$	358.46			$	3,790			$	313.23			87.4	%		$	547

	Nine Months Ended September 30, 2019
TANF and CHIP	18.3			$	3,594			$	196.01			$	3,141			$	171.30			87.4	%		$	453
Medicaid Expansion	5.4			2,055				380.08				1,810				334.85				88.1			245
ABD	3.3			3,590				1,097.94				3,200				978.64				89.1			390
Total Medicaid	27.0			9,239				342.03				8,151				301.77				88.2			1,088
MMP	0.5			1,193				2,368.38				1,034				2,051.90				86.6			159
Medicare	0.4			489				1,270.32				399				1,037.24				81.7			90
Total Medicare	0.9			1,682				1,892.63				1,433				1,612.29				85.2			249
Total Medicaid and Medicare	27.9			10,921				391.44				9,584				343.53				87.8			1,337
Marketplace	2.8			1,164				414.17				776				276.28				66.7			388
	30.7			$	12,085			$	393.52			$	10,360			$	337.37			85.7	%		$	1,725

	Nine Months Ended September 30, 2018
TANF and CHIP	22.3			$	4,145			$	186.12			$	3,705			$	166.35			89.4	%		$	440
Medicaid Expansion	6.1			2,184				359.37				1,957				322.01				89.6			227
ABD	3.7			3,864				1,034.25				3,550				950.11				91.9			314
Total Medicaid	32.1			10,193				317.70				9,212				287.10				90.4			981
MMP	0.5			1,077				2,173.90				941				1,899.26				87.4			136
Medicare	0.4			470				1,171.59				385				959.54				81.9			85
Total Medicare	0.9			1,547				1,725.71				1,326				1,479.06				85.7			221
Total Medicaid and Medicare	33.0			11,740				355.96				10,538				319.50				89.8			1,202
Marketplace	3.8			1,434				379.91				824				218.44				57.5			610
	36.8			$	13,174			$	358.42			$	11,362			$	309.12			86.2	%		$	1,812
__________________
(1) A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2) The MCR represents medical costs as a percentage of premium revenue.

HEALTH PLANS SEGMENT FINANCIAL DATA — MEDICAID AND MEDICARE
	Member Months			Premium Revenue								Medical Care Costs								MCR			Medical Margin
				Total				PMPM				Total				PMPM
	Three Months Ended September 30, 2019
California	1.6			$	510			$	315.90			$	423			$	261.97			82.9	%		$	87
Florida	0.3			130				436.99				127				427.80				97.9			3
Illinois	0.7			257				383.41				232				347.28				90.6			25
Michigan	1.1			401				373.01				332				307.97				82.6			69
Ohio	0.9			615				687.38				563				628.98				91.5			52
Puerto Rico	0.6			117				209.25				102				182.53				87.2			15
South Carolina	0.4			151				379.20				138				347.23				91.6			13
Texas	0.7			592				912.76				540				833.51				91.3			52
Washington	2.3			643				269.52				570				238.55				88.5			73
Other (1) (2)	0.6			311				437.60				242				341.29				78.0			69
	9.2			$	3,727			$	402.76			$	3,269			$	353.31			87.7	%		$	458
	Three Months Ended September 30, 2018
California	1.7			$	435			$	249.00			$	446			$	255.22			102.5	%		$	(11	)
Florida	1.0			388				363.16				362				339.33				93.4			26
Illinois	0.7			207				312.72				182				274.98				87.9			25
Michigan	1.1			397				350.05				321				282.49				80.7			76
New Mexico (2)	0.6			304				471.66				275				426.69				90.5			29
Ohio	0.9			584				624.84				532				568.93				91.1			52
Puerto Rico	1.0			179				189.65				162				171.96				90.7			17
South Carolina	0.4			124				354.53				112				318.56				89.9			12
Texas	0.7			577				848.47				525				772.14				91.0			52
Washington	2.3			511				226.77				444				197.04				86.9			67
Other (1)	0.5			175				334.29				137				261.49				78.2			38
	10.9			$	3,881			$	354.70			$	3,498			$	319.63			90.1	%		$	383

	Nine Months Ended September 30, 2019
California	4.9			$	1,508			$	306.96			$	1,286			$	261.76			85.3	%		$	222
Florida	1.0			418				410.71				374				367.95				89.6			44
Illinois	2.0			726				365.35				632				318.26				87.1			94
Michigan	3.3			1,199				370.77				990				305.99				82.5			209
Ohio	2.7			1,835				682.59				1,653				614.89				90.1			182
Puerto Rico	1.8			341				190.42				301				167.98				88.2			40
South Carolina	1.2			427				368.35				378				326.61				88.7			49
Texas	2.0			1,789				910.64				1,623				826.20				90.7			166
Washington	7.1			1,868				261.92				1,691				236.98				90.5			177
Other (1) (2)	1.9			810				402.31				656				325.93				81.0			154
	27.9			$	10,921			$	391.44			$	9,584			$	343.53			87.8	%		$	1,337
	Nine Months Ended September 30, 2018
California	5.3			$	1,446			$	270.63			$	1,299			$	243.14			89.8	%		$	147
Florida	3.2			1,147				356.15				1,069				331.93				93.2			78
Illinois	1.8			551				308.45				474				265.47				86.1			77
Michigan	3.4			1,161				343.08				983				290.26				84.6			178
New Mexico (2)	2.0			936				469.19				875				438.70				93.5			61
Ohio	2.8			1,670				590.71				1,474				521.26				88.2			196
Puerto Rico	2.9			549				190.34				501				173.83				91.3			48
South Carolina	1.1			369				350.94				323				306.76				87.4			46
Texas	2.1			1,715				831.21				1,554				753.31				90.6			161
Washington	6.8			1,666				245.40				1,544				227.41				92.7			122
Other (1)	1.6			530				323.84				442				269.98				83.4			88
	33.0			$	11,740			$	355.96			$	10,538			$	319.50			89.8	%		$	1,202
_______________
(1) “Other” includes the Idaho, Mississippi, New York, Utah and Wisconsin health plans, which are not individually significant to the Company’s consolidated operating results.
(2) In 2019, “Other” includes the New Mexico health plan. The New Mexico health plan’s Medicaid contract terminated on December 31, 2018, and therefore its 2019 results are not individually significant to the Company’s consolidated operating results.

HEALTH PLANS SEGMENT FINANCIAL DATA — MARKETPLACE
	Member Months			Premium Revenue								Medical Care Costs								MCR			Medical Margin
				Total				PMPM				Total				PMPM
	Three Months Ended September 30, 2019
California	0.2			$	57			$	371.07			$	33			$	210.87			56.8	%		$	24
Florida	0.1			41				349.53				25				212.00				60.7			16
Michigan	—			7				431.41				4				289.45				67.1			3
Ohio	—			25				792.96				19				626.30				79.0			6
Texas	0.4			142				351.04				105				257.68				73.4			37
Washington	0.1			45				719.67				33				548.75				76.2			12
Other (1)	0.1			40				480.41				35				408.35				85.0			5
	0.9			$	357			$	410.23			$	254			$	292.21			71.2	%		$	103
	Three Months Ended September 30, 2018
California	0.2			$	49			$	309.04			$	37			$	235.63			76.2	%		$	12
Florida	0.2			66				548.60				45				362.39				66.1			21
Michigan	—			12				233.51				7				145.13				62.1			5
New Mexico	0.1			28				419.20				18				249.33				59.5			10
Ohio	0.1			27				485.08				18				336.86				69.4			9
Texas	0.6			228				357.54				134				209.80				58.7			94
Washington	—			44				656.70				34				518.75				79.0			10
Other (2)	—			2				NM				(1		)		NM				NM			3
	1.2			$	456			$	394.02			$	292			$	252.61			64.1	%		$	164

	Nine Months Ended September 30, 2019
California	0.5			$	174			$	364.72			$	101			$	210.76			57.8	%		$	73
Florida	0.4			152				389.44				81				207.22				53.2			71
Michigan	—			27				474.12				15				265.95				56.1			12
Ohio	0.1			79				801.90				53				543.00				67.7			26
Texas	1.3			457				344.19				331				249.44				72.5			126
Washington	0.2			143				744.47				97				509.50				68.4			46
Other (1)	0.3			132				494.59				98				364.71				73.7			34
	2.8			$	1,164			$	414.17			$	776			$	276.28			66.7	%		$	388
	Nine Months Ended September 30, 2018
California	0.6			$	171			$	326.82			$	89			$	169.98			52.0	%		$	82
Florida	0.5			211				491.13				67				155.24				31.6			144
Michigan	0.1			40				248.24				23				145.38				58.6			17
New Mexico	0.2			93				426.07				55				247.57				58.1			38
Ohio	0.2			84				466.75				58				324.91				69.6			26
Texas	2.0			679				330.92				440				214.65				64.9			239
Washington	0.2			139				654.78				105				497.00				75.9			34
Other (2)	—			17				NM				(13		)		NM				NM			30
	3.8			$	1,434			$	379.91			$	824			$	218.44			57.5	%		$	610
__________________
(1) “Other” includes the New Mexico, Utah and Wisconsin health plans, which are not individually significant to the Company’s consolidated operating results in 2019.
(2) “Other” includes the Utah and Wisconsin health plans, where the Company did not participate in the Marketplace in 2018. Therefore, the ratios for 2018 periods are not meaningful (NM).

HEALTH PLANS SEGMENT FINANCIAL DATA — TOTAL
	Member Months			Premium Revenue								Medical Care Costs								MCR			Medical Margin
				Total				PMPM				Total				PMPM
	Three Months Ended September 30, 2019
California	1.8			$	567			$	320.67			$	456			$	257.55			80.3	%		$	111
Florida	0.4			171				412.29				152				366.86				89.0			19
Illinois	0.7			257				383.41				232				347.28				90.6			25
Michigan	1.1			408				373.92				336				307.68				82.3			72
Ohio	0.9			640				690.88				582				628.89				91.0			58
Puerto Rico	0.6			117				209.25				102				182.53				87.2			15
South Carolina	0.4			151				379.20				138				347.23				91.6			13
Texas	1.1			734				696.46				645				611.78				87.8			89
Washington	2.4			688				280.85				603				246.36				87.7			85
Other (1) (2)	0.7			351				442.14				277				348.40				78.8			74
	10.1			$	4,084			$	403.40			$	3,523			$	348.06			86.3	%		$	561
	Three Months Ended September 30, 2018
California	1.9			$	484			$	253.96			$	483			$	253.60			99.9	%		$	1
Florida	1.2			454				382.20				407				341.70				89.4			47
Illinois	0.7			207				312.72				182				274.98				87.9			25
Michigan	1.1			409				345.28				328				276.88				80.2			81
New Mexico (2)	0.7			332				466.63				293				409.68				87.8			39
Ohio	1.0			611				616.95				550				555.83				90.1			61
Puerto Rico	1.0			179				189.65				162				171.96				90.7			17
South Carolina	0.4			124				354.53				112				318.56				89.9			12
Texas	1.3			805				611.01				659				500.14				81.9			146
Washington	2.3			555				239.25				478				206.38				86.3			77
Other (1)	0.5			177				336.18				136				260.19				77.4			41
	12.1			$	4,337			$	358.46			$	3,790			$	313.23			87.4	%		$	547

	Nine Months Ended September 30, 2019
California	5.4			$	1,682			$	312.08			$	1,387			$	257.25			82.4	%		$	295
Florida	1.4			570				404.81				455				323.37				79.9			115
Illinois	2.0			726				365.35				632				318.26				87.1			94
Michigan	3.3			1,226				372.58				1,005				305.29				81.9			221
Ohio	2.8			1,914				686.80				1,706				612.35				89.2			208
Puerto Rico	1.8			341				190.42				301				167.98				88.2			40
South Carolina	1.2			427				368.35				378				326.61				88.7			49
Texas	3.3			2,246				682.10				1,954				593.50				87.0			292
Washington	7.3			2,011				274.52				1,788				244.10				88.9			223
Other (1) (2)	2.2			942				413.13				754				330.48				80.0			188
	30.7			$	12,085			$	393.52			$	10,360			$	337.37			85.7	%		$	1,725
	Nine Months Ended September 30, 2018
California	5.9			$	1,617			$	275.64			$	1,388			$	236.61			85.8	%		$	229
Florida	3.7			1,358				372.07				1,136				311.09				83.6			222
Illinois	1.8			551				308.45				474				265.47				86.1			77
Michigan	3.5			1,201				338.83				1,006				283.77				83.7			195
New Mexico (2)	2.2			1,029				464.92				930				419.78				90.3			99
Ohio	3.0			1,754				583.29				1,532				509.52				87.4			222
Puerto Rico	2.9			549				190.34				501				173.83				91.3			48
South Carolina	1.1			369				350.94				323				306.76				87.4			46
Texas	4.1			2,394				581.74				1,994				484.70				83.3			400
Washington	7.0			1,805				257.82				1,649				235.59				91.4			156
Other (1)	1.6			547				334.26				429				262.27				78.5			118
	36.8			$	13,174			$	358.42			$	11,362			$	309.12			86.2	%		$	1,812
__________________
(1) “Other” includes the Idaho, Mississippi, New York, Utah and Wisconsin health plans, which are not individually significant to the Company’s consolidated operating results.
(2) In 2019, “Other” includes the New Mexico health plan. The New Mexico health plan’s Medicaid contract terminated on December 31, 2018, and therefore its 2019 results are not individually significant to the Company’s consolidated operating results.

SELECTED FINANCIAL DATA
The following table provides details of the Company’s medical care costs for the periods indicated:
	Three Months Ended September 30,
	2019											2018
	Amount				PMPM				% of Total			Amount				PMPM				% of Total
Fee for service	$	2,685			$	265.12			76.2	%		$	2,865			$	236.74			75.6	%
Pharmacy	412				40.74				11.7			495				40.90				13.1
Capitation	283				28.01				8.0			297				24.52				7.8
Other	143				14.19				4.1			133				11.07				3.5
	$	3,523			$	348.06			100.0	%		$	3,790			$	313.23			100.0	%

	Nine Months Ended September 30,
	2019											2018
	Amount				PMPM				% of Total			Amount				PMPM				% of Total
Fee for service	$	7,793			$	253.77			75.2	%		$	8,471			$	230.46			74.6	%
Pharmacy	1,254				40.83				12.1			1,645				44.76				14.5
Capitation	856				27.88				8.3			891				24.23				7.8
Other	457				14.89				4.4			355				9.67				3.1
	$	10,360			$	337.37			100.0	%		$	11,362			$	309.12			100.0	%

The following table provides details of the Company’s medical claims and benefits payable as of the dates indicated:
	September 30,				December 31,
	2019				2018
Fee-for-service claims incurred but not paid (IBNP)	$	1,424			$	1,562
Pharmacy payable	128				115
Capitation payable	57				52
Other (1)	366				232
	$	1,975			$	1,961
______________________
(1) “Other” medical claims and benefits payable include amounts payable to certain providers for which the Company acts as an intermediary on behalf of various state agencies without assuming financial risk. Such receipts and payments do not impact the Company’s consolidated statements of income. As of September 30, 2019 and December 31, 2018, the Company had recorded non-risk provider payables of approximately $239 million and $107 million, respectively.

CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE
(Dollars in millions)

The Company’s claims liability includes a provision for adverse claims deviation 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 period” represent the amount by which the original estimate of claims and benefits payable at the beginning of the period was more than the actual amount of the liability based on information (principally the payment of claims) developed since that liability was first reported. The following table presents the components of the change in medical claims and benefits payable for the periods indicated:

	Nine Months Ended								Year Ended
	September 30,								Dec. 31, 2018
	2019				2018
Medical claims and benefits payable, beginning balance	$	1,961			$	2,192			$	2,192
Components of medical care costs related to:
Current period	10,613				11,670				15,478
Prior period (1)	(253		)		(308		)		(341		)
Total medical care costs	10,360				11,362				15,137
Change in non-risk and other provider payables	131				60				13
Payments for medical care costs related to:
Current period	8,996				9,866				13,671
Prior period	1,481				1,706				1,710
Total paid	10,477				11,572				15,381
Medical claims and benefits payable, ending balance	$	1,975			$	2,042			$	1,961
Days in claims payable, fee for service (2)	50				53				53
______________________
(1) The September 30, 2018, and December 31, 2018, amounts include the 2018 benefit of the 2017 Marketplace CSR reimbursement of $81 million.
(2) Claims payable includes primarily IBNP. It also includes certain fee-for-service payables reported in “Other” medical claims and benefits payable amounting to $42 million, $34 million and $43 million, as of September 30, 2019, September 30, 2018, and December 31, 2018, respectively.

SUMMARY OF NON-RUN RATE ITEMS AFFECTING CURRENT QUARTER AND YEAR-TO-DATE FINANCIAL RESULTS
(In millions, except per diluted share amounts)

The table below summarizes the impact of certain expenses and other items that management believes are not indicative of longer-term business trends and operations. The individual items presented below increase (decrease) income before income tax expense.

	Three Months Ended September 30,																Nine Months Ended September 30,
	2019								2018								2019								2018
	Amount				Per Diluted Share (1)				Amount				Per Diluted Share (1)				Amount				Per Diluted Share (1)				Amount				Per Diluted Share (1)
(Loss) gain on debt repayment	$	(2	)		$	(0.03	)		$	(10	)		$	(0.12	)		$	15			$	0.18			$	(25	)		$	(0.33	)
Restructuring costs	—				—				(5		)		(0.06		)		(5		)		(0.06		)		(38		)		(0.45		)
Gain on sale of subsidiary	—				—				37				0.42				—				—				37				0.43
	$	(2	)		$	(0.03	)		$	22			$	0.24			$	10			$	0.12			$	(26	)		$	(0.35	)
______________________
(1) Except for permanent differences between GAAP and tax (such as certain expenses that are not deductible for tax purposes), per diluted share amounts are generally calculated at the statutory income tax rate of 22.6% and 22% for 2019 and 2018, respectively.

NON-GAAP FINANCIAL MEASURES

The Company uses non-generally accepted accounting principles, or non-GAAP, financial measures as supplemental metrics in evaluating the Company’s financial performance, making financing and business decisions, and forecasting and planning for future periods. For these reasons, management believes such 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. These non-GAAP financial measures should be considered as supplements to, and not as substitutes for or superior to, GAAP measures. See further information regarding non-GAAP measures below the tables.

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2019				2018				2019				2018
Net income	$	175			$	197			$	569			$	506
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software	21				28				68				95
Interest expense	22				26				67				91
Income tax expense	58				62				181				237
EBITDA	$	276			$	313			$	885			$	929

Adjustments made to GAAP measures used to calculate the non-GAAP measures used in this news release follow:

Earnings before interest, taxes, depreciation and amortization (“EBITDA”): Net income on a GAAP basis less depreciation, and amortization of intangible assets and capitalized software, interest expense and income tax expense. The Company believes that EBITDA is helpful in assessing the Company’s ability to meet the cash demands of its operating units.

	Three Months Ended September 30,																Nine Months Ended September 30,
	2019								2018								2019								2018
	Amount				Per Diluted Share				Amount				Per Diluted Share				Amount				Per Diluted Share				Amount				Per Diluted Share
Net income	$	175			$	2.75			$	197			$	2.90			$	569			$	8.80			$	506			$	7.60
Adjustment:
Amortization of intangible assets	4				0.07				6				0.08				13				0.21				16				0.23
Income tax effect (1)	(1		)		(0.02		)		(2		)		(0.01		)		(3		)		(0.05		)		(4		)		(0.05		)
Adjustment, net of tax effect	3				0.05				4				0.07				10				0.16				12				0.18
Adjusted net income	$	178			$	2.80			$	201			$	2.97			$	579			$	8.96			$	518			$	7.78
________________________
(1) Income tax effect of adjustments calculated at the blended federal and state statutory tax rate of 22.6% and 22% for 2019 and 2018, respectively.

Adjustments made to GAAP measures used to calculate the non-GAAP measures used in this news release follow:

Adjusted net income: Net income on a GAAP basis less amortization of intangible assets, net of income tax effect calculated at the statutory tax rate. The Company believes that adjusted net income is helpful in assessing the Company’s financial performance exclusive of the non-cash impact of the amortization of purchased intangibles.

Adjusted net income per diluted share: Adjusted net income divided by weighted average common shares outstanding on a fully diluted basis.

2019 REVISED GUIDANCE
Reconciliation of Non-GAAP Financial Measures
	Low End				High End
	(In millions)
Net income	$	725			$	740
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software	90				90
Interest expense	90				90
Income tax expense	235				240
EBITDA	$	1,140			$	1,160

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191029005966/en/

Source: Molina Healthcare, Inc.

Investor Contact: Julie Trudell, Julie.Trudell@molinahealthcare.com, 562-912-6720

Media Contact: Caroline Zubieta, Caroline.Zubieta@molinahealthcare.com, 562-951-1588