Molina Healthcare — Oct 23, 2024 release

News Release Investor Contact: Jeffrey Geyer, Jeffrey.Geyer@molinahealthcare.com , 305-317-3012 Media Contact: Caroline Zubieta, Caroline.Zubieta@molinahealthcare.com , 562-951-1588 Molina Healthcare Reports Third Quarter 2024 Financial Results Reaffirms Full Year 2024 Earnings Guidance Long Beach, Calif, October 23, 2024 – Molina Healthcare, Inc. (NYSE: MOH) (the “Company”) today reported third quarter 2024 GAAP earnings per diluted share of $5.65 and adjusted earnings per diluted share of $6.01. Financial results are summarized below: Three months ended Nine months ended September 30,  September 30,   2024 2023 2024 2023 (In millions, except per-share results) Premium Revenue $9,694 $8,240 $28,644 $24,167 Total Revenue $10,340 $8,548 $30,151 $25,024 GAAP: Net Income $326 $245 $928 $875 EPS – Diluted $5.65 $4.21 $15.97 $15.08 Medical Care Ratio (MCR) 89.2  % 88.7  % 88.8  % 87.8  % G&A Ratio 6.5  % 7.1  % 6.9  % 7.3  % After-tax Margin 3.2  % 2.9  % 3.1  % 3.5  % Adjusted: Net Income $347 $294 $1,022 $958 EPS – Diluted $6.01 $5.05 $17.59 $16.50 G&A Ratio 6.4  % 7.1  % 6.8  % 7.2  % After-tax Margin 3.4  % 3.4  % 3.4  % 3.8  % See the Reconciliation of Unaudited Non-GAAP Financial Measures at the end of this release. Quarter Highlights • As of September 30, 2024, the Company served approximately 5.6 million members, an increase of 8% compared to September 30, 2023. • Premium revenue was approximately $9.7 billion for the third quarter of 2024, an increase of 18% year over year. • GAAP net income was $5.65 per diluted share for the third quarter of 2024, an increase of 34% year over year. • Adjusted net income was $6.01 per diluted share for the third quarter of 2024, an increase of 19% year over year. • The Company reaffirmed its full year 2024 guidance with expected premium revenue of approximately $38 billion and adjusted earnings of at least $23.50 per diluted share. -MORE- Molina Healthcare, Inc. Reports Third Quarter 2024 Financial Results Page 2 October 23, 2024 “We are pleased with our performance in the quarter and, in a challenging environment, continued to execute on the fundamentals of the business,” said Joseph Zubretsky, President and Chief Executive Officer. “Our results reflect continued operating discipline despite the unprecedented short-term dynamics caused by redeterminations. We believe all of our businesses are well positioned for sustainable profitable growth.” Premium Revenue Premium revenue was approximately $9.7 billion for the third quarter of 2024, an increase of 18% year over year. The higher premium revenue reflects new contract wins, acquisitions, and growth in our current footprint, partially offset by the impact of Medicaid redeterminations. Net Income GAAP net income for the third quarter of 2024 was $5.65 per diluted share, an increase of 34% year over year. Adjusted net income for the third quarter of 2024 was $6.01 per diluted share, an increase of 19% year over year. Medical Care Ratio (MCR) • The consolidated MCR for the third quarter of 2024 was 89.2% and reflects continued focus on managing medical costs. • The Medicaid MCR for the third quarter of 2024 was 90.5%. Within that result, approximately 50 basis points were due to a premium rate reduction retroactive to the beginning of 2024, and approximately 20 basis points were due to Medicaid “new store” plans, which are continuing to improve in line with the Company’s expectations. Excluding the retroactive premium adjustment and new stores, the Medicaid MCR was approximately 89.8%, which is higher than the Company’s long-term expectations, primarily due to redetermination-related acuity shifts and higher utilization for long-term services and supports, pharmacy, and behavioral health services. • The Medicare MCR for the third quarter of 2024 was 89.6%, which primarily reflects higher-than-expected utilization, partially offset by benefit adjustments implemented for 2024. • The Marketplace MCR for the third quarter of 2024 was 73.0%, better than the Company’s expectations, reflecting strong operating performance. General and Administrative Expense Ratio The G&A ratio and the adjusted G&A ratio for the third quarter of 2024 were 6.5% and 6.4%, respectively, reflecting disciplined cost management, one-time credits related to certain vendor contracts, and operating leverage. Balance Sheet Cash and investments at the parent company were $195 million as of September 30, 2024 compared to $742 million as of December 31, 2023. The Company purchased approximately 1.5 million shares for $500 million in the third quarter of 2024. Days in claims payable at September 30, 2024 was 48. Cash Flow Operating cash flow for the nine months ended September 30, 2024 was $868 million, compared to $2,352 million for the nine months ended September 30, 2023. The decrease in cash flow for the period year-over-year was driven mainly by the net impact of timing differences in government receivables and payables, including Medicare and Medicaid prepayments, risk corridor settlement activity, and timing differences in receipts and payments of provider payables. -MORE- Molina Healthcare, Inc. Reports Third Quarter 2024 Financial Results Page 3 October 23, 2024 2024 Guidance Premium revenue for the full year is unchanged and expected to be approximately $38 billion, an increase of approximately 17% from the full year 2023. Adjusted earnings per diluted share for the full year is unchanged and expected to be at least $23.50, representing approximately 13% growth over the full year 2023. Continued strong performance due to Marketplace, operating leverage, and higher net investment income are expected to offset the higher-than-expected trend in Medicaid and Medicare in the second half of the year. Conference Call Management will host a conference call and webcast to discuss Molina Healthcare’s third quarter results at 8:00 a.m. Eastern Time on Thursday, October 24, 2024. The number to call for the interactive teleconference is (877) 883-0383 and the confirmation number is 7014206. A telephonic replay of the conference call will be available through Thursday, October 31, 2024, by dialing (877) 344-7529 and entering confirmation number 5232318 . A live audio broadcast of this conference call will be available on Molina Healthcare’s investor relations website, investors.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 include, but are not limited to, statements regarding our business and financial performance, 2024 guidance and long-term growth targets, expected headwinds during the second half of 2024, and management’s plans and objectives for future operations and business strategy. 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, 2023, 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, 2024, to be filed with the SEC. 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 -MORE- Molina Healthcare, Inc. Reports Third Quarter 2024 Financial Results Page 4 October 23, 2024 forward-looking statements in this release represent the Company’s judgment as of October 23, 2024, 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. -MORE- Molina Healthcare, Inc. Reports Third Quarter 2024 Financial Results Page 5 October 23, 2024 MOLINA HEALTHCARE, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Nine Months Ended   September 30, September 30,   2024 2023 2024 2023   (In millions, except per-share amounts) Revenue: Premium revenue $ 9,694  $ 8,240  $ 28,644  $ 24,167  Premium tax revenue 508  176  1,103  517  Investment income 118  112  341  280  Other revenue 20  20  63  60  Total revenue 10,340  8,548  30,151  25,024  Operating expenses: Medical care costs 8,643  7,306  25,425  21,215  General and administrative expenses 676  608  2,078  1,817  Premium tax expenses 508  176  1,103  517  Depreciation and amortization 47  42  138  128  Other (1) 57  80  90  Total operating expenses 9,873  8,189  28,824  23,767  Operating income 467  359  1,327  1,257  Interest expense 29  27  84  82  Income before income tax expense 438  332  1,243  1,175  Income tax expense 112  87  315  300  Net income $ 326  $ 245  $ 928  $ 875  Net income per share – Diluted $ 5.65  $ 4.21  $ 15.97  $ 15.08  Diluted weighted average shares outstanding 57.7  58.1  58.1  58.1  -MORE- Molina Healthcare, Inc. Reports Third Quarter 2024 Financial Results Page 6 October 23, 2024 MOLINA HEALTHCARE, INC. CONSOLIDATED BALANCE SHEETS September 30, December 31, 2024 2023 Unaudited (Dollars in millions, except per-share amounts) ASSETS Current assets: Cash and cash equivalents $ 4,732  $ 4,848  Investments 4,482  4,259  Receivables 3,259  3,104  Prepaid expenses and other current assets 408  331  Total current assets 12,881  12,542  Property, equipment, and capitalized software, net 306  270  Goodwill and intangible assets, net 1,923  1,449  Restricted investments 289  261  Deferred income taxes, net 227  227  Other assets 132  143  Total assets $ 15,758  $ 14,892  LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Medical claims and benefits payable $ 4,732  $ 4,204  Amounts due government agencies 2,026  2,294  Accounts payable, accrued liabilities and other 1,215  1,252  Deferred revenue 364  418  Total current liabilities 8,337  8,168  Long-term debt 2,332  2,180  Finance lease liabilities 197  205  Other long-term liabilities 122  124  Total liabilities 10,988  10,677  Stockholders’ equity: Common stock, $0.001 par value, 150 million shares authorized; outstanding: 57 million shares at September 30, 2024, and 58 million at December 31, 2023 —  —  Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding —  —  Additional paid-in capital 453  410  Accumulated other comprehensive loss (9) (82) Retained earnings 4,326  3,887  Total stockholders’ equity 4,770  4,215  Total liabilities and stockholders’ equity $ 15,758  $ 14,892  -MORE- Molina Healthcare, Inc. Reports Third Quarter 2024 Financial Results Page 7 October 23, 2024 MOLINA HEALTHCARE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 2024 2023 (In millions) Operating activities: Net income $ 928  $ 875  Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 138  128  Deferred income taxes 14  (33) Share-based compensation 98  88  Other, net 8  3  Changes in operating assets and liabilities: Receivables (31) (132) Prepaid expenses and other current assets (6) (69) Medical claims and benefits payable 65  611  Amounts due government agencies (289) 377  Accounts payable, accrued liabilities and other (33) (137) Deferred revenue (53) 332  Income taxes 29  309  Net cash provided by operating activities 868  2,352  Investing activities: Purchases of investments (989) (1,295) Proceeds from sales and maturities of investments 871  670  Net cash paid in business combinations (344) (3) Purchases of property, equipment, and capitalized software (89) (89) Other, net 68  (2) Net cash used in investing activities (483) (719) Financing activities: Common stock purchases (500) —  Proceeds from borrowings under credit facility 300  —  Repayment of credit facility (150) —  Common stock withheld to settle employee tax obligations (57) (60) Other, net (7) (1) Net cash used in financing activities (414) (61) Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents (29) 1,572  Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period 4,908  4,048  Cash, cash equivalents, and restricted cash and cash equivalents at end of period $ 4,879  $ 5,620  -MORE- Molina Healthcare, Inc. Reports Third Quarter 2024 Financial Results Page 8 October 23, 2024 MOLINA HEALTHCARE, INC. UNAUDITED SEGMENT DATA (Dollars in millions) September 30, December 31, September 30, 2024 2023 2023 Ending Membership by Segment: Medicaid 4,941,000  4,542,000  4,757,000  Medicare 247,000  172,000  173,000  Marketplace 410,000  281,000  276,000  Total 5,598,000  4,995,000  5,206,000  Three Months Ended September 30, 2024 2023 Premium Revenue Medical Margin MCR (1) Premium Revenue Medical Margin MCR (1) Medicaid $ 7,668  $ 730  90.5  % $ 6,711  $ 752  88.8  % Medicare 1,367  142  89.6  1,032  78  92.4  Marketplace 659  179  73.0  497  104  78.9  Consolidated $ 9,694  $ 1,051  89.2  % $ 8,240  $ 934  88.7  % Nine Months Ended September 30, 2024 2023 Premium Revenue Medical Margin MCR (1) Premium Revenue Medical Margin MCR (1) Medicaid $ 22,538  $ 2,188  90.3  % $ 19,545  $ 2,242  88.5  % Medicare 4,250  522  87.7  3,122  317  89.8  Marketplace 1,856  509  72.6  1,500  393  73.8  Consolidated $ 28,644  $ 3,219  88.8  % $ 24,167  $ 2,952  87.8  % (1) The MCR represents medical costs as a percentage of premium revenue. -MORE- Molina Healthcare, Inc. Reports Third Quarter 2024 Financial Results Page 9 October 23, 2024 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, 2024 2023 Unaudited Medical claims and benefits payable, beginning balance $ 4,204  $ 3,528  Components of medical care costs related to: Current year 26,050  21,573  Prior year (625) (358) Total medical care costs 25,425  21,215  Payments for medical care costs related to: Current year 22,172  18,228  Prior year 3,215  2,707  Total paid 25,387  20,935  Acquired balances, net of post-acquisition adjustments 463  96  Change in non-risk and other payables 27  331  Medical claims and benefits payable, ending balance $ 4,732  $ 4,235  Days in Claims Payable (1) 48  51  __________________ (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. -MORE- Molina Healthcare, Inc. Reports Third Quarter 2024 Financial Results Page 10 October 23, 2024 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, 2024 2023 2024 2023 Amount Per Diluted Share Amount Per Diluted Share Amount Per Diluted Share Amount Per Diluted Share GAAP Net income $ 326  $ 5.65  $ 245  $ 4.21  $ 928  $ 15.97  $ 875  $ 15.08  Adjustments: Amortization of intangible assets $ 21  $ 0.35  $ 20  $ 0.36  $ 62  $ 1.07  $ 63  $ 1.09  Acquisition-related expenses (1) 11  0.19  2  0.04  46  0.79  4  0.07  Other (2) (4) (0.07) 41  0.70  16  0.27  41  0.70  Subtotal, adjustments 28  0.47  63  1.10  124  2.13  108  1.86  Income tax effect (7) (0.11) (14) (0.26) (30) (0.51) (25) (0.44) Adjustments, net of tax 21  0.36  49  0.84  94  1.62  83  1.42  Adjusted net income $ 347  $ 6.01  $ 294  $ 5.05  $ 1,022  $ 17.59  $ 958  $ 16.50  __________________ (1) Reflects non-recurring costs associated with acquisitions, including various transaction and certain integration costs. (2) The nine months ended September 30, 2024 includes non-recurring litigation and one-time termination benefits. The 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. -MORE- Molina Healthcare, Inc. Reports Third Quarter 2024 Financial Results Page 11 October 23, 2024 MOLINA HEALTHCARE, INC. RECONCILIATION OF UNAUDITED NON-GAAP FINANCIAL MEASURES (CONTINUED) 2024 GUIDANCE Amount Per Diluted Share (2) GAAP Net income $ 1,250  $ 21.59  Adjustments: Amortization of intangible assets 83  1.43  Acquisition-related expenses 49  0.86  Other 16  0.27  Subtotal, adjustments 148  2.56  Income tax effect (1) (38) (0.65) Adjustments, net of tax 110  1.91  Adjusted net income $ 1,360  $ 23.50  __________________ (1) Income tax effect calculated at the statutory tax rate of approximately 25.5%. (2) Computations assume approximately 57.9 million diluted weighted average shares outstanding. -END-