News Releases
Three Months Ended | ||||||||
March 31 | ||||||||
(In millions, except per share amounts) | ||||||||
|
2020 |
|
2019 |
Chg |
||||
Net revenue |
$ |
1,794.3 |
$ |
1,739.5 |
3.2% |
|||
Net income |
$ |
18.3 |
$ |
0.4 |
4134.3% |
|||
Segment profit [1] |
$ |
74.8 |
$ |
45.6 |
64.3% |
|||
Adjusted net income [1] |
$ |
28.6 |
$ |
9.6 |
199.3% |
|||
Earnings per share |
$ |
0.73 |
$ |
0.02 |
3550.0% |
|||
Adjusted earnings per share [1] |
$ |
1.15 |
$ |
0.40 |
187.5% |
[1] Refer to the Basis of Presentation for a discussion of non-GAAP financial measures. |
Highlights:
- Net revenue increased 3.2 percent over the first quarter of 2019 to
$1.8 billion . - Net income increased 4134.3 percent over the first quarter of 2019 to
$18.3 million . - Segment profit increased 64.3 percent over the first quarter of 2019 to
$74.8 million . - Adjusted net income increased 199.3 percent over the first quarter of 2019 to
$28.6 million . - Unrestricted cash and investments were
$281.2 million as ofMarch 31, 2020 . Approximately$123.3 million of the unrestricted cash and investments atMarch 31, 2020 is related to excess capital and undistributed earnings held at regulated entities. - The Company is maintaining its full year 2020 earnings guidance.
- On
March 18, 2020 , the Company announced the offering of several services and resources in response to the spread of the novel coronavirus (COVID-19) including the digital cognitive behavioral therapy (DCBT) app, RESTORE®, at no cost for individuals experiencing sleep difficulty and insomnia. - On
March 20, 2020 , the Company expanded telehealth services and implemented additional initiatives to help support clients during the COVID-19 pandemic. - On
April 10, 2020 , the Company opened a free national 24-hour crisis line for all first responders and healthcare workers who are serving on the front lines battling the coronavirus pandemic. - On
April 30, 2020 , the Company and Molina Healthcare, Inc. entered into definitive agreements to divest Magellan Complete Care.
“Magellan Health has a vital, ongoing and shared responsibility in protecting the mental and physical health of millions of people,” said
Divestiture of Magellan Complete Care
On
“The sale of Magellan Complete Care tightens our focus, strengthens our balance sheet and creates a new, multi-faceted strategic relationship with Molina Healthcare, a Fortune 500 company with a strong reputation for serving states and their beneficiaries’ health care needs,” said Fasola. “This divestiture will provide Magellan with additional financial flexibility to invest in our remaining businesses and supports our vision to become the leading independent payor services company offering behavioral health, specialty health, and pharmacy management solutions for high cost, chronic populations on a carve-out or integrated basis.”
Net Revenue
Net revenue for the first quarter ended
Segment Profit
Segment profit was
- Healthcare segment profit was
$62.1 million , which represents an increase of$17.1 million versus the first quarter of 2019. This increase is driven by favorable prior period development and utilization results, particularly in MCC ofVirginia andNew York , as well as reinstatement of the Health Insurer Fee. - Pharmacy Management segment profit was
$20.9 million , which was an increase of$12.6 million from the first quarter of 2019. This year-over-year increase was primarily driven by improved gross margins from our PBM business as well strong performance within our specialty drug management portfolio. - Corporate costs inclusive of eliminations, but excluding stock compensation expense, totaled
$8.2 million , compared to$7.7 million in the prior year’s quarter.
Cash Flow & Balance Sheet
Cash flow from operations for the quarter ended
As of
“Magellan posted strong first quarter results and while COVID-19 presents uncertainties, our business fundamentals are on track,” said
Earnings Conference Call
Management will discuss the Company’s first quarter results on a conference call scheduled for
Basis of Presentation
In addition to results determined under Generally Accepted Accounting Principles (GAAP), Magellan provides certain non-GAAP financial measures that management believes are useful in assessing the Company’s performance. Following is a description of these important non-GAAP measures.
Segment profit is equal to net revenue less the sum of cost of care, cost of goods sold, direct service costs and other operating expenses, and includes income from unconsolidated subsidiaries, but excludes segment profit or loss from non-controlling interests held by other parties, stock compensation expense, special charges or benefits, as well as changes in the fair value of contingent consideration recorded in relation to acquisitions.
Adjusted net income and adjusted earnings per share reflect certain adjustments made for acquisitions completed after
Included in the tables issued with this press release are the reconciliations from GAAP measures to the corresponding non-GAAP measures.
About
Forward-Looking Statements
This press release, and oral statements made in connection with this release, include statements which may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “may,” “should,” “could,” “estimate,” “intend” and other similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to, express or implied forward-looking statements relating to 2020 guidance for net revenue, income before income taxes, net income, earnings per share, segment profit, adjusted net income, and adjusted earnings per share; growth and margin opportunities and initiatives; business environment, long term opportunities and strategy; transformation, process improvement and innovation initiatives; our expectations regarding the benefits to the Company of the transaction to sell the Magellan Complete Care business (the “transaction”), the ability of the Company to obtain regulatory approvals for the transaction and to satisfy other closing conditions, the anticipated timing of the closing of the transaction, the benefits to the Company of the commercial agreements entered into in connection with the transaction, the ability of the Company to use the proceeds of the transaction to fund future growth initiatives or otherwise create value for the Company, the ability of the Company to strategically focus on enhancing its behavioral and specialty health business, as well as the continued growth of its pharmacy business, and the ability of the Company to achieve our strategic and growth goals. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Factors that could cause actual results to differ materially from those expressed or implied include the effectiveness of business continuity plans during the COVID-19 pandemic, the possible election of certain of the Company’s customers to manage the healthcare services of their members directly; changes in rates paid to and/or by the Company by customers and/or providers; higher utilization of healthcare services by the Company’s members; risks and uncertainties associated with the pharmacy benefits management industry; delays, higher costs or inability to implement new business or other Company initiatives; the impact of changes in the contracting model for Medicaid contracts; termination or non-renewal of customer contracts; the impact of new or amended laws or regulations; governmental inquiries; litigation; competition; operational issues; healthcare reform; and general business conditions. Additional factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, the risks discussed in the “Risk Factors” section included within the Company’s most recent Annual Report on Form 10-K, its Quarterly Report on Form 10-Q for the quarter ended
CONSOLIDATED BALANCE SHEETS | |||||||||
(In thousands) | |||||||||
December 31, 2019 | March 31, 2020 | ||||||||
(unaudited) | |||||||||
ASSETS | |||||||||
Current Assets: | |||||||||
Cash and cash equivalents |
$ |
325,249 |
|
$ |
383,963 |
|
|||
Accounts receivable, net |
|
890,065 |
|
|
923,716 |
|
|||
Short-term investments |
|
334,489 |
|
|
350,192 |
|
|||
Pharmaceutical inventory |
|
44,962 |
|
|
42,333 |
|
|||
Other current assets |
|
78,278 |
|
|
106,820 |
|
|||
Total Current Assets |
|
1,673,043 |
|
|
1,807,024 |
|
|||
Property and equipment, net |
|
138,422 |
|
|
143,260 |
|
|||
Long-term investments |
|
10,668 |
|
|
6,289 |
|
|||
Deferred income taxes |
|
1,840 |
|
|
698 |
|
|||
Other long-term assets |
|
82,700 |
|
|
96,389 |
|
|||
|
1,018,156 |
|
|
1,018,156 |
|
||||
Other intangible assets, net |
|
167,344 |
|
|
153,095 |
|
|||
Total Assets |
$ |
3,092,173 |
|
$ |
3,224,911 |
|
|||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Current Liabilities: | |||||||||
Accounts payable |
$ |
88,415 |
|
$ |
104,359 |
|
|||
Accrued liabilities |
|
284,024 |
|
|
320,826 |
|
|||
Medical claims payable |
|
409,533 |
|
|
392,141 |
|
|||
Other medical liabilities |
|
124,684 |
|
|
128,454 |
|
|||
Current debt, finance lease and deferred financing obligations |
|
3,491 |
|
|
84,402 |
|
|||
Total Current Liabilities |
|
910,147 |
|
|
1,030,182 |
|
|||
Long-term debt, finance lease and deferred financing obligations |
|
679,125 |
|
|
647,624 |
|
|||
Deferred income taxes |
|
17,034 |
|
|
23,235 |
|
|||
Tax contingencies |
|
14,841 |
|
|
16,021 |
|
|||
Deferred credits and other long-term liabilities |
|
73,243 |
|
|
76,246 |
|
|||
Total Liabilities |
|
1,694,390 |
|
|
1,793,308 |
|
|||
Stockholders’ Equity: | |||||||||
Ordinary common stock |
|
543 |
|
|
546 |
|
|||
Additional paid-in capital |
|
1,386,616 |
|
|
1,402,797 |
|
|||
Retained earnings |
|
1,475,207 |
|
|
1,493,044 |
|
|||
Accumulated other comprehensive income (loss) |
|
144 |
|
|
(57 |
) |
|||
Ordinary common stock in treasury, at cost |
|
(1,464,727 |
) |
|
(1,464,727 |
) |
|||
Total Stockholders’ Equity |
|
1,397,783 |
|
|
1,431,603 |
|
|||
Total Liabilities and Stockholders’ Equity |
$ |
3,092,173 |
|
$ |
3,224,911 |
|
|||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||
(Unaudited) | ||||||||||
(In thousands, except per share amounts) | ||||||||||
Three Months Ended | ||||||||||
|
2019 |
|
|
2020 |
|
|||||
Net revenue: | ||||||||||
Managed care and other |
$ |
1,223,979 |
|
$ |
1,272,936 |
|
||||
PBM |
|
515,510 |
|
|
521,371 |
|
||||
Total net revenue |
|
1,739,489 |
|
|
1,794,307 |
|
||||
Costs and expenses: | ||||||||||
Cost of care |
|
941,961 |
|
|
951,642 |
|
||||
Cost of goods sold |
|
489,793 |
|
|
486,142 |
|
||||
Direct service costs and other operating expenses (1)(2) |
|
271,924 |
|
|
287,731 |
|
||||
Depreciation and amortization |
|
30,708 |
|
|
28,684 |
|
||||
Interest expense |
|
9,107 |
|
|
9,029 |
|
||||
Interest and other income |
|
(4,974 |
) |
|
(3,759 |
) |
||||
Total costs and expenses |
|
1,738,519 |
|
|
1,759,469 |
|
||||
Income before income taxes |
|
970 |
|
|
34,838 |
|
||||
Provision for income taxes |
|
539 |
|
|
16,588 |
|
||||
Net income |
$ |
431 |
|
$ |
18,250 |
|
||||
Weighted average number of common shares outstanding — basic |
|
23,946 |
|
|
24,728 |
|
||||
Weighted average number of common shares outstanding — diluted |
|
24,213 |
|
|
24,869 |
|
||||
Net income per common share — basic |
$ |
0.02 |
|
$ |
0.74 |
|
||||
Net income per common share — diluted |
$ |
0.02 |
|
$ |
0.73 |
|
||||
Net income |
$ |
431 |
|
$ |
18,250 |
|
||||
Other comprehensive income: | ||||||||||
Unrealized gains (losses) on available-for-sale securities (3) |
|
320 |
|
|
(201 |
) |
||||
Comprehensive income |
$ |
751 |
|
$ |
18,049 |
|
(1) Includes stock compensation expense of |
||||||
(2) Includes changes in fair value of contingent consideration of |
||||||
(3) Net of income tax provision (benefit) of |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
(Unaudited) | |||||||||
(In thousands) | |||||||||
Three Months Ended |
|||||||||
|
|||||||||
|
2019 |
|
|
|
|
2020 |
|
||
Cash flows from operating activities: | |||||||||
Net income |
$ |
431 |
|
$ |
18,250 |
|
|||
Adjustments to reconcile net income to net cash from operating activities: | |||||||||
Depreciation and amortization |
|
30,708 |
|
|
28,684 |
|
|||
Non-cash interest expense |
|
326 |
|
|
585 |
|
|||
Non-cash stock compensation expense |
|
9,607 |
|
|
6,057 |
|
|||
Non-cash income tax (benefit) provision |
|
(250 |
) |
|
7,802 |
|
|||
Non-cash amortization on investments |
|
(192 |
) |
|
325 |
|
|||
Changes in assets and liabilities, net of effects from acquisitions of businesses: | |||||||||
Accounts receivable, net |
|
(23,804 |
) |
|
(33,291 |
) |
|||
Pharmaceutical inventory |
|
(6,333 |
) |
|
2,629 |
|
|||
Other assets |
|
(10,835 |
) |
|
(41,862 |
) |
|||
Accounts payable and accrued liabilities |
|
20,399 |
|
|
52,746 |
|
|||
Medical claims payable and other medical liabilities |
|
19,671 |
|
|
(13,622 |
) |
|||
Contingent consideration |
|
(1,609 |
) |
|
- |
|
|||
Tax contingencies |
|
83 |
|
|
925 |
|
|||
Deferred credits and other long-term liabilities |
|
(2,889 |
) |
|
3,003 |
|
|||
Other |
|
111 |
|
|
(505 |
) |
|||
Net cash provided by operating activities |
|
35,424 |
|
|
31,726 |
|
|||
Cash flows from investing activities: | |||||||||
Capital expenditures |
|
(12,642 |
) |
|
(15,719 |
) |
|||
Acquisitions and investments in businesses, net of cash acquired |
|
(320 |
) |
|
(369 |
) |
|||
Purchases of investments |
|
(172,766 |
) |
|
(164,311 |
) |
|||
Proceeds from maturities and sales of investments |
|
128,748 |
|
|
152,394 |
|
|||
Net cash used in investing activities |
|
(56,980 |
) |
|
(28,005 |
) |
|||
Cash flows from financing activities: | |||||||||
Proceeds from borrowings on revolving line of credit |
|
- |
|
|
80,000 |
|
|||
Payments to acquire treasury stock |
|
(4,124 |
) |
|
- |
|
|||
Proceeds from exercise of stock options |
|
2,045 |
|
|
10,903 |
|
|||
Payments on debt, finance lease and deferred financing obligations |
|
(7,323 |
) |
|
(34,774 |
) |
|||
Payments on contingent consideration |
|
(6,247 |
) |
|
- |
|
|||
Other |
|
(1,702 |
) |
|
(1,136 |
) |
|||
Net cash (used in) provided by financing activities |
|
(17,351 |
) |
|
54,993 |
|
|||
Net (decrease) increase in cash and cash equivalents |
|
(38,907 |
) |
|
58,714 |
|
|||
Cash and cash equivalents at beginning of period |
|
272,308 |
|
|
325,249 |
|
|||
Cash and cash equivalents at end of period |
$ |
233,401 |
|
$ |
383,963 |
|
CONSOLIDATED OPERATING RESULTS BY BUSINESS SEGMENT | ||||||||||
(Unaudited) | ||||||||||
(In thousands) | ||||||||||
Three Months Ended |
||||||||||
|
||||||||||
|
2019 |
|
|
|
|
2020 |
|
|||
Healthcare | ||||||||||
Managed care and other revenue |
$ |
1,164,253 |
|
$ |
1,208,674 |
|
||||
Cost of care |
|
(941,961 |
) |
|
(951,642 |
) |
||||
Direct service costs and other |
|
(179,190 |
) |
|
(196,909 |
) |
||||
Stock compensation expense (1) |
|
1,750 |
|
|
2,021 |
|
||||
Changes in fair value of contingent consideration (1) |
|
144 |
|
|
- |
|
||||
Healthcare segment profit |
|
44,996 |
|
|
62,144 |
|
||||
Pharmacy Management | ||||||||||
Managed care and other revenue |
|
59,895 |
|
|
64,435 |
|
||||
PBM revenue |
|
556,565 |
|
|
573,778 |
|
||||
Cost of goods sold |
|
(530,207 |
) |
|
(537,574 |
) |
||||
Direct service costs and other |
|
(79,635 |
) |
|
(81,866 |
) |
||||
Stock compensation expense (1) |
|
1,672 |
|
|
2,107 |
|
||||
Pharmacy Management segment profit |
|
8,290 |
|
|
20,880 |
|
||||
Corporate and Elimination (2) | ||||||||||
Managed care and other revenue |
|
(169 |
) |
|
(173 |
) |
||||
PBM revenue |
|
(41,055 |
) |
|
(52,407 |
) |
||||
Cost of goods sold |
|
40,414 |
|
|
51,432 |
|
||||
Direct service costs and other |
|
(13,099 |
) |
|
(8,956 |
) |
||||
Stock compensation expense (1) |
|
6,185 |
|
|
1,929 |
|
||||
Corporate and Elimination |
|
(7,724 |
) |
|
(8,175 |
) |
||||
Consolidated | ||||||||||
Managed care and other revenue |
|
1,223,979 |
|
|
1,272,936 |
|
||||
PBM revenue |
|
515,510 |
|
|
521,371 |
|
||||
Cost of care |
|
(941,961 |
) |
|
(951,642 |
) |
||||
Cost of goods sold |
|
(489,793 |
) |
|
(486,142 |
) |
||||
Direct service costs and other |
|
(271,924 |
) |
|
(287,731 |
) |
||||
Stock compensation expense (1) |
|
9,607 |
|
|
6,057 |
|
||||
Changes in fair value of contingent consideration (1) |
|
144 |
|
|
- |
|
||||
Consolidated segment profit |
$ |
45,562 |
|
$ |
74,849 |
|
||||
Reconciliation of income before income taxes to segment profit: | ||||||||||
Income before income taxes |
$ |
970 |
|
$ |
34,838 |
|
||||
Stock compensation expense |
|
9,607 |
|
|
6,057 |
|
||||
Changes in fair value of contingent consideration |
|
144 |
|
|
- |
|
||||
Depreciation and amortization |
|
30,708 |
|
|
28,684 |
|
||||
Interest expense |
|
9,107 |
|
|
9,029 |
|
||||
Interest and other income |
|
(4,974 |
) |
|
(3,759 |
) |
||||
Segment profit |
$ |
45,562 |
|
$ |
74,849 |
|
(1) Stock compensation expense, changes in the fair value of contingent consideration recorded in relation to acquisitions and impairment of intangible assets are included in direct service costs and other operating expenses; however, these amounts are excluded from the computation of segment profit. | ||||||
(2) Healthcare subcontracts with Pharmacy Management to provide pharmacy benefits management services for certain of Healthcare’s customers. In addition, Pharmacy Management provides pharmacy benefits management for the Company’s employees covered under its medical plan. As such, revenue, cost of goods sold and direct service costs and other related to these arrangements are eliminated. |
NON-GAAP MEASURES | ||||||||||
(Unaudited) | ||||||||||
(In thousands, except per share amounts) | ||||||||||
Three Months Ended |
||||||||||
|
||||||||||
|
2019 |
|
|
|
|
2020 |
|
|||
Net income |
$ |
431 |
|
$ |
18,250 |
|
||||
Adjusted for acquisitions starting in 2013 | ||||||||||
Changes in fair value of contingent consideration |
|
144 |
|
|
- |
|
||||
Amortization of acquired intangibles |
|
12,272 |
|
|
14,191 |
|
||||
Tax impact |
|
(3,282 |
) |
|
(3,816 |
) |
||||
Adjusted net income |
$ |
9,565 |
|
$ |
28,625 |
|
||||
Net income per common share—diluted |
$ |
0.02 |
|
$ |
0.73 |
|
||||
Adjusted for acquisitions starting in 2013 | ||||||||||
Changes in fair value of contingent consideration |
|
0.01 |
|
|
- |
|
||||
Amortization of acquired intangibles |
|
0.50 |
|
|
0.57 |
|
||||
Tax impact |
|
(0.13 |
) |
|
(0.15 |
) |
||||
Adjusted earnings per share |
$ |
0.40 |
|
$ |
1.15 |
|
(MGLN-GEN)
View source version on businesswire.com: https://www.businesswire.com/news/home/20200511005228/en/
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