News Release

LONG BEACH, Calif.--(BUSINESS WIRE)--Jul. 31, 2018-- Molina Healthcare, Inc. (NYSE: MOH):

• Net income of $3.02 per diluted share on a GAAP basis in the second quarter of 2018, compared with $1.64 per diluted share in the first quarter of 2018
• Second quarter 2018 results include a net benefit of $0.83 per diluted share for non-run rate items, primarily relating to the 2017 Marketplace risk adjustment
• Premium revenue increases $191 million, or 4.4%, in the second quarter of 2018 compared with the first quarter of 2018
• Medical care ratio of 85.3% in the quarter
• General and administrative expense ratio of 6.9% in the quarter
• Net profit margin of 4.1% in the quarter and 3.2% year to date
• 2018 guidance increases by $3.00 per diluted share at the midpoint to a range of $7.15 - $7.35 net income per diluted share on a GAAP basis
• 2018 guidance includes the net benefit of $0.96 per diluted share for the non-run rate items recorded in the first half of the year

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the second quarter of 2018.

“Our second quarter results are a strong indication that the early stages of our margin recovery and sustainability plan are working,” said Joe Zubretsky, President and Chief Executive Officer. “Our focus on managed care fundamentals and a more rigorous performance management process is reflected in our improved earnings.”

We believe that the sequential comparison of our 2018 second quarter performance with our 2018 first quarter performance is the most useful indicator of our business progress. Significant items impacting the quarter are presented in a table later in this press release.

Second Quarter of 2018 Compared With First Quarter of 2018

Net income increased to $202 million, from $107 million in the first quarter of 2018. Net income per diluted share increased to $3.02, from $1.64 in the first quarter of 2018.

Overall, the medical care ratio improved to 85.3%, from 86.1% in the first quarter of 2018. Excluding the combined benefit of the 2017 Marketplace risk adjustment and cost sharing reduction (CSR) reimbursement, the medical care ratio would have been 87.0% in the second quarter of 2018, compared with 87.2% in the first quarter of 2018. The sequential improvement in the overall medical care ratio was due to a decrease in the Medicaid medical care ratio partially offset by a seasonally higher Marketplace medical care ratio.

• The Medicaid medical care ratio decreased to 89.8%, from 90.8% in the first quarter of 2018. Improved performance at the Washington, California, Texas, New Mexico and Illinois health plans, partially offset by a decline in performance at the Ohio and Florida health plans, drove the decrease in the medical care ratio for Medicaid.
• The Marketplace medical care ratio increased to 57.4%, from 50.6% in the first quarter of 2018. Excluding the combined net benefit of the 2017 risk adjustment and CSR, the Marketplace medical care ratio would have been 68.4% in the second quarter of 2018, compared with 63.5% in the first quarter of 2018.

The general and administrative (G&A) expense ratio decreased to 6.9%, from 7.6% in the first quarter of 2018, due to increased revenue and continuing G&A cost containment. Excluding the impact of Marketplace broker commissions and exchange fees in both periods, the G&A ratio decreased to 6.2%, from 6.8% in the first quarter of 2018.

Renewal of Medicaid Contracts

Year to date in 2018, we renewed Medicaid contracts in Washington, Florida and Puerto Rico as follows:

• In May 2018, our Washington health plan was selected to negotiate and enter into a managed care contract for the eight remaining regions of the state’s Apple Health Integrated Managed Care program, in addition to the two regions previously awarded to us. As of June 30, 2018, we served approximately 742,000 Medicaid members in Washington.
• In June 2018, our Florida health plan was awarded Medicaid Managed Care contracts in Regions 8 and 11 of the Florida Statewide Medicaid Managed Care Invitation to Negotiate, beginning in 2019. As of June 30, 2018, we served approximately 96,000 Medicaid members in those regions.
• In July 2018, our Puerto Rico health plan was selected to be one of the organizations to administer the Commonwealth’s new Medicaid Managed Care contract. Services under the new contract, currently expected to begin on November 1, 2018, would cover the entire island. As of June 30, 2018, we served approximately 326,000 Medicaid members in the East and Southwest regions of Puerto Rico.

Capital Plan Progress

In the second quarter of 2018, we repaid $300 million outstanding under the revolving credit facility. In addition, we repaid $96 million aggregate principal amount of our 1.125% cash convertible senior notes due 2020 and entered into privately negotiated termination agreements to terminate the respective portions of the call options and warrants. Year to date, we have reduced the principal amount of outstanding debt by $493 million.

Sale of Molina Medicaid Solutions Segment

In June 2018, we entered into a definitive agreement to sell Molina Medicaid Solutions (MMS) to DXC Technology Company. The divestiture, expected to close in the third quarter of 2018, is subject to the satisfaction of customary closing conditions and the receipt of certain third party consents and regulatory approvals. We expect the net cash selling price for the equity interests of MMS to approximate $220 million after certain adjustments.

Second Quarter of 2018 Compared With Second Quarter of 2017

Net income for the second quarter of 2018 was $202 million, compared with a net loss of $230 million for the second quarter of 2017. Net income per diluted share was $3.02 for the second quarter of 2018 compared with net loss per diluted share of $4.10 reported for the second quarter of 2017. In the second quarter of 2017, we recorded significant medical care costs relating to prior year dates of service in excess of historical expectations, and Marketplace-related premium deficiency reserves and changes in estimates relating to prior year dates of service. In addition, we recorded significant impairment and restructuring charges.

2018 Revised Guidance

The following table summarizes 2018 Revised Guidance ⁽¹⁾:

	Premium revenue					~ $17.5B
	Service revenue					~ $475M
	Premium tax revenue					~ $415M
	Health insurer fees reimbursed					~ $325M
	Investment income and other revenue					~ $125M
	Total revenue					~ $18.8B
	Medical care costs					~ $15.2B
	Medical care ratio (2)					~ 87%
	Cost of service revenue					~ $430M
	General and administrative expenses					~ $1.4B
	G&A ratio (3)					~ 7.4%
	Premium tax expenses					~ $415M
	Health insurer fees					~ $345M
	Depreciation and amortization					~ $100M
	Restructuring and separation costs					~ $30M
	Interest expense and other income, net					~ $140M
	Income before income taxes					$730M - $745M
	Net income					$471M - $484M
	EBITDA (4)					$968M - $985M
	Effective tax rate					35% - 36%
	Net profit margin (3)					2.5% - 2.6%
	Diluted weighted average shares					~ 65.9M
	Net income per share					$7.15 - $7.35
	Adjusted net income per share (4)					$7.39 - $7.59
	End-of-year Marketplace membership					354,000
	End-of-year Medicaid and Medicare membership					3,569,000

__________________
(1)		All amounts are estimates; actual results may differ materially. See the Company’s risk factors as discussed in its 2017 Form 10-K and other filings and the statements below in this press release after the heading “Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995.”
(2)		Medical care ratio represents medical care costs as a percentage of premium revenue.
(3)		G&A ratio represents general and administrative expenses as a percentage of total revenue. Net profit margin represents net income as a percentage of total revenue.
(4)		See reconciliation of non-GAAP financial measures at the end of this release.

ConferenceCall

Management will host a conference call and webcast to discuss Molina Healthcare’s second quarter 2018 results at 8:00 a.m. Eastern time on Wednesday, August 1, 2018. The number to call for the interactive teleconference is (877) 883-0383 and entering confirmation number 7567890. A telephonic replay of the conference call will be available through Wednesday, August 8, 2018, by dialing (877) 344-7529 and entering confirmation number 10121865. 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 health care services under the Medicaid and Medicare programs and through the state insurance marketplaces. Through its locally operated health plans, Molina Healthcare served approximately 4.1 million members as of June 30, 2018. 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 2018 revised 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 known risks and uncertainties include, but are not limited to, the following:

• the success of the Company’s profit improvement and maintenance initiatives, including the timing and amounts of the benefits realized, and administrative and medical cost savings achieved;
• the numerous political and market-based uncertainties associated with the Affordable Care Act (the “ACA”) or “Obamacare;”
• the market dynamics surrounding the ACA Marketplaces, including but not limited to uncertainties associated with risk adjustment requirements, the potential for disproportionate enrollment of higher acuity members, the discontinuation of premium tax credits, and the adequacy of agreed rates;
• subsequent adjustments to reported premium revenue based upon subsequent developments or new information, including changes to estimated amounts payable or receivable related to Marketplace risk adjustment;
• effective management of the Company’s medical costs;
• the Company’s ability to predict with a reasonable degree of accuracy utilization rates, including utilization rates associated with seasonal flu patterns or other newly emergent diseases;
• significant budget pressures on state governments and their potential inability to maintain current rates, to implement expected rate increases, or to maintain existing benefit packages or membership eligibility thresholds or criteria;
• the full reimbursement of the ACA health insurer fee, or HIF;
• the success of the Company’s efforts to retain existing or awarded government contracts, including those in New Mexico and Texas, and those for Regions 8 and 11 in Florida, including the success of any protest filings or defenses;
• the Company’s ability to manage its operations, including maintaining and creating adequate internal systems and controls relating to authorizations, approvals, provider payments, and the overall success of its care management initiatives;
• the Company’s ability to consummate and realize benefits from divestitures and acquisitions, including the timely closing of the MMS divestiture;
• the Company’s receipt of adequate premium rates to support increasing pharmacy costs, including costs associated with specialty drugs and costs resulting from formulary changes that allow the option of higher-priced non-generic drugs;
• the Company’s ability to operate profitably in an environment where the trend in premium rate increases lags behind the trend in increasing medical costs;
• the interpretation and implementation of federal or state medical cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit sharing arrangements, and risk adjustment provisions and requirements;
• the Company’s estimates of amounts owed for such cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit-sharing arrangements, and risk adjustment provisions;
• the Medicaid expansion medical cost corridors in California, New Mexico, and Washington, and any other retroactive adjustment to revenue where methodologies and procedures are subject to interpretation or dependent upon information about the health status of participants other than Molina members;
• the interpretation and implementation of at-risk premium rules and state contract performance requirements regarding the achievement of certain quality measures, and the Company’s ability to recognize revenue amounts associated therewith;
• cyber-attacks or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;
• the success of the Company’s health plan in Puerto Rico, including the resolution of the debt crisis and the effect of the PROMESA law, and the impact of any future significant weather events;
• the success and renewal of the Company’s duals demonstration programs in California, Illinois, Michigan, Ohio, South Carolina, and Texas;
• the accurate estimation of incurred but not reported or paid medical costs across the Company’s health plans;
• efforts by states to recoup previously paid and recognized premium amounts;
• complications, member confusion, or enrollment backlogs related to the annual renewal of Medicaid coverage;
• government audits and reviews, or potential investigations, and any fine, sanction, enrollment freeze, monitoring program, or premium recovery that may result therefrom;
• changes with respect to the Company’s provider contracts and the loss of providers;
• approval by state regulators of dividends and distributions by the Company’s health plan subsidiaries;
• changes in funding under the Company’s contracts as a result of regulatory changes, programmatic adjustments, or other reforms;
• high dollar claims related to catastrophic illness;
• the favorable resolution of litigation, arbitration, or administrative proceedings, including litigation involving the ACA to which we ourselves are not a direct party;
• the relatively small number of states in which we operate health plans, including the greater scale and revenues of the Company’s California, Ohio, Texas, and Washington health plans;
• the availability of adequate financing on acceptable terms to fund and capitalize the Company’s expansion and growth, repay the Company’s outstanding indebtedness at maturity and meet its liquidity needs, including the interest expense and other costs associated with such financing;
• the Company’s failure to comply with the financial or other covenants in its credit agreements or the indentures governing its outstanding notes;
• the sufficiency of the Company’s funds on hand to pay the amounts due upon conversion or maturity of its outstanding notes;
• the failure of a state in which we operate to renew its federal Medicaid waiver;
• changes generally affecting the managed care or Medicaid management information systems industries;
• increases in government surcharges, taxes, and assessments, including but not limited to the deductibility of certain compensation costs;
• newly emergent viruses or widespread epidemics, public catastrophes or terrorist attacks, and associated public alarm;
• the unexpected loss of the leadership of one or more of our senior executives;
• increasing competition and consolidation in the Medicaid industry;

and numerous other risk factors, including those discussed in the Company’s periodic reports and filings with the Securities and Exchange Commission. 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 July 31, 2018, and the Company disclaims any obligation to update any forward-looking statements to conform the statement to actual results or changes in its expectations.

MOLINA HEALTHCARE, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
			Three Months Ended June 30,										Six Months Ended June 30,
			2018					2017					2018					2017
			(Dollar amounts in millions, except per-share amounts)
Revenue:
Premium revenue			$	4,514				$	4,740				$	8,837				$	9,388
Service revenue			127					129					261					260
Premium tax revenue			106					114					210					225
Health insurer fees reimbursed			104					—					165					—
Investment income and other revenue			32					16					56					30
Total revenue			4,883					4,999					9,529					9,903
Operating expenses:
Medical care costs			3,850					4,491					7,572					8,602
Cost of service revenue			118					124					238					246
General and administrative expenses			335					405					687					844
Premium tax expenses			106					114					210					225
Health insurer fees			99					—					174					—
Depreciation and amortization			25					37					51					76
Impairment losses			—					72					—					72
Restructuring and separation costs			8					43					33					43
Total operating expenses			4,541					5,286					8,965					10,108
Operating income (loss)			342					(287		)			564					(205		)
Other expenses (income), net:
Interest expense			32					27					65					53
Other expense (income), net			5					—					15					(75		)
Total other expenses (income), net			37					27					80					(22		)
Income (loss) before income tax expense (benefit)			305					(314		)			484					(183		)
Income tax expense (benefit)			103					(84		)			175					(30		)
Net income (loss)			$	202				$	(230	)			$	309				$	(153	)
Net income (loss) per diluted share			$	3.02				$	(4.10	)			$	4.68				$	(2.74	)
Diluted weighted average shares outstanding			66.7					56.2					66.0					56.1
Operating Statistics:
Medical care ratio			85.3		%			94.8		%			85.7		%			91.6		%
G&A ratio			6.9		%			8.1		%			7.2		%			8.5		%
Premium tax ratio			2.3		%			2.4		%			2.3		%			2.3		%
Effective income tax rate			33.8		%			26.8		%			36.2		%			16.0		%
Net profit (loss) margin			4.1		%			(4.6		)%			3.2		%			(1.5		)%

MOLINA HEALTHCARE, INC. UNAUDITED CONSOLIDATED BALANCE SHEETS
			June 30,					December 31,
			2018					2017
			(In millions, except per-share data)
ASSETS
Current assets:
Cash and cash equivalents			$	3,392				$	3,186
Investments			2,176					2,524
Restricted investments			80					169
Receivables			1,148					871
Prepaid expenses and other current assets			344					239
Derivative asset			657					522
Assets held for sale			230					—
Total current assets			8,027					7,511
Property, equipment, and capitalized software, net			276					342
Goodwill and intangible assets, net			201					255
Restricted investments			117					119
Deferred income taxes			114					103
Other assets			28					141
			$	8,763				$	8,471
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable			$	1,920				$	2,192
Amounts due government agencies			1,746					1,542
Accounts payable and accrued liabilities			754					366
Deferred revenue			193					282
Current portion of long-term debt			484					653
Derivative liability			657					522
Liabilities held for sale			66					—
Total current liabilities			5,820					5,557
Long-term debt			1,019					1,318
Lease financing obligations			198					198
Other long-term liabilities			68					61
Total liabilities			7,105					7,134
Stockholders’ equity:
Common stock, $0.001 par value, 150 shares authorized; outstanding: 62 shares at June 30, 2018 and 60 shares at December 31, 2017			—					—
Preferred stock, $0.001 par value; 20 shares authorized, no shares issued and outstanding			—					—
Additional paid-in capital			1,055					1,044
Accumulated other comprehensive loss			(11		)			(5		)
Retained earnings			614					298
Total stockholders’ equity			1,658					1,337
			$	8,763				$	8,471

MOLINA HEALTHCARE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
			Three Months Ended										Six Months Ended
			June 30,										June 30,
			2018					2017					2018					2017
			(In millions)
Operating activities:
Net income (loss)			$	202				$	(230	)			$	309				$	(153	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization			36					47					73					96
Impairment losses			—					72					—					72
Deferred income taxes			—					(36		)			(6		)			(41		)
Share-based compensation			7					29					13					35
Non-cash restructuring costs			—					—					17					—
Amortization of convertible senior notes and lease financing obligations			6					8					13					16
Loss on debt extinguishment			5					—					15					—
Other, net			2					4					4					7
Changes in operating assets and liabilities:
Receivables			(232		)			—					(315		)			(32		)
Prepaid expenses and other current assets			58					(26		)			(181		)			(38		)
Medical claims and benefits payable			(104		)			151					(267		)			148
Amounts due government agencies			33					269					205					642
Accounts payable and accrued liabilities			30					(68		)			349					(18		)
Deferred revenue			(172		)			(178		)			(42		)			(32		)
Income taxes			49					(89		)			127					(30		)
Net cash (used in) provided by operating activities			(80		)			(47		)			314					672
Investing activities:
Purchases of investments			(525		)			(903		)			(914		)			(1,636		)
Proceeds from sales and maturities of investments			792					441					1,335					874
Purchases of property, equipment, and capitalized software			(10		)			(34		)			(14		)			(60		)
Other, net			(4		)			(13		)			(9		)			(24		)
Net cash provided by (used in) investing activities			253					(509		)			398					(846		)
Financing activities:
Repayment of credit facility			(300		)			—					(300		)			—
Repayment of 1.125% Convertible Notes			(89		)			—					(89		)			—
Cash paid for partial settlement of 1.125% Conversion Option			(134		)			—					(134		)			—
Cash received for partial termination of 1.125% Call Option			134					—					134					—
Cash paid for partial termination of 1.125% Warrants			(113		)			—					(113		)			—
Proceeds from senior notes offerings, net of issuance costs			—					325					—					325
Other, net			4					9					(1		)			8
Net cash (used in) provided by financing activities			(498		)			334					(503		)			333
Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents			(325		)			(222		)			209					159
Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period			3,824					3,293					3,290					2,912
Cash, cash equivalents, and restricted cash and cash equivalents at end of period			$	3,499				$	3,071				$	3,499				$	3,071

MOLINA HEALTHCARE, INC. UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP
			June 30,				December 31,				June 30,
			2018				2017				2017
Ending Membership by Program:
Temporary Assistance for Needy Families (TANF) and Children’s Health Insurance Program (CHIP)			2,464,000				2,457,000				2,517,000
Medicaid Expansion			675,000				668,000				678,000
Aged, Blind or Disabled (ABD)			415,000				412,000				408,000
Total Medicaid			3,554,000				3,537,000				3,603,000
Medicare-Medicaid Plan (MMP) - Integrated			55,000				57,000				54,000
Medicare Special Needs Plans			45,000				44,000				44,000
Total Medicare			100,000				101,000				98,000
Total Medicaid and Medicare			3,654,000				3,638,000				3,701,000
Marketplace			409,000				815,000				949,000
			4,063,000				4,453,000				4,650,000
Ending Membership by Health Plan:
California			639,000				746,000				766,000
Florida			398,000				625,000				672,000
Illinois			219,000				165,000				163,000
Michigan			397,000				398,000				414,000
New Mexico			241,000				253,000				266,000
Ohio			320,000				327,000				351,000
Puerto Rico			326,000				314,000				322,000
South Carolina			114,000				116,000				112,000
Texas			450,000				430,000				465,000
Washington			776,000				777,000				788,000
Other (1)			183,000				302,000				331,000
			4,063,000				4,453,000				4,650,000

__________________
(1)		“Other” includes the Idaho, New York, Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results.

MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA (In millions, except percentages and per-member per-month amounts)
			Three Months Ended June 30, 2018
			Member Months (1)				Premium Revenue										Medical Care Costs										MCR (2)				Medical Margin
							Total					PMPM					Total					PMPM
TANF and CHIP			7.5				$	1,393				$	186.18				$	1,205				$	161.13				86.5	%			$	188
Medicaid Expansion			2.1				761					372.04					676					330.83					88.9				85
ABD			1.3				1,288					1,033.34					1,209					969.27					93.8				79
Total Medicaid			10.9				3,442					319.52					3,090					286.89					89.8				352
MMP			0.1				367					2,224.30					313					1,893.91					85.1				54
Medicare			0.2				157					1,168.40					133					989.33					84.7				24
Total Medicare			0.3				524					1,751.49					446					1,488.85					85.0				78
Total Medicaid and Medicare			11.2				3,966					358.23					3,536					319.37					89.2				430
Marketplace			1.2				548					440.93					314					253.04					57.4				234
			12.4				$	4,514				$	366.57				$	3,850				$	312.68				85.3	%			$	664
			Three Months Ended June 30, 2017
			Member Months (1)				Premium Revenue										Medical Care Costs										MCR (2)				Medical Margin
							Total					PMPM					Total					PMPM
TANF and CHIP			7.6				$	1,391				$	182.47				$	1,315				$	172.48				94.5	%			$	76
Medicaid Expansion			2.1				786					383.07					689					335.26					87.5				97
ABD			1.2				1,285					1,053.89					1,245					1,020.85					96.9				40
Total Medicaid			10.9				3,462					317.79					3,249					298.10					93.8				213
MMP			0.1				361					2,217.44					333					2,050.20					92.5				28
Medicare			0.2				148					1,126.14					126					963.34					85.5				22
Total Medicare			0.3				509					1,730.91					459					1,565.65					90.5				50
Total Medicaid and Medicare			11.2				3,971					354.87					3,708					331.36					93.4				263
Marketplace			2.8				769					267.37					783					272.37					101.9				(14		)
			14.0				$	4,740				$	336.98				$	4,491				$	319.29				94.8	%			$	249

__________________
(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.

MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA (In millions, except percentages and per-member per-month amounts)
			Six Months Ended June 30, 2018
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
TANF and CHIP			14.9				$	2,766				$	185.66				$	2,477				$	166.32				89.6	%			$	289
Medicaid Expansion			4.1				1,513					372.39					1,317					324.19					87.1				196
ABD			2.5				2,542					1,023.83					2,364					951.99					93.0				178
Total Medicaid			21.5				6,821					318.11					6,158					287.22					90.3				663
MMP			0.3				724					2,180.86					618					1,858.87					85.2				106
Medicare			0.3				314					1,178.58					264					992.05					84.2				50
Total Medicare			0.6				1,038					1,735.05					882					1,473.30					84.9				156
Total Medicaid and Medicare			22.1				7,859					356.59					7,040					319.43					89.6				819
Marketplace			2.6				978					373.67					532					203.34					54.4				446
			24.7				$	8,837				$	358.40				$	7,572				$	307.11				85.7	%			$	1,265
			Six Months Ended June 30, 2017
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
TANF and CHIP			15.3				$	2,793				$	182.58				$	2,619				$	171.25				93.8	%			$	174
Medicaid Expansion			4.1				1,603					390.88					1,378					335.88					85.9				225
ABD			2.4				2,481					1,030.68					2,375					986.54					95.7				106
Total Medicaid			21.8				6,877					315.39					6,372					292.22					92.7				505
MMP			0.3				705					2,152.75					640					1,954.15					90.8				65
Medicare			0.3				286					1,097.36					243					933.20					85.0				43
Total Medicare			0.6				991					1,685.72					883					1,502.36					89.1				108
Total Medicaid and Medicare			22.4				7,868					351.35					7,255					323.98					92.2				613
Marketplace			5.7				1,520					264.77					1,347					234.62					88.6				173
			28.1				$	9,388				$	333.68				$	8,602				$	305.74				91.6	%			$	786

MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA— MEDICAID AND MEDICARE (In millions, except percentages and per-member per-month amounts)
			Three Months Ended June 30, 2018
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
California			1.8				$	517				$	289.80				$	441				$	247.36				85.4	%			$	76
Florida			1.2				377					353.81					362					339.31					95.9				15
Illinois			0.6				203					311.60					170					261.59					84.0				33
Michigan			1.2				388					342.45					331					292.20					85.3				57
New Mexico			0.7				313					469.88					290					435.36					92.7				23
Ohio			1.0				535					571.08					482					514.57					90.1				53
Puerto Rico			0.9				184					188.26					165					168.20					89.3				19
South Carolina			0.4				123					350.22					107					304.20					86.9				16
Texas			0.7				576					835.66					510					740.55					88.6				66
Washington			2.2				571					252.61					526					232.49					92.0				45
Other (1)			0.5				179					322.99					152					274.59					85.0				27
			11.2				$	3,966				$	358.23				$	3,536				$	319.37				89.2	%			$	430
			Three Months Ended June 30, 2017
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
California			1.9				$	598				$	318.89				$	539				$	287.36				90.1	%			$	59
Florida			1.1				380					347.20					370					337.92					97.3				10
Illinois			0.5				149					289.51					174					336.76					116.3				(25		)
Michigan			1.1				390					333.26					358					305.40					91.6				32
New Mexico			0.8				321					443.13					311					428.58					96.7				10
Ohio			1.0				529					536.90					489					496.41					92.5				40
Puerto Rico			0.9				179					184.28					189					194.42					105.5				(10		)
South Carolina			0.4				111					326.57					102					304.14					93.1				9
Texas			0.7				524					752.01					473					679.43					90.3				51
Washington			2.2				618					276.90					546					244.58					88.3				72
Other (1)			0.6				172					294.15					157					268.91					91.4				15
			11.2				$	3,971				$	354.87				$	3,708				$	331.36				93.4	%			$	263

__________________
(1)		“Other” includes the Idaho, New York, Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results.

MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA— MEDICAID AND MEDICARE (In millions, except percentages and per-member per-month amounts)
			Six Months Ended June 30, 2018
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
California			3.6				$	1,011				$	281.14				$	853				$	237.26				84.4	%			$	158
Florida			2.2				759					352.68					707					328.26					93.1				52
Illinois			1.1				344					305.94					292					259.87					84.9				52
Michigan			2.3				764					339.56					662					294.19					86.6				102
New Mexico			1.4				632					468.00					600					444.44					95.0				32
Ohio			1.9				1,086					573.87					942					497.75					86.7				144
Puerto Rico			1.9				370					190.68					339					174.74					91.6				31
South Carolina			0.7				245					349.15					211					300.87					86.2				34
Texas			1.4				1,138					822.72					1,029					744.05					90.4				109
Washington			4.5				1,155					254.64					1,100					242.48					95.2				55
Other			1.1				355					318.94					305					273.97					85.9				50
			22.1				$	7,859				$	356.59				$	7,040				$	319.43				89.6	%			$	819
			Six Months Ended June 30, 2017
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
California			3.7				$	1,170				$	313.76				$	1,023				$	274.42				87.5	%			$	147
Florida			2.2				744					343.29					722					333.23					97.1				22
Illinois			1.1				310					282.66					354					322.63					114.1				(44		)
Michigan			2.3				772					330.34					690					295.02					89.3				82
New Mexico			1.5				629					432.98					610					419.65					96.9				19
Ohio			2.0				1,049					532.35					951					482.73					90.7				98
Puerto Rico			1.9				362					185.40					354					181.24					97.8				8
South Carolina			0.7				216					321.85					200					298.79					92.8				16
Texas			1.4				1,051					751.94					962					687.96					91.5				89
Washington			4.4				1,223					275.05					1,081					243.18					88.4				142
Other			1.2				342					291.93					308					262.97					90.1				34
			22.4				$	7,868				$	351.35				$	7,255				$	323.98				92.2	%			$	613

MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—MARKETPLACE (In millions, except percentages and per-member per-month amounts)
			Three Months Ended June 30, 2018
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
California			0.2				$	73				$	426.16				$	21				$	117.92				27.7	%			$	52
Florida			0.1				100					698.31					38					269.86					38.6				62
Michigan			—				15					288.67					7					146.97					50.9				8
New Mexico			—				31					418.82					18					247.06					59.0				13
Ohio			—				31					518.64					23					381.46					73.6				8
Texas			0.7				222					330.12					160					238.72					72.3				62
Washington			0.2				56					787.80					41					572.48					72.7				15
Other (1)			—				20					NM					6					NM					NM				14
			1.2				$	548				$	440.93				$	314				$	253.04				57.4	%			$	234
			Three Months Ended June 30, 2017
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
California			0.5				$	81				$	186.90				$	67				$	154.23				82.5	%			$	14
Florida			0.9				269					284.60					317					336.78					118.3				(48		)
Michigan			0.1				16					204.15					10					135.89					66.6				6
New Mexico			—				31					367.98					23					266.91					72.5				8
Ohio			—				24					377.94					27					404.20					106.9				(3		)
Texas			0.7				177					247.49					129					180.92					73.1				48
Washington			0.2				44					317.42					49					359.87					113.4				(5		)
Other (1)			0.4				127					304.00					161					383.02					126.0				(34		)
			2.8				$	769				$	267.37				$	783				$	272.37				101.9	%			$	(14	)

__________________
(1)		“Other” includes the Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results. We terminated Marketplace operations at these plans effective January 1, 2018, so the ratios for 2018 periods are not meaningful (NM).

MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—MARKETPLACE (In millions, except percentages and per-member per-month amounts)
			Six Months Ended June 30, 2018
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
California			0.4				$	122				$	334.47				$	52				$	141.73				42.4	%			$	70
Florida			0.3				145					468.36					22					73.13					15.6				123
Michigan			0.1				28					254.69					16					145.49					57.1				12
New Mexico			0.1				65					429.19					37					246.77					57.5				28
Ohio			0.1				57					458.48					40					319.53					69.7				17
Texas			1.4				451					318.93					306					216.83					68.0				145
Washington			0.2				95					653.89					71					486.90					74.5				24
Other			—				15					NM					(12		)			NM					NM				27
			2.6				$	978				$	373.67				$	532				$	203.34				54.4	%			$	446
			Six Months Ended June 30, 2017
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
California			0.9				$	153				$	185.68				$	93				$	112.20				60.4	%			$	60
Florida			1.9				561					288.81					523					269.48					93.3				38
Michigan			0.2				27					177.12					17					116.21					65.6				10
New Mexico			0.1				53					317.10					42					249.90					78.8				11
Ohio			0.1				45					356.20					44					339.26					95.2				1
Texas			1.4				334					235.07					242					171.07					72.8				92
Washington			0.3				81					310.26					95					362.78					116.9				(14		)
Other			0.8				266					313.77					291					342.88					109.3				(25		)
			5.7				$	1,520				$	264.77				$	1,347				$	234.62				88.6	%			$	173

MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—TOTAL (In millions, except percentages and per-member per-month amounts)
			Three Months Ended June 30, 2018
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
California			2.0				$	590				$	301.73				$	462				$	236.04				78.2	%			$	128
Florida			1.3				477					394.38					400					331.13					84.0				77
Illinois			0.6				203					311.60					170					261.59					84.0				33
Michigan			1.2				403					340.08					338					285.78					84.0				65
New Mexico			0.7				344					464.90					308					416.99					89.7				36
Ohio			1.0				566					567.96					505					506.66					89.2				61
Puerto Rico			0.9				184					188.26					165					168.20					89.3				19
South Carolina			0.4				123					350.22					107					304.20					86.9				16
Texas			1.4				798					585.50					670					492.23					84.1				128
Washington			2.4				627					268.84					567					242.80					90.3				60
Other (1)			0.5				199					360.90					158					285.65					79.1				41
			12.4				$	4,514				$	366.57				$	3,850				$	312.68				85.3	%			$	664
			Three Months Ended June 30, 2017
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
California			2.4				$	679				$	294.09				$	606				$	262.34				89.2	%			$	73
Florida			2.0				649					318.21					687					337.39					106.0				(38		)
Illinois			0.5				149					289.51					174					336.76					116.3				(25		)
Michigan			1.2				406					325.38					368					295.06					90.7				38
New Mexico			0.8				352					435.34					334					411.83					94.6				18
Ohio			1.0				553					527.14					516					490.75					93.1				37
Puerto Rico			0.9				179					184.28					189					194.42					105.5				(10		)
South Carolina			0.4				111					326.57					102					304.14					93.1				9
Texas			1.4				701					495.93					602					426.41					86.0				99
Washington			2.4				662					279.21					595					251.16					90.0				67
Other (1)			1.0				299					298.29					318					316.89					106.2				(19		)
			14.0				$	4,740				$	336.98				$	4,491				$	319.29				94.8	%			$	249

__________________
(1)		“Other” includes the Idaho, New York, Utah and Wisconsin health plans, which are not individually significant to our consolidated operating results.

MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—TOTAL (In millions, except percentages and per-member per-month amounts)
			Six Months Ended June 30, 2018
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
California			4.0				$	1,133				$	286.07				$	905				$	228.44				79.9	%			$	228
Florida			2.5				904					367.18					729					296.29					80.7				175
Illinois			1.1				344					305.94					292					259.87					84.9				52
Michigan			2.4				792					335.59					678					287.23					85.6				114
New Mexico			1.5				697					464.11					637					424.58					91.5				60
Ohio			2.0				1,143					566.77					982					486.79					85.9				161
Puerto Rico			1.9				370					190.68					339					174.74					91.6				31
South Carolina			0.7				245					349.15					211					300.87					86.2				34
Texas			2.8				1,589					567.95					1,335					477.43					84.1				254
Washington			4.7				1,250					267.01					1,171					250.05					93.6				79
Other			1.1				370					333.35					293					263.24					79.0				77
			24.7				$	8,837				$	358.40				$	7,572				$	307.11				85.7	%			$	1,265
			Six Months Ended June 30, 2017
			Member Months				Premium Revenue										Medical Care Costs										MCR				Medical Margin
							Total					PMPM					Total					PMPM
California			4.6				$	1,323				$	290.56				$	1,116				$	245.02				84.3	%			$	207
Florida			4.1				1,305					317.53					1,245					303.09					95.5				60
Illinois			1.1				310					282.66					354					322.63					114.1				(44		)
Michigan			2.5				799					321.10					707					284.24					88.5				92
New Mexico			1.6				682					421.11					652					402.27					95.5				30
Ohio			2.1				1,094					521.57					995					473.95					90.9				99
Puerto Rico			1.9				362					185.40					354					181.24					97.8				8
South Carolina			0.7				216					321.85					200					298.79					92.8				16
Texas			2.8				1,385					491.46					1,204					427.48					87.0				181
Washington			4.7				1,304					276.99					1,176					249.79					90.2				128
Other			2.0				608					301.11					599					296.58					98.5				9
			28.1				$	9,388				$	333.68				$	8,602				$	305.74				91.6	%			$	786

MOLINA HEALTHCARE, INC. UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA (In millions, except percentages and per-member per-month amounts)
The following tables provide the details of our medical care costs for the periods indicated:
			Three Months Ended June 30,
			2018												2017
			Amount				PMPM				% of Total				Amount				PMPM				% of Total
Fee for service			$	2,861			$	232.40			74.4	%			$	3,348			$	238.04				74.5	%
Pharmacy				567				46.05			14.7					650				46.23				14.5
Capitation				282				22.89			7.3					356				25.29				7.9
Other				140				11.34			3.6					137				9.73				3.1
			$	3,850			$	312.68			100.0	%			$	4,491			$	319.29				100.0	%
			Six Months Ended June 30,
			2018												2017
			Amount				PMPM				% of Total				Amount				PMPM				% of Total
Fee for service			$	5,606			$	227.38			74.1	%			$	6,434			$	228.68				74.8	%
Pharmacy				1,150				46.66			15.2					1,266				45.00				14.7
Capitation				594				24.09			7.8					680				24.17				7.9
Other				222				8.98			2.9					222				7.89				2.6
			$	7,572			$	307.11			100.0	%			$	8,602			$	305.74				100.0	%
The following table provides the details of our medical claims and benefits payable as of the dates indicated:
																			June 30,				December 31,
																			2018				2017
Fee-for-service claims incurred but not paid (IBNP)																			$	1,510			$	1,717
Pharmacy payable																				116				112
Capitation payable																				49				67
Other (1)																				245				296
																			$	1,920			$	2,192

__________________
(1)		“Other” medical claims and benefits payable include amounts payable to certain providers for which we act as an intermediary on behalf of various state agencies without assuming financial risk. Such receipts and payments do not impact our consolidated statements of operations. As of June 30, 2018 and December 31, 2017, we had recorded non-risk provider payables of approximately $158 million and $122 million, respectively.

MOLINA HEALTHCARE, INC.

UNAUDITED CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE

(Dollars in millions, except per-member amounts)

Our 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. Our 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 our original estimate of claims and benefits payable at the beginning of the period was (more) less 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:

			Six Months Ended June 30,										Year Ended December 31, 2017
			2018					2017
Medical claims and benefits payable, beginning balance			$	2,192				$	1,929				$	1,929
Components of medical care costs related to:
Current period			7,794					8,633					17,037
Prior period (1)			(222		)			(31		)			36
Total medical care costs			7,572					8,602					17,073
Change in non-risk provider payables			56					(114		)			(106		)
Payments for medical care costs related to:
Current period			6,248					6,883					15,130
Prior period			1,652					1,457					1,574
Total paid			7,900					8,340					16,704
Medical claims and benefits payable, ending balance			$	1,920				$	2,077				$	2,192
Days in claims payable, fee for service (2)			49					46					54

__________________
(1)		Excludes the 2018 benefit of the 2017 Marketplace CSR reimbursement.
(2)		Claims payable includes primarily IBNP. It also includes certain fee-for-service payables reported in “Other” medical claims and benefits payable amounting to $33 million, $157 million and $99 million, as of June 30, 2018, 2017 and December 31, 2017, respectively.

MOLINA HEALTHCARE, INC.

UNAUDITED SUMMARY OF SIGNIFICANT ITEMS AFFECTING SECOND QUARTER AND

YEAR-TO-DATE FINANCIAL RESULTS

(In millions, except per diluted share amounts)

The table below summarizes the impact of certain items significant to our financial performance in the periods presented. The individual items presented below increase (decrease) income before income tax expense.

			Three Months Ended June 30, 2018										Six Months Ended June 30, 2018
			Amount					Per Diluted Share (1)					Amount					Per Diluted Share (1)
Marketplace risk adjustment, for 2017 dates of service			$	79				$	0.92				$	56				$	0.66
Marketplace CSR subsidies, for 2017 dates of service			6					0.07					76					0.90
Restructuring costs			(8		)			(0.10		)			(33		)			(0.39		)
Loss on debt extinguishment			(5		)			(0.06		)			(15		)			(0.21		)
			$	72				$	0.83				$	84				$	0.96

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(1)		Except for certain items that are not deductible for tax purposes, per diluted share amounts are generally calculated at the statutory income tax rate of 22%.

MOLINA HEALTHCARE, INC.

UNAUDITED NON-GAAP FINANCIAL MEASURES

We use non-generally accepted accounting principles, or non-GAAP, financial measures as supplemental metrics in evaluating our 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 our 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 (in millions, except per diluted share amounts).

			Three Months Ended June 30,										Six Months Ended June 30,
			2018					2017					2018					2017
Net income (loss)			$	202				$	(230	)			$	309				$	(153	)
Adjustments:
Depreciation and amortization of intangible assets and capitalized software			33					44					67					90
Interest expense			32					27					65					53
Income tax expense (benefit)			103					(84		)			175					(30		)
EBITDA			$	370				$	(243	)			$	616				$	(40	)

			Three Months Ended June 30,																				Six Months Ended June 30,
			2018										2017										2018										2017
			Amount					Per Diluted Share					Amount					Per Diluted Share					Amount					Per Diluted Share					Amount					Per Diluted Share
Net income (loss)			$	202				$	3.02				$	(230	)			$	(4.10	)			$	309				$	4.68				$	(153	)			$	(2.74	)
Adjustment:
Amortization of intangible assets			5					0.08					8					0.14					10					0.16					17					0.30
Income tax effect (1)			(1		)			(0.02		)			(3		)			(0.05		)			(2		)			(0.04		)			(6		)			(0.11		)
Amortization of intangible assets, net of tax effect			4					0.06					5					0.09					8					0.12					11					0.19
Adjusted net income (loss)			$	206				$	3.08				$	(225	)			$	(4.01	)			$	317				$	4.80				$	(142	)			$	(2.55	)

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(1)		Income tax effect of adjustments calculated at the blended federal and state statutory tax rate of 22% and 37% for 2018 and 2017, respectively.

The following are descriptions of the adjustments made to GAAP measures used to calculate the non-GAAP measures used in this news release:

Earnings before interest, taxes, depreciation and amortization (EBITDA): Net income (loss) (GAAP) less depreciation, and amortization of intangible assets and capitalized software, interest expense and income tax expense. We believe that EBITDA is helpful in assessing our ability to meet the cash demands of our operating units.

Adjusted net income: Net income (loss) (GAAP) less amortization of intangible assets, net of income tax effect calculated at the statutory tax rate. We believe that adjusted net income (loss) is helpful in assessing our financial performance exclusive of the non-cash impact of the amortization of purchased intangibles.

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

MOLINA HEALTHCARE, INC. 2018 REVISED GUIDANCE
Reconciliation of Non-GAAP Financial Measures
(in millions, except per-share amounts)
													Low End					High End
Net income													$	471				$	484
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software														125					125
Interest expense														115					115
Income tax expense														257					261
EBITDA													$	968				$	985
			Low End										High End
			Amount					Per share (2)					Amount					Per share (2)
Net income			$	471				$	7.15				$	484				$	7.35
Adjustments:
Amortization of intangible assets				21					0.32					21					0.32
Income tax effect (1)				(5	)				(0.08	)				(5	)				(0.08	)
Amortization of intangible assets, net of tax effect				16					0.24					16					0.24
Adjusted net income			$	487				$	7.39				$	500				$	7.59

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(1)		Income tax effect calculated at the statutory tax rate of 22%.
(2)		Computation assumes 65.9 million diluted weighted average shares outstanding.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180731005924/en/

Source: Molina Healthcare, Inc.

Molina Healthcare, Inc.
Ryan Kubota, 562-435-3666, ext. 119057
Investor Relations