Magellan Health Reports Third Quarter 2020 Financial Results
PHOENIX--(BUSINESS WIRE)--Magellan Health, Inc. (NASDAQ: MGLN) today announced financial results for the third quarter ended September 30, 2020, as summarized below:
Three Months Ended |
|
|
Nine Months Ended |
|||||||||||||||||
Sept 30 |
|
|
Sept 30 |
|||||||||||||||||
| (In millions, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
| Continuing Operations | 2020 |
|
2019 |
|
Chg |
|
|
2020 |
|
2019 |
|
Chg |
||||||||
| Net revenue | $ |
1,170.1 |
|
$ |
1,158.5 |
1.0 |
% |
$ |
3,392.6 |
$ |
3,431.8 |
-1.1 |
% |
|||||||
| Net (loss) income | $ |
(17.3 |
) |
$ |
4.1 |
NM |
|
$ |
28.7 |
$ |
3.1 |
NM |
|
|||||||
| Segment profit [1] | $ |
34.1 |
|
$ |
45.6 |
-25.3 |
% |
$ |
132.7 |
$ |
129.9 |
2.1 |
% |
|||||||
| Adjusted net income [1] | $ |
2.1 |
|
$ |
9.8 |
-78.1 |
% |
$ |
29.4 |
$ |
20.2 |
45.6 |
% |
|||||||
| Earnings (loss) per share | $ |
(0.68 |
) |
$ |
0.17 |
NM |
|
$ |
1.14 |
$ |
0.13 |
NM |
|
|||||||
| Adjusted earnings per share [1] | $ |
0.08 |
|
$ |
0.40 |
-80.0 |
% |
$ |
1.16 |
$ |
0.83 |
39.8 |
% |
|||||||
| [1] Refer to the Basis of Presentation for a discussion of non-GAAP financial measures. | ||||||||||||||||||||
| NM = "not meaningful" | ||||||||||||||||||||
Third Quarter 2020 and Recent Highlights:
-
Net revenue from continuing operations was
$1.17 0 billion for the third quarter of 2020, an increase of1.0% compared to the third quarter of 2019 primarily due to growth in the Pharmacy Management segment, partially offset by a decline in the Healthcare segment. -
Net loss from continuing operations was
$17.3 million for the third quarter of 2020 compared to net income of$4.1 for the third quarter of 2019, due primarily to non-cash special charges as the Company reduces its real estate footprint. - The Company is re-affirming its 2020 continuing operations guidance ranges for revenue, segment profit, adjusted net income and adjusted earnings per share, and updating its guidance ranges for GAAP net income and earnings per share to reflect higher year-to-date and anticipated fourth quarter special charges.
- On September 3, 2020, the Company appointed David Bourdon as chief financial officer.
- On September 9, 2020, the Company announced a strategic relationship with Livongo, whereby Livongo’s digital self-care solutions are being added to Magellan Health’s product suite. The Company and Livongo have also agreed to collaborate on new product innovations for behavioral health.
- On October 27, 2020, the Company completed a strategic investment in Kaden Health, a technology-enabled healthcare company with a proprietary telemedicine platform for virtual behavioral care.
-
On October 27, 2020, the Company’s Board of Directors authorized an extension of its
$400 million stock repurchase program through November 15, 2021. As of September 30, 2020, the remaining capacity under the repurchase program was$186 million .
“I am encouraged by the significant progress we continue to make in our journey to re-imagine Magellan Health, and I am pleased we remain on track to deliver on our commitments for 2020. Our success is, in no small part, based on the efforts of our dedicated Magellan associates who have responded to the needs of our members and clients during the pandemic,” said Kenneth Fasola, chief executive officer, Magellan Health.
“As a leading independent payer services company, we offer disruptive, comprehensive and integrated complex care services and insights. Magellan is committed to remaining a key partner in lowering total healthcare costs, while driving higher quality care for members. We are developing new solutions to build on years of insight and experience that will enable payers to manage high cost areas through integrated physical and mental healthcare. Our new relationships with Livongo and Kaden demonstrate we are executing on our strategy to innovate our solutions so that we can accelerate growth in the future,” continued Fasola.
Net Revenue
Net revenue from continuing operations for the third quarter of 2020, was
Segment Profit
Segment profit from continuing operations was
-
Healthcare segment profit was
$21.2 million , representing a decrease of$5.0 million from the third quarter of 2019. This year-over-year decrease was primarily driven by net contract losses, as well as minimum medical loss ratio (MLR) thresholds in certain contracts. -
Pharmacy Management segment profit was
$31.4 million , representing a decrease of$4.0 million from the third quarter of 2019. This year-over-year decrease was primarily driven by previously disclosed contract losses and start-up costs associated with the Medi-Cal contract, partially off-set by strong results from specialty pharmacy operations, as well as favorable customer settlements. -
Corporate segment costs inclusive of eliminations, but excluding stock compensation expense, totaled
$18.6 million , as compared to$16.0 million in the third quarter of 2019.
Other Items
The Company recorded a special charge of
Income from discontinued operations, net of tax, for the third quarter of 2020 was
Cash Flow & Balance Sheet
Cash flow provided by operations from continuing operations for the nine months ended September 30, 2020, was
As of September 30, 2020, the Company’s unrestricted cash and investments totaled
Strategic Investment in Kaden Health
On October 27, 2020, the Company made a strategic minority equity investment in Kaden Health, a technology-enabled healthcare company with a proprietary telemedicine platform for virtual behavioral care. The Company is partnering with Kaden to deploy its virtual medication assisted treatment (vMAT) platform in certain markets, and will collaborate with Kaden to develop other use cases for virtual behavioral care including capabilities to support Magellan Connect, the Company’s newly-developed collaborative care model.
Outlook
As summarized in the table below, the Company is re-affirming its 2020 continuing operations guidance ranges for revenue, segment profit, adjusted net income and adjusted earnings per share, and updating its continuing operations guidance ranges for GAAP income before income taxes, net income and earnings per share to reflect higher year-to-date and anticipated fourth quarter special accounting charges.
| 2020 Guidance for Continuing Operations | As of Oct. 29, 2020 |
|
As of July 29, 2020 |
|||||||||||||
| (In millions, except per share results) | Low |
|
High |
|
Low |
|
High |
|||||||||
| Net revenue | $ |
4,400.0 |
|
$ |
4,600.0 |
|
$ |
4,400.0 |
|
$ |
4,600.0 |
|
||||
| Income before income taxes | $ |
(42.0 |
) |
$ |
(22.0 |
) |
$ |
(22.0 |
) |
$ |
(2.0 |
) |
||||
| Net income | $ |
1.0 |
|
$ |
13.0 |
|
$ |
15.0 |
|
$ |
27.0 |
|
||||
| Segment Profit[1] | $ |
145.0 |
|
$ |
165.0 |
|
$ |
145.0 |
|
$ |
165.0 |
|
||||
| Adjusted net income[1] | $ |
16.0 |
|
$ |
28.0 |
|
$ |
16.0 |
|
$ |
28.0 |
|
||||
| Diluted per share results: | ||||||||||||||||
| Earnings per share[2] | $ |
0.04 |
|
$ |
0.51 |
|
$ |
0.59 |
|
$ |
1.06 |
|
||||
| Adjusted earnings per share[1][2] | $ |
0.63 |
|
$ |
1.10 |
|
$ |
0.63 |
|
$ |
1.10 |
|
||||
| [1] Refer to the Basis of Presentation for a discussion of non-GAAP financial measures. | ||||||||||||||||
| [2] 2020 EPS and Adjusted EPS guidance includes share repurchases and option exercises through the close of business October 23, 2020, but excludes the impact of any potential future activity. | ||||||||||||||||
Earnings Conference Call
Management will discuss the Company’s third quarter 2020 results on a conference call scheduled for Thursday, October 29, 2020 at 9:00 a.m. Eastern. The conference call may be accessed by dialing (877) 269-7756 (Domestic) and (201) 689-7817 (International) using conference ID code 13710919. A telephonic replay will be available shortly after the conclusion of the call through November 29, 2020. This replay may be accessed by dialing (877) 660-6853 (Domestic) or (201) 612-7415 (International) using the same conference ID code. The conference call will also be available live via webcast at Magellan's investor relations page at MagellanHealth.com. A replay of the webcast will also be available at the site listed above for 30 days, beginning approximately two hours after its conclusion.
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 January 1, 2013, to exclude non-cash stock compensation expense resulting from restricted stock purchases by sellers, changes in the fair value of contingent consideration, amortization of identified acquisition intangibles, as well as impairment of identified acquisition intangibles, special charges, and any impact related to the sale of MCC.
Included in the tables issued with this press release are the reconciliations from GAAP measures to the corresponding non-GAAP measures.
Magellan Complete Care Business Reflected as Discontinued Operations
As previously announced, on April 30, 2020, the Company and Molina Healthcare, Inc. (Molina) entered into a Stock and Asset Purchase Agreement in which the Company has agreed to sell its Magellan Complete Care (MCC) business to Molina. Therefore, the consolidated financial statements for all periods presented reflect the MCC business as discontinued operations. In addition, the Company’s 2020 guidance reflects its continuing operations, thereby excluding the MCC business from guidance for the full fiscal year 2020.
About Magellan Health: Magellan Health, Inc., a Fortune 500 company, is a leader in managing the fastest growing, most complex areas of health, including special populations, complete pharmacy benefits and other specialty areas of healthcare. Magellan supports innovative ways of accessing better health through technology, while remaining focused on the critical personal relationships that are necessary to achieve a healthy, vibrant life. Magellan's customers include health plans and other managed care organizations, employers, labor unions, various military and governmental agencies and third-party administrators. For more information, visit MagellanHealth.com.
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 (loss) before income taxes, net income, segment profit, adjusted net income, earnings per share and adjusted earnings per share; growth and margin opportunities and initiatives; business environment, long term opportunities and strategy; transformation, process improvement and innovation initiatives; new product offerings, digital tools and advanced analytics capabilities; 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 offset stranded overhead costs associated with the transaction, 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, and the risks associated with, the COVID-19 pandemic; termination or non-renewal of customer contracts; changes in rates paid to and/or by the Company by customers and/or providers; our ability to develop and maintain satisfactory relationships with providers; higher utilization of healthcare services by the Company’s members; risks and uncertainties associated with the pharmacy benefits management industry; costs to maintain or upgrade our information technology and other business systems and the effectiveness and security of such systems; cyberattacks, other privacy/data security incidents, and/or our failure to comply with related regulations; delays, higher costs or inability to implement new business or other Company initiatives; the impact of changes in the contracting model for Medicaid contracts; impairment of our goodwill and intangible assets; the impact of new or amended laws or regulations; costs and other liabilities associated with litigation, government investigations, audits or reviews; 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, Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, to be filed with the Securities and Exchange Commission later today, and subsequent reports on Forms 10-Q and 8-K. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.
| MAGELLAN HEALTH, INC. AND SUBSIDIARIES | |||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||
| (Unaudited) | |||||||||
| (In thousands) | |||||||||
| December 31, 2019 | September 30, 2020 | ||||||||
| ASSETS | |||||||||
| Current Assets: | |||||||||
| Cash and cash equivalents | $ |
115,752 |
|
$ |
152,050 |
|
|||
| Accounts receivable, net |
|
680,569 |
|
|
769,159 |
|
|||
| Short-term investments |
|
98,797 |
|
|
92,686 |
|
|||
| Pharmaceutical inventory |
|
44,962 |
|
|
37,637 |
|
|||
| Other current assets |
|
69,687 |
|
|
95,666 |
|
|||
| Current portion of assets held for sale |
|
663,276 |
|
|
1,144,032 |
|
|||
| Total Current Assets |
|
1,673,043 |
|
|
2,291,230 |
|
|||
| Property and equipment, net |
|
131,712 |
|
|
131,869 |
|
|||
| Long-term investments |
|
2,864 |
|
|
5,623 |
|
|||
| Deferred income taxes |
|
1,840 |
|
|
25,823 |
|
|||
| Other long-term assets |
|
58,905 |
|
|
67,692 |
|
|||
| Goodwill |
|
806,421 |
|
|
806,421 |
|
|||
| Other intangible assets, net |
|
81,675 |
|
|
52,362 |
|
|||
| Assets held for sale, less current portion |
|
335,713 |
|
|
- |
|
|||
| Total Assets | $ |
3,092,173 |
|
$ |
3,381,020 |
|
|||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current Liabilities: | |||||||||
| Accounts payable | $ |
83,790 |
|
$ |
122,020 |
|
|||
| Accrued liabilities |
|
191,854 |
|
|
235,152 |
|
|||
| Medical claims payable |
|
128,114 |
|
|
119,922 |
|
|||
| Other medical liabilities |
|
92,915 |
|
|
123,205 |
|
|||
| Current debt, finance lease and deferred financing obligations |
|
3,491 |
|
|
4,308 |
|
|||
| Current portion of liabilities held for sale |
|
409,983 |
|
|
496,272 |
|
|||
| Total Current Liabilities |
|
910,147 |
|
|
1,100,879 |
|
|||
| Long-term debt, finance lease and deferred financing obligations |
|
679,125 |
|
|
637,093 |
|
|||
| Deferred income taxes |
|
1,971 |
|
|
- |
|
|||
| Tax contingencies |
|
9,453 |
|
|
11,724 |
|
|||
| Deferred credits and other long-term liabilities |
|
56,393 |
|
|
52,172 |
|
|||
| Liabilities held for sale, less current portion |
|
37,301 |
|
|
- |
|
|||
| Total Liabilities |
|
1,694,390 |
|
|
1,801,868 |
|
|||
| Stockholders’ Equity: | |||||||||
| Ordinary common stock |
|
543 |
|
|
553 |
|
|||
| Additional paid-in capital | 1,386,616 |
1,455,009 |
|||||||
| Retained earnings |
|
1,475,207 |
|
|
1,588,196 |
|
|||
| Accumulated other comprehensive income |
|
144 |
|
|
121 |
|
|||
| Ordinary common stock in treasury, at cost |
|
(1,464,727 |
) |
|
(1,464,727 |
) |
|||
| Total Stockholders’ Equity |
|
1,397,783 |
|
|
1,579,152 |
|
|||
| Total Liabilities and Stockholders’ Equity | $ |
3,092,173 |
|
$ |
3,381,020 |
|
|||
| MAGELLAN HEALTH, INC. AND SUBSIDIARIES | ||||||||||||||||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||||
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||
September 30, |
|
September 30, |
||||||||||||||||
2019 |
|
|
2020 |
|
2019 |
|
|
2020 |
||||||||||
| Net revenue: | ||||||||||||||||||
| Managed care and other | $ |
591,229 |
|
$ |
568,688 |
|
$ |
1,766,391 |
|
$ |
1,670,567 |
|
||||||
| PBM |
|
567,314 |
|
|
601,429 |
|
|
1,665,447 |
|
|
1,722,004 |
|
||||||
| Total net revenue |
|
1,158,543 |
|
|
1,170,117 |
|
|
3,431,838 |
|
|
3,392,571 |
|
||||||
| Costs and expenses: | ||||||||||||||||||
| Cost of care |
|
397,697 |
|
|
364,438 |
|
|
1,175,705 |
|
|
1,035,377 |
|
||||||
| Cost of goods sold |
|
523,973 |
|
|
560,269 |
|
|
1,551,368 |
|
|
1,621,577 |
|
||||||
| Direct service costs and other operating expenses (1) |
|
195,844 |
|
|
216,770 |
|
|
594,051 |
|
|
620,767 |
|
||||||
| Depreciation and amortization |
|
28,890 |
|
|
24,730 |
|
|
82,498 |
|
|
71,976 |
|
||||||
| Interest expense |
|
8,935 |
|
|
7,286 |
|
|
27,042 |
|
|
24,239 |
|
||||||
| Interest and other income |
|
(1,699 |
) |
|
(349 |
) |
|
(5,279 |
) |
|
(2,119 |
) |
||||||
| Special charges |
|
- |
|
|
16,599 |
|
|
- |
|
|
24,908 |
|
||||||
| Total costs and expenses |
|
1,153,640 |
|
|
1,189,743 |
|
|
3,425,385 |
|
|
3,396,725 |
|
||||||
| Income (loss) from continuing operations before income taxes |
|
4,903 |
|
|
(19,626 |
) |
|
6,453 |
|
|
(4,154 |
) |
||||||
| Provision (benefit) for income taxes |
|
782 |
|
|
(2,330 |
) |
|
3,308 |
|
|
(32,896 |
) |
||||||
| Net income (loss) from continuing operations |
|
4,121 |
|
|
(17,296 |
) |
|
3,145 |
|
|
28,742 |
|
||||||
| Income from discontinued operations, net of tax |
|
17,153 |
|
|
28,943 |
|
|
32,173 |
|
|
84,660 |
|
||||||
| Net Income | $ |
21,274 |
|
$ |
11,647 |
|
$ |
35,318 |
|
$ |
113,402 |
|
||||||
| Weighted average number of common shares outstanding — basic |
|
24,426 |
|
|
25,448 |
|
|
24,159 |
|
|
25,078 |
|
||||||
| Weighted average number of common shares outstanding — diluted |
|
24,708 |
|
|
25,448 |
|
|
24,447 |
|
|
25,317 |
|
||||||
| Net income (loss) per common share — basic | ||||||||||||||||||
| Continuing operations | $ |
0.17 |
|
$ |
(0.68 |
) |
$ |
0.13 |
|
$ |
1.15 |
|
||||||
| Discontinued operations |
|
0.70 |
|
|
1.14 |
|
|
1.33 |
|
|
3.37 |
|
||||||
| Consolidated operations | $ |
0.87 |
|
$ |
0.46 |
|
$ |
1.46 |
|
$ |
4.52 |
|
||||||
| Net income (loss) per common share — diluted | ||||||||||||||||||
| Continuing operations | $ |
0.17 |
|
$ |
(0.68 |
) |
$ |
0.13 |
|
$ |
1.14 |
|
||||||
| Discontinued operations |
|
0.69 |
|
|
1.14 |
|
|
1.31 |
|
|
3.34 |
|
||||||
| Consolidated operations | $ |
0.86 |
|
$ |
0.46 |
|
$ |
1.44 |
|
$ |
4.48 |
|
||||||
| Net income | $ |
21,274 |
|
$ |
11,647 |
|
$ |
35,318 |
|
$ |
113,402 |
|
||||||
| Other comprehensive income: | ||||||||||||||||||
| Unrealized gains on available-for-sale securities (2) |
|
(98 |
) |
|
(481 |
) |
|
641 |
|
|
(23 |
) |
||||||
| Comprehensive income | $ |
21,176 |
|
$ |
11,166 |
|
$ |
35,959 |
|
$ |
113,379 |
|
||||||
| (1) Includes stock compensation expense of |
||||||||||
| (2) Net of income tax (benefit) provision of ( |
||||||||||
| MAGELLAN HEALTH, INC. AND SUBSIDIARIES | |||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| (Unaudited) | |||||||||
| (In thousands) | |||||||||
Nine Months Ended |
|||||||||
September 30, |
|||||||||
2019 |
|
|
2020 |
||||||
| Cash flows from operating activities: | |||||||||
| Net income | $ |
35,318 |
|
$ |
113,402 |
|
|||
| Adjustments to reconcile net income to net cash from operating activities: | |||||||||
| Depreciation and amortization |
|
98,355 |
|
|
88,061 |
|
|||
| Special charges |
|
- |
|
|
24,908 |
|
|||
| Non-cash interest expense |
|
1,069 |
|
|
1,297 |
|
|||
| Non-cash stock compensation expense |
|
19,832 |
|
|
18,854 |
|
|||
| Non-cash income tax provision (benefit) |
|
4,567 |
|
|
(26,537 |
) |
|||
| Non-cash (amortization) accretion on investments |
|
(509 |
) |
|
2,371 |
|
|||
| Changes in assets and liabilities, net of effects from acquisitions of businesses: | |||||||||
| Accounts receivable, net |
|
(54,261 |
) |
|
(78,682 |
) |
|||
| Pharmaceutical inventory |
|
(7,555 |
) |
|
7,325 |
|
|||
| Other assets |
|
(35,714 |
) |
|
(66,612 |
) |
|||
| Accounts payable and accrued liabilities |
|
83,976 |
|
|
110,710 |
|
|||
| Medical claims payable and other medical liabilities |
|
11,997 |
|
|
47,478 |
|
|||
| Contingent consideration |
|
(3,754 |
) |
|
- |
|
|||
| Tax contingencies |
|
(251 |
) |
|
1,914 |
|
|||
| Deferred credits and other long-term liabilities |
|
(9,566 |
) |
|
(11,572 |
) |
|||
| Other |
|
919 |
|
|
(965 |
) |
|||
| Net cash provided by operating activities |
|
144,423 |
|
|
231,952 |
|
|||
| Net cash provided by operating activities from discontinued operations |
|
25,079 |
|
|
177,800 |
|
|||
| Net cash provided by operating activities from continuing operations |
|
119,344 |
|
|
54,152 |
|
|||
| Cash flows from investing activities: | |||||||||
| Capital expenditures |
|
(44,234 |
) |
|
(56,006 |
) |
|||
| Acquisitions and investments in businesses, net of cash acquired |
|
(320 |
) |
|
(2,066 |
) |
|||
| Purchases of investments |
|
(391,062 |
) |
|
(661,004 |
) |
|||
| Proceeds from maturities and sales of investments |
|
434,493 |
|
|
500,660 |
|
|||
| Net cash used in investing activities |
|
(1,123 |
) |
|
(218,416 |
) |
|||
| Net cash provided by (used in) investing activities from discontinued operations |
|
46,196 |
|
|
(164,836 |
) |
|||
| Net cash used in investing activities from continuing operations |
|
(47,319 |
) |
|
(53,580 |
) |
|||
| 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 |
|
20,653 |
|
|
48,284 |
|
|||
| Payments on debt, finance lease and deferred financing obligations |
|
(50,950 |
) |
|
(126,110 |
) |
|||
| Payments on contingent consideration |
|
(6,247 |
) |
|
- |
|
|||
| Other |
|
1,763 |
|
|
902 |
|
|||
| Net cash (used in) provided by financing activities |
|
(38,905 |
) |
|
3,076 |
|
|||
| Net cash used in financing activities from discontinued operations |
|
- |
|
|
(32,650 |
) |
|||
| Net cash (used in) provided by financing activities from continuing operations |
|
(38,905 |
) |
|
35,726 |
|
|||
| Net increase in cash and cash equivalents |
|
33,120 |
|
|
36,298 |
|
|||
| Cash and cash equivalents at beginning of period |
|
86,923 |
|
|
115,752 |
|
|||
| Cash and cash equivalents at end of period | $ |
120,043 |
|
$ |
152,050 |
|
|||
| MAGELLAN HEALTH, INC. AND SUBSIDIARIES | |||||||||||||||||||
| CONTINUING OPERATIONS RESULTS BY BUSINESS SEGMENT | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| (In thousands) | |||||||||||||||||||
Three Months Ended |
|
Nine Months Ended |
|||||||||||||||||
September 30, |
|
September 30, |
|||||||||||||||||
2019 |
|
|
2020 |
|
2019 |
|
|
2020 |
|||||||||||
| Healthcare | |||||||||||||||||||
| Managed care and other revenue | $ |
521,379 |
|
$ |
489,451 |
|
$ |
1,574,314 |
|
$ |
1,459,378 |
|
|||||||
| Cost of care |
|
(397,697 |
) |
|
(364,438 |
) |
|
(1,175,705 |
) |
|
(1,035,377 |
) |
|||||||
| Direct service costs and other |
|
(99,416 |
) |
|
(104,610 |
) |
|
(297,840 |
) |
|
(310,996 |
) |
|||||||
| Stock compensation expense (1) |
|
1,995 |
|
|
833 |
|
|
5,775 |
|
|
4,696 |
|
|||||||
| Healthcare segment profit |
|
26,261 |
|
|
21,236 |
|
|
106,544 |
|
|
117,701 |
|
|||||||
| Pharmacy Management | |||||||||||||||||||
| Managed care and other revenue |
|
69,968 |
|
|
79,382 |
|
|
192,511 |
|
|
211,684 |
|
|||||||
| PBM revenue |
|
572,086 |
|
|
606,546 |
|
|
1,678,661 |
|
|
1,736,519 |
|
|||||||
| Cost of goods sold |
|
(528,500 |
) |
|
(565,121 |
) |
|
(1,563,910 |
) |
|
(1,635,380 |
) |
|||||||
| Direct service costs and other |
|
(79,842 |
) |
|
(91,012 |
) |
|
(238,253 |
) |
|
(252,960 |
) |
|||||||
| Stock compensation expense (1) |
|
1,669 |
|
|
1,615 |
|
|
5,465 |
|
|
5,661 |
|
|||||||
| Pharmacy Management segment profit |
|
35,381 |
|
|
31,410 |
|
|
74,474 |
|
|
65,524 |
|
|||||||
| Corporate and Elimination (2) | |||||||||||||||||||
| Managed care and other revenue |
|
(118 |
) |
|
(145 |
) |
|
(434 |
) |
|
(495 |
) |
|||||||
| PBM revenue |
|
(4,772 |
) |
|
(5,117 |
) |
|
(13,214 |
) |
|
(14,515 |
) |
|||||||
| Cost of goods sold |
|
4,527 |
|
|
4,852 |
|
|
12,542 |
|
|
13,803 |
|
|||||||
| Direct service costs and other |
|
(16,586 |
) |
|
(21,148 |
) |
|
(57,958 |
) |
|
(56,811 |
) |
|||||||
| Stock compensation expense (1) |
|
940 |
|
|
2,994 |
|
|
7,971 |
|
|
7,474 |
|
|||||||
| Corporate and Elimination |
|
(16,009 |
) |
|
(18,564 |
) |
|
(51,093 |
) |
|
(50,544 |
) |
|||||||
| Consolidated | |||||||||||||||||||
| Managed care and other revenue |
|
591,229 |
|
|
568,688 |
|
|
1,766,391 |
|
|
1,670,567 |
|
|||||||
| PBM revenue |
|
567,314 |
|
|
601,429 |
|
|
1,665,447 |
|
|
1,722,004 |
|
|||||||
| Cost of care |
|
(397,697 |
) |
|
(364,438 |
) |
|
(1,175,705 |
) |
|
(1,035,377 |
) |
|||||||
| Cost of goods sold |
|
(523,973 |
) |
|
(560,269 |
) |
|
(1,551,368 |
) |
|
(1,621,577 |
) |
|||||||
| Direct service costs and other |
|
(195,844 |
) |
|
(216,770 |
) |
|
(594,051 |
) |
|
(620,767 |
) |
|||||||
| Stock compensation expense (1) |
|
4,604 |
|
|
5,442 |
|
|
19,211 |
|
|
17,831 |
|
|||||||
| Segment profit from continuing operations | $ |
45,633 |
|
$ |
34,082 |
|
$ |
129,925 |
|
$ |
132,681 |
|
|||||||
| Reconciliation of income from continuing before income taxes (GAAP) to segment profit (non-GAAP): | |||||||||||||||||||
| Income from continuing operations before income taxes | $ |
4,903 |
|
$ |
(19,626 |
) |
$ |
6,453 |
|
$ |
(4,154 |
) |
|||||||
| Stock compensation expense |
|
4,604 |
|
|
5,442 |
|
|
19,211 |
|
|
17,831 |
|
|||||||
| Depreciation and amortization |
|
28,890 |
|
|
24,730 |
|
|
82,498 |
|
|
71,976 |
|
|||||||
| Interest expense |
|
8,935 |
|
|
7,286 |
|
|
27,042 |
|
|
24,239 |
|
|||||||
| Interest and other income |
|
(1,699 |
) |
|
(349 |
) |
|
(5,279 |
) |
|
(2,119 |
) |
|||||||
| Special charges |
|
- |
|
|
16,599 |
|
|
- |
|
|
24,908 |
|
|||||||
| Segment profit from continuing operations | $ |
45,633 |
|
$ |
34,082 |
|
$ |
129,925 |
|
$ |
132,681 |
|
|||||||
| (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) Pharmacy Management provides pharmacy benefits management for certain Healthcare customers, and 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. | |||||||||||
| MAGELLAN HEALTH, INC. AND SUBSIDIARIES | ||||||||||||||||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||||
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||
September 30, |
|
September 30, |
||||||||||||||||
2019 |
|
|
2020 |
|
2019 |
|
|
2020 |
||||||||||
| Net income (loss) from continuing operations | $ |
4,121 |
|
$ |
(17,296 |
) |
$ |
3,145 |
|
$ |
28,742 |
|
||||||
| Adjustments | ||||||||||||||||||
| Amortization of acquired intangibles |
|
7,750 |
|
|
9,924 |
|
|
23,252 |
|
|
29,183 |
|
||||||
| Special charges |
|
- |
|
|
16,599 |
|
|
- |
|
|
24,908 |
|
||||||
| Tax impact |
|
(2,088 |
) |
|
(6,975 |
) |
|
(6,185 |
) |
|
(14,388 |
) |
||||||
| Nonrecurring tax benefit - divestiture |
|
- |
|
|
(105 |
) |
|
- |
|
|
(39,012 |
) |
||||||
| Adjusted net income from continuing operations | $ |
9,783 |
|
$ |
2,147 |
|
$ |
20,212 |
|
$ |
29,433 |
|
||||||
| Net income (loss) per common share attributable to Magellan —Diluted | $ |
0.17 |
|
$ |
(0.68 |
) |
$ |
0.13 |
|
$ |
1.14 |
|
||||||
| Adjustments | ||||||||||||||||||
| Amortization of acquired intangibles |
|
0.31 |
|
|
0.39 |
|
|
0.95 |
|
|
1.15 |
|
||||||
| Special charges |
|
- |
|
|
0.65 |
|
|
- |
|
|
0.98 |
|
||||||
| Tax impact |
|
(0.08 |
) |
|
(0.27 |
) |
|
(0.25 |
) |
|
(0.57 |
) |
||||||
| Nonrecurring tax benefit - divestiture |
|
- |
|
|
(0.01 |
) |
|
- |
|
|
(1.54 |
) |
||||||
| Adjusted earnings per share | $ |
0.40 |
|
$ |
0.08 |
|
$ |
0.83 |
|
$ |
1.16 |
|
||||||
| MAGELLAN HEALTH, INC. AND SUBSIDIARIES | ||||||||||
| FISCAL 2020 CONTINUING OPERATIONS GUIDANCE | ||||||||||
| (In millions, except per share amounts) | ||||||||||
| As of October 29, 2020 | ||||||||||
| Low | High | |||||||||
| Net revenue | $ |
4,400.0 |
|
$ |
4,600.0 |
|
||||
| Income (loss) before income taxes |
|
(42.0 |
) |
|
(22.0 |
) |
||||
| Net income |
|
1.0 |
|
|
13.0 |
|
||||
| Segment profit (1) |
|
145.0 |
|
|
165.0 |
|
||||
| Adjusted net income (1) |
|
16.0 |
|
|
28.0 |
|
||||
| Diluted per share results: | ||||||||||
| Earnings per share (2) |
|
0.04 |
|
|
0.51 |
|
||||
| Adjusted earnings per share (1)(2) |
|
0.63 |
|
|
1.10 |
|
||||
| (1) Refer to the Reconciliation of Non-GAAP Financial Measures table. | ||||||||||
| (2) Based on average fully diluted shares of 25.5 million. | ||||||||||
| MAGELLAN HEALTH, INC. AND SUBSIDIARIES | |||||||
| FISCAL 2020 CONTINUING OPERATIONS GUIDANCE | |||||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||
| (In millions, except per share amounts) | |||||||
| As of October 29, 2020 | |||||||
| Low | High | ||||||
| Net income | $ |
1.0 |
$ |
13.0 |
|||
| Adjustments | |||||||
| Amortization of acquired intangibles | ~39.0 | ||||||
| Special charges | ~35.0 | ||||||
| Tax impact | ~(20.0) | ||||||
| Nonrecurring tax benefit - divestiture | ~(39.0) | ||||||
| Adjusted net income | $ |
16.0 |
$ |
28.0 |
|||
| Net income per common share — Diluted | $ |
0.04 |
$ |
0.51 |
|||
| Adjustments | |||||||
| Amortization of acquired intangibles | ~1.54 | ||||||
| Special charges | ~1.37 | ||||||
| Tax impact | ~(0.78) | ||||||
| Nonrecurring tax benefit - divestiture | ~(1.54) | ||||||
| Adjusted earnings per share | $ |
0.63 |
$ |
1.10 |
|||
| Reconciliation of income (loss) before income taxes to segment profit: | |||||||
| Income (loss) before income taxes | $ |
(42.0) |
$ |
(22.0) |
|||
| Stock compensation expense | ~25.0 | ||||||
| Depreciation and amortization | ~98.0 | ||||||
| Interest expense | ~31.0 | ||||||
| Interest income | ~(2.0) | ||||||
| Special charges | ~35.0 | ||||||
| Segment profit | $ |
145.0 |
$ |
165.0 |
|||
(MGLN-GEN)
