Molina Healthcare, Inc. (NYSE:MOH) Q4 2020 Results Conference Call February 11, 2021 8:00 AM ET Company Participants Julie Trudell - Senior Vice President of Investor Relations Joseph Zubretsky - President and Chief Executive Officer Thomas Tran - Chief Financial Officer Conference Call Participants Matthew Borsch - BMO Capital Markets Ricky Goldwasser - Morgan Stanley Robert Jones - Goldman Sachs Charles Rhyee - Cowen & Company Gary Taylor - JPMorgan Justin Lake - Wolfe Research Scott Fidel - Stephens Davi ...

Molina Healthcare, Inc. (NYSE:MOH) Q3 2020 Earnings Conference Call October 29, 2020 8:00 AM ET Company Participants Julie Trudell ??? Senior Vice President of Investor Relations Joe Zubretsky ??? President and Chief Executive Officer Tom Tran ??? Chief Financial Officer Conference Call Participants Matthew Borsch ??? BMO Capital Markets Kevin Fischbeck ??? Bank of America Justin Lake ??? Wolfe Research Dave Styblo ??? Jefferies Josh Raskin ??? Nephron Research Sarah James ??? Piper Sandler Scott Fidel ??? ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-31719 200 Oceangate, Suite 100 Long Beach, California 90802 (Address of principal executive offices) (Zip ...

Part I - Financial and Operational Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Molina Healthcare, Inc.'s unaudited consolidated financial statements as of June 30, 2020, show significant year-over-year growth in net income to $276 million for Q2 and $454 million for H1, with total assets increasing to $7.88 billion, reflecting operations across Health Plans and Other segments Consolidated Statements of Income Highlights (Unaudited) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $4,618 million | $4,193 million | $9,167 million | $8,312 million | | **Operating Income** | $424 million | $265 million | $698 million | $545 million | | **Net Income** | $276 million | $196 million | $454 million | $394 million | | **Diluted Net Income per Share** | $4.65 | $3.06 | $7.54 | $6.04 | Consolidated Balance Sheet Highlights (Unaudited) | Metric | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $3,303 million | $2,452 million | | **Total Assets** | $7,876 million | $6,787 million | | **Total Liabilities** | $5,880 million | $4,827 million | | **Total Stockholders' Equity** | $1,996 million | $1,960 million | Consolidated Statements of Cash Flows Highlights (Unaudited) | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $749 million | $156 million | | **Net cash provided by (used in) investing activities** | $38 million | ($393) million | | **Net cash provided by (used in) financing activities** | $71 million | ($362) million | [Note 1. Organization and Basis of Presentation](index=8&type=section&id=Note%201.%20Organization%20and%20Basis%20of%20Presentation) Molina Healthcare provides managed healthcare services through its Health Plans and Other segments, serving approximately 3.6 million members as of June 30, 2020, while actively pursuing acquisitions like YourCare and Magellan Complete Care, winning new contracts in Kentucky, and exiting the Puerto Rico Medicaid program - The company operates through two segments: Health Plans and Other. The Health Plans segment served approximately **3.6 million members** in 14 states and Puerto Rico as of June 30, 2020[16](index=16&type=chunk)[17](index=17&type=chunk) - Recent strategic activities include: - **New York:** Completed the acquisition of YourCare Health Plan for **$42 million** on July 1, 2020 - **Kentucky:** Selected for a statewide Medicaid contract starting January 1, 2021, and agreed to acquire Passport Health Plan for approximately **$20 million** - **Magellan Complete Care:** Agreed to acquire the MCC line of business for approximately **$820 million**, expected to close by Q1 2021 - **Puerto Rico:** Exiting the Medicaid program upon contract expiration in October 2020[20](index=20&type=chunk)[21](index=21&type=chunk)[23](index=23&type=chunk) [Note 2. Significant Accounting Policies](index=9&type=section&id=Note%202.%20Significant%20Accounting%20Policies) Key accounting policies include monthly premium revenue recognition with adjustments for MLR and risk, a Q2 2020 accrual of $75 million for COVID-19 related premium refunds, and an estimated $277 million liability for the reinstated 2020 Health Insurer Fee which increases the effective tax rate - Due to reduced medical service demand from COVID-19, the company accrued approximately **$75 million** in Q2 2020 for retroactive premium refunds and related actions to various states[39](index=39&type=chunk) Amounts Due Government Agencies (in millions) | Program | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Medicaid Program | $190 | $187 | | Medicare Program | $78 | $71 | | Marketplace Program | $597 | $406 | | **Total** | **$865** | **$664** | - The federal Health Insurer Fee (HIF) was reinstated for 2020, with an estimated liability of **$277 million**. This fee is not tax-deductible and increases the 2020 effective tax rate. The HIF is repealed for years after 2020[54](index=54&type=chunk) [Note 6. Medical Claims and Benefits Payable](index=18&type=section&id=Note%206.%20Medical%20Claims%20and%20Benefits%20Payable) Total medical claims and benefits payable increased to $1.960 billion at June 30, 2020, primarily due to higher fee-for-service claims IBNP, with favorable prior-year reserve development of $58 million in H1 2020, less than the $232 million in H1 2019 Medical Claims and Benefits Payable (in millions) | Category | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Fee-for-service claims IBNP | $1,432 | $1,406 | | Pharmacy payable | $132 | $126 | | Capitation payable | $74 | $55 | | Other | $322 | $267 | | **Total** | **$1,960** | **$1,854** | - Estimates for prior-year medical claims payable developed favorably by **$58 million** in the first six months of 2020. This was a smaller favorable development compared to the **$232 million** seen in the first six months of 2019[82](index=82&type=chunk) [Note 7. Debt](index=19&type=section&id=Note%207.%20Debt) Molina significantly restructured its debt in Q2 2020 by issuing $800 million in 4.375% Senior Notes to repay a $600 million term loan and expanding its revolving credit facility to $1.0 billion, resulting in total long-term debt of $1.812 billion as of June 30, 2020 - In June 2020, the company issued **$800 million** of 4.375% Notes due 2028. Proceeds were used to repay a **$600 million** term loan and for general corporate purposes[92](index=92&type=chunk) - A new credit agreement was established in June 2020, increasing the revolving credit facility to **$1.0 billion** from **$500 million** and terminating the previous term loan facility[85](index=85&type=chunk)[96](index=96&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported strong Q2 2020 results with $4.65 net income per diluted share, driven by an 8.0% premium revenue increase and lower MCR, with COVID-19 having a net positive impact on earnings, while the company strengthened its balance sheet and pursued strategic acquisitions and contract wins [Second Quarter 2020 Highlights](index=26&type=section&id=SECOND%20QUARTER%202020%20HIGHLIGHTS) Q2 2020 saw strong financial performance with $276 million net income ($4.65 per diluted share), supported by an 8.0% premium revenue increase and a lower consolidated MCR of 82.3%, with COVID-19 having a net positive impact on earnings estimated between $65 million and $100 million Q2 2020 Key Performance Metrics | Metric | Q2 2020 | Change vs. Q2 2019 | | :--- | :--- | :--- | | **Premium Revenue** | $4.4 billion | +8.0% | | **Consolidated MCR** | 82.3% | -330 bps | | **G&A Ratio** | 7.5% | -30 bps | | **After-tax Margin** | 6.0% | +130 bps | - The combined effects of COVID-19 are estimated to have increased net income by approximately **$65 million to $100 million**, or **$1.10 to $1.65 per diluted share**[123](index=123&type=chunk) [Health Plans Segment Analysis](index=29&type=section&id=HEALTH%20PLANS) The Health Plans segment, serving 3.6 million members, experienced a Medical Margin increase to $774 million in Q2 2020 due to lower MCR from reduced healthcare utilization during COVID-19, partially offset by premium refunds, while navigating uncertainties from the pandemic, the ACA Supreme Court case, and contract re-procurements - Total membership grew to **3.56 million** as of June 30, 2020, an increase of **151,000** in the quarter, primarily in the Medicaid program due to the suspension of member redeterminations during the pandemic[155](index=155&type=chunk)[177](index=177&type=chunk) Medical Margin by Program (in millions) | Program | Q2 2020 Medical Margin | Q2 2019 Medical Margin | Change | | :--- | :--- | :--- | :--- | | Medicaid | $553 | $364 | +52% | | Medicare | $125 | $84 | +49% | | Marketplace | $96 | $135 | -29% | | **Total** | **$774** | **$583** | **+33%** | - The company faces significant uncertainty from the pending Supreme Court decision on the ACA. As of June 30, 2020, ACA-related programs (Medicaid Expansion and Marketplace) accounted for nearly **1 million members** and **$2.4 billion** in revenue for the first half of the year[161](index=161&type=chunk) - The company is actively pursuing growth through acquisitions, including the pending **$820 million** purchase of Magellan Complete Care and the **$20 million** purchase of Passport Health Plan in Kentucky[164](index=164&type=chunk)[166](index=166&type=chunk) [Liquidity and Financial Condition](index=36&type=section&id=LIQUIDITY%20AND%20FINANCIAL%20CONDITION) Molina's financial condition strengthened with parent company cash and investments increasing to $1.17 billion at June 30, 2020, driven by new debt issuance and subsidiary dividends, offset by loan repayment and stock repurchases, maintaining sufficient liquidity for future acquisitions like Magellan Complete Care and Passport Health Plan - Cash, cash equivalents and investments at the parent company increased to **$1,166 million** as of June 30, 2020, from **$997 million** at December 31, 2019[202](index=202&type=chunk) - Net cash from operating activities was strong at **$749 million** for the first six months of 2020, a significant increase from **$156 million** in the prior-year period, due to better operating results and timing of government payments[210](index=210&type=chunk) - The company has available borrowing capacity of approximately **$1 billion** under its new revolving credit facility as of June 30, 2020[225](index=225&type=chunk) - Future uses of liquidity include funding the acquisitions of Magellan Complete Care (approx. **$820 million**) and Passport Health Plan (approx. **$20 million**), both of which will be funded with cash on hand[229](index=229&type=chunk)[230](index=230&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate risk, where a hypothetical 1% increase in market rates as of June 30, 2020, would decrease the fair value of its fixed-income investments by approximately $47 million, while declining rates would reduce future investment income - The company's main market risk is interest rate risk. A hypothetical and immediate **1% increase** in market interest rates would decrease the fair value of its fixed income investments by approximately **$47 million** as of June 30, 2020[235](index=235&type=chunk) [Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2020, the company's management, including the CEO and CFO, concluded that its disclosure controls and procedures are effective, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period[237](index=237&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the second quarter of 2020[238](index=238&type=chunk) Part II - Other Information [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions in the ordinary course of business, accruing liabilities for probable and estimable losses, though the uncertain outcome of pending matters could negatively impact its financial position - The company is involved in legal actions in the ordinary course of business and has accrued for losses that are probable and estimable, though outcomes remain uncertain[239](index=239&type=chunk)[111](index=111&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) The company highlights significant business risks, particularly from the unforeseeable full impact of the COVID-19 pandemic on health costs, state premium actions, and cybersecurity, alongside risks associated with its October 2020 exit from Puerto Rico's Medicaid program - The full impact of the COVID-19 pandemic on business, financial condition, and results of operations cannot be reasonably foreseen. Key risks include increased medical costs, retroactive state rate actions, potential disruption in state payments, and heightened cybersecurity threats[240](index=240&type=chunk)[241](index=241&type=chunk) - The company's exit from Puerto Rico's Medicaid program in October 2020 presents a risk. A failure to achieve an orderly transition could negatively impact financial results[241](index=241&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2020, the company did not repurchase shares under a publicly announced plan, which concluded in March, but withheld 2,568 common shares at an average price of $176.52 to satisfy employee income tax obligations for vested equity awards Issuer Purchases of Equity Securities (Q2 2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - April 30 | 136 | $133.48 | | May 1 - May 31 | 2,024 | $180.01 | | June 1 - June 30 | 408 | $173.58 | | **Total** | **2,568** | **$176.52** | - All shares purchased during the quarter were withheld to settle employee income tax obligations for vested awards under the 2019 Equity Incentive Plan. No shares were purchased under a publicly announced buyback program[242](index=242&type=chunk) [Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including agreements for the Magellan acquisition, the new credit agreement, and senior notes indenture, along with required CEO and CFO certifications and XBRL data files

Financial Data and Key Metrics Changes - The company reported earnings per diluted share of $2.92, with net income of $178 million and an after-tax margin of 3.9%, slightly exceeding expectations [9][11] - Premium revenue increased to $4.3 billion, an 8.9% increase over the prior year, consistent with the company's pivot to growth [9][43] - The medical care ratio (MCR) was 86.3%, reflecting medical cost pressures early in the quarter due to seasonal flu and unidentified COVID-19 costs, offset by lower costs later in the quarter [10][44] Business Line Data and Key Metrics Changes - In the Medicaid line of business, the MCR was 88.9%, slightly up from 88.5% in the prior year, with solid performance attributed to effective cost management [45] - The Medicare MCR improved to 81.7% from 84.7% year-over-year, driven by rate increases and higher quality incentive revenues [47] - The Marketplace MCR increased to 72.3% from 52.2% in the prior year, primarily due to lower pricing strategies [47] Market Data and Key Metrics Changes - The company experienced a steep decline in elective medical procedures starting late March, which continued into April, impacting overall medical costs [49] - COVID-19 had a significant impact on the healthcare landscape, with 950 members hospitalized, and the average length of stay being approximately 10 days [49][50] Company Strategy and Development Direction - The company announced the acquisition of Magellan Complete Care, which is expected to enhance geographic diversity and revenue, with a projected growth to $3 billion within two years [31][34] - The acquisition is anticipated to be accretive by approximately $0.50 to $0.75 in cash earnings per diluted share in the first year and at least $1.75 in the second year [35] - The company is focused on maintaining continuity of care and stability for state partners while expanding its portfolio [36] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented challenges posed by the COVID-19 pandemic but emphasized the company's strong financial position and operational resilience [17][19] - The company reaffirmed its full-year earnings guidance range of $11.20 to $11.70 per diluted share, despite uncertainties related to COVID-19's impact on medical costs and membership [24][52] - Management highlighted the potential for increased Medicaid and Marketplace enrollment due to rising unemployment, although the exact impact remains uncertain [23][54] Other Important Information - The company completed a share repurchase program, buying back 3.4 million shares for approximately $450 million [17] - The company drew down $380 million from its term loan facility to bolster liquidity, holding approximately $840 million in excess cash [18][60] Q&A Session Summary Question: Can you talk about the Magellan acquisition in terms of margins? - Management indicated that the acquisition is expected to improve margins significantly, with a current EBITDA margin of approximately 1% projected to reach 6% or 6.5% in the future [57][58] Question: What is the cash outlook for the rest of the year? - The company expects to extract approximately $500 million in ordinary dividends from operating subsidiaries, with a total cash position of $840 million and additional debt capacity of $900 million [60] Question: How do you see the enrollment trajectory changing? - Management noted that Medicaid membership grew by over 30,000 members in April, primarily due to the suspension of eligibility determinations, not directly from unemployment [68] Question: What might the MLR be for new members entering Medicaid? - Management acknowledged the uncertainty regarding the acuity of new members but indicated that the impact on MLR is difficult to predict at this time [70][71] Question: Are there any significant negatives not included in guidance? - Management confirmed that the guidance includes headwinds from lower investment income and increased SG&A expenses related to COVID-19, but no other significant negatives were identified [72][74]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-31719 MOLINA HEALTHCARE, INC. (Exact name of registrant as specified in its charter) Delaware 13-4204626 (Sta ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2019 or Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Common Stock, $0.001 Par Value MOH New York Stock Exchange Commission File Number 1-31719 Securities registered pursuant to Section 12(g) of the ...

Capital Position - Molina Healthcare had approximately $800 million in excess cash at the parent company level[8], representing roughly $13 per share[8] - The company targets a regulatory capital level of 10% of premium or 300% RBC[8] - Molina's debt to capital ratio at the parent level is 40%, with a debt to EBITDA ratio of 13x[8] - The company's ROE is 35%, and the targeted ROE at target capital is 65%[8] Capital Deployment - Molina Healthcare had approximately $17 billion in total deployable capital, including $800 million in excess cash and $900 million in undrawn debt capacity as of 3Q19[11] - The company's deployable capital could support $17 billion in additional premium capacity or $35 billion in additional premium capacity via M&A[13] - Molina targets a 65% ROE at targeted capital when reinvesting in organic growth[15] Financial Outlook - Molina Healthcare reiterated its full-year 2019 guidance as of October 29, 2019, with total revenue of approximately $161 billion[26], net income between $725 million and $740 million[26], and EPS between $1130 and $1155[26] - The company anticipates an after-tax margin of 43% to 44%[26] and a medical care ratio (MCR) of approximately 86%[26] - Molina's long-term outlook includes compound annual growth rates of 10%-12% for premium revenue, 38%-42% for after-tax margin, 9%-11% for net income, and 12%-15% for EPS[29]

OR Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-31719 MOLINA HEALTHCARE, INC. (Exact name of registrant as specified in its charter) Delaware 13-4204626 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-31719 MOLINA HEALTHCARE, INC. (Exact name of registrant as specified in its charter) Delaware 13-4204626 (Stat ...