Magellan Health Announces Full Year 2019 Guidance

SCOTTSDALE, Ariz.–(BUSINESS WIRE)–Magellan
Health, Inc.
(NASDAQ: MGLN) announced today its full year 2019
guidance parameters.

     
$ Millions, except per share results 2019 Guidance

Low

High

 
Net revenue $ 7,200.0 $ 7,500.0
Income before income taxes $ 75.0 $ 117.0
Net income $ 52.0 $ 79.0
Segment profit (1) $ 270.0 $ 290.0
Adjusted net income (1) $ 90.0 $ 114.0
Per share results:
Earnings per share (2) $ 2.14 $ 3.25
Adjusted earnings per share (1)(2) $ 3.70 $ 4.69
 
(1) Refer to the Reconciliation of GAAP to Non-GAAP measures table.
 
(2) 2019 EPS and Adjusted EPS calculations includes share
repurchases and option exercises through December 3rd, 2018 but does
not reflect any potential future activity.
 

The Company expects net revenue in the range of $7.2 to $7.5 billion.
Net income is expected to be in the range of $52 to $79 million, which
equates to a diluted earnings per share range of $2.14 to $3.25.
Adjusted net income is expected to be in the range of $90 to $114
million, which equates to an adjusted EPS range of $3.70 to $4.69.

“Over the last few years, Magellan Health has evolved considerably by
building our successful strategy to focus on the management of complex
populations, specialty healthcare and pharmacy,” said Barry M. Smith,
chairman and chief executive officer of Magellan Health. “Magellan has
significant earnings power in our current portfolio; however, we
recognize that our margins are not at industry competitive levels. As a
result, we have begun a multi-year margin improvement plan.”

Segment profit for the full year 2019 is expected to be in the range of
$270 to $290 million. The year-over-year segment profit is expected to
be favorably impacted by the following drivers:

  • Projected new business effective in 2019 of approximately $600 million
    in revenue, of which approximately 60 percent has been sold to date;
  • The annualized impact in 2019 of new business revenue sold and
    implemented during calendar year 2018 of approximately $120 million;
  • Same store growth within existing contracts;
  • Cost of care initiatives in Magellan Complete Care (MCC) of Virginia
    and other healthcare contracts;
  • Administrative cost reductions related to operational improvement
    actions; and
  • Pharmacy network rate improvement actions.

These favorable items are expected to be offset by:

  • Contract terminations with year-over-year revenue impact of
    approximately $660 million;
  • The previously announced reduction to the Company’s MCC Florida
    footprint, which will result in the contract providing an immaterial
    contribution to earnings in 2019; and
  • The impact of the lower level of discretionary benefits in 2018, which
    the Company expects to normalize in 2019.

“We feel confident in our ability to deliver 2019 guidance,” said
Jonathan N. Rubin, chief financial officer of Magellan Health. “Entering
the year, we are highly focused on execution of our key business
priorities and multi-year profitability improvement.”

The Company is confirming its 2018 full year guidance as detailed in its third
quarter 2018 earnings release
dated November 7, 2018. Full year 2018
earnings will be reported on February 28, 2019 at 6:30 a.m. Eastern,
with a conference call following the earnings release.

Guidance Conference Call

Management will discuss the Company’s full year 2019 guidance parameters
on Friday, December 7, 2018 at 8:30 a.m. Eastern. To participate in the
conference call, dial 1-800-857-1812 and use passcode “2019 Guidance”
approximately 10 minutes before the start of the call. The conference
call will also be available live via webcast at Magellan’s investor
relations page at MagellanHealth.com.
A telephonic replay will be available shortly after the conclusion of
the call through January 7, 2019. This replay may be accessed by dialing
1-866-357-4211 (domestic) or 1-203-369-0126 (international). 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.

Included in the tables issued with this press release are the
reconciliations from GAAP measures to the corresponding non-GAAP
measures.

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 release is intended to be disclosure through methods reasonably
designed to provide broad, non-exclusionary distribution to the public
in compliance with the Securities and Exchange Commission’s Fair
Disclosure Regulation. This release contains forward-looking statements
within the meaning of the Securities Exchange Act of 1934 and the
Securities Act of 1933, as amended, which involve a number of risks and
uncertainties, many of which are out of our control. All statements,
other than statements of historical information provided herein, may be
deemed to be forward-looking statements including, without limitation,
statements regarding reaffirmation of 2018 guidance, 2019 guidance for
net revenue, income before income taxes, net income, earnings per share,
segment profit, adjusted net income, and adjusted earnings per share,
projected new business effective in 2019, same store growth within
existing contracts, the annualized impact in 2019 of new business
revenue sold and implemented during calendar year 2018, cost of care
initiatives in Magellan Complete Care and other Healthcare contracts,
administrative cost reductions, pharmacy network rate improvement
actions, growth opportunities, business environment, long term
opportunities and strategy. These statements are based on management’s
analysis, judgment, belief and expectation only as of the date hereof,
and are subject to uncertainty and changes in circumstances. 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.
Actual results could differ materially due to, among other things, the
possible election of certain of the Company’s customers to manage the
healthcare services of their members directly; changes in rates paid to
and/or by the Company by customers and/or providers; higher utilization
of healthcare services by the Company’s risk members; delays, higher
costs or inability to implement new business or other Company
initiatives; the impact of changes in the contracting model for Medicaid
contracts; termination or non-renewal of customer contracts; the impact
of new or amended laws or regulations; governmental inquiries;
litigation; competition; operational issues; healthcare reform; and
general business conditions. Additional factors that could cause actual
results to differ materially from those reflected in the forward-looking
statements include, but are not limited to, the risks discussed in the
“Risk Factors” section included within the Company’s Annual Report on
Form 10-K for the year ended December 31, 2017, filed with the
Securities and Exchange Commission on March 1, 2018, and the Company’s
subsequent Quarterly Reports on Form 10-Q filed during 2018. Readers are
cautioned not to place undue reliance on these forward-looking
statements. The Company undertakes no obligation to publicly revise
these forward-looking statements to reflect events or circumstances that
arise after the date of this release. Segment profit, adjusted net
income, and adjusted EPS information referred to herein may be
considered a non-GAAP financial measure. Further information regarding
these measures, including the reasons management considers this
information useful to investors, are included in the Company’s most
recent Annual Report on Form 10-K and on subsequent Form 10-Qs.

 
MAGELLAN HEALTH, INC. AND SUBSIDIARIES
FISCAL 2019 GUIDANCE
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts)
     
 
December 7, 2018
Low     High
 
Net income attributable to Magellan $ 52.0 $ 79.0
Adjusted for acquisitions starting in 2013
Stock compensation expense
Changes in fair value of contingent consideration
Amortization of acquired intangibles 52.0 47.0
Tax impact   (14.0 )   (12.0 )
Adjusted net income $ 90.0   $ 114.0  
 
 
 
Net income per common share attributable to Magellan —Diluted $ 2.14 $ 3.25
Adjusted for acquisitions starting in 2013
Stock compensation expense
Changes in fair value of contingent consideration
Amortization of acquired intangibles 2.14 1.93
Tax impact   (0.58 )   (0.49 )
Adjusted earnings per share $ 3.70   $ 4.69  
 
 
 
Reconciliation of income before income taxes to segment profit:
Income before income taxes $ 75.0 $ 117.0
Stock compensation expense 33.0 29.0
Changes in fair value of contingent consideration
Depreciation and amortization 136.0 126.0
Interest expense 38.0 34.0
Interest income   (12.0 )   (16.0 )
Segment profit $ 270.0   $ 290.0  
 

(MGLN-GEN)

Contacts

Media Contact:
Lilly Ackley, ackleyl@magellanhealth.com,
(860) 507-1923

Investor Contact:
Joe Bogdan, jbogdan@magellanhealth.com,
(860) 507-1910