Executive Summary

Q1 2025 delivered strong EPS and revenue growth: GAAP EPS $2.63 and adjusted EPS $2.90 (+28% YoY), premium and service revenues up 17% YoY to $42.49B, and operating cash flow of $1.51B .
EPS materially beat Wall Street consensus ($2.90 vs $2.52*), while premium & service revenue was modestly below consensus ($42.49B vs $43.25B*); beat driven by SG&A leverage, early-year Medicare Part D HBR dynamics under IRA, and robust Marketplace enrollment .
Guidance raised: premium & service revenues increased by $6B to $164–$166B (from $158–$160B in Feb and $154–$156B in Dec), with total revenue now $178.5–$181.5B; EPS floors reiterated (GAAP >$6.19, adjusted >$7.25) .
Catalysts: strength in Marketplace membership (+29% YoY), Medicare PDP (+22% YoY), and policy visibility around enhanced APTCs and Medicaid rates; management highlighted progress on Medicaid margin recovery and Medicare breakeven trajectory by 2027 .

What Went Well and What Went Wrong

What Went Well

Robust EPS performance: Adjusted EPS of $2.90 (+28% YoY) and GAAP EPS $2.63, with SG&A ratio improving to 7.9% (vs 8.7% adjusted in Q1 2024) due to scale and PDP growth .
Membership and revenue expansion: Marketplace +29% YoY to 5.63M, PDP +22% YoY to 7.87M; Medicare revenue +48% YoY and Commercial +31% YoY, reflecting strong product positioning and retention .
Raised revenue guidance by $6B driven by outperforming Marketplace enrollment and stronger Medicare Advantage retention; CEO reiterated adjusted EPS floor >$7.25: “attractive opportunities to grow from the strength of our core businesses” .

What Went Wrong

Elevated Medicaid HBR (93.6%) and consolidated HBR (87.5%) impacted by $130M of excess flu/ILI costs beyond initial expectations; masks underlying Medicaid MLR improvement .
PDP specialty drug utilization pressure in non-LIS populations (as max OOP fell to $2,000 under IRA), partially offset by demo risk corridor and SG&A gains; management anticipates incorporating higher specialty trend in 2026 bids .
Marketplace HBR ticked higher (75.0% vs 73.3% last year) due to 1.9M new members’ early-year utilization before risk adjustment recognition; prudently awaiting first Wakely file (late June/early July) .

Financial Results

Metric	Q1 2024	Q4 2024	Q1 2025
Total Revenues ($USD Billions)	$40.41	$40.81	$46.62
Premium & Service Revenues ($USD Billions)	$36.34	$36.30	$42.49
GAAP Diluted EPS ($)	$2.16	$0.56	$2.63
Adjusted Diluted EPS ($)	$2.26	$0.80	$2.90
Health Benefits Ratio (%)	87.1%	89.6%	87.5%
SG&A Expense Ratio (%)	8.9%	8.9%	7.9%
Cash Flow from Operations ($USD Billions)	$(0.46)	$(0.59)	$1.51

Estimates vs Actuals (Premium & Service Revenues, EPS)	Q1 2024	Q4 2024	Q1 2025
Revenue Consensus Mean ($USD Billions)	$36.40*	$39.32*	$43.25*
Revenue Actual ($USD Billions)	$36.78	$36.64	$42.49
Primary EPS Consensus Mean ($)	$2.08*	$0.49*	$2.52*
Adjusted Diluted EPS Actual ($)	$2.26	$0.80	$2.90

Values retrieved from S&P Global.*

Segment revenue mix (Premium & Service Revenues):

Segment ($USD Billions)	Q1 2024	Q1 2025	YoY Change
Medicaid	$21.46	$22.30	+4%
Commercial	$7.75	$10.15	+31%
Medicare (MA, Supplement, D-SNP, PDP)	$5.94	$8.76	+48%
Other	$1.19	$1.28	+8%
Total Premium & Service Revenues	$36.34	$42.49	+17%

Key KPIs and product-level HBRs:

KPI	Q1 2024	Q1 2025
Total At-Risk Membership	25.65M	27.94M
Individual Marketplace Membership	4.35M	5.63M
Medicare PDP Membership	6.44M	7.87M
Days in Claims Payable	53	49
HBR – Medicaid	90.9%	93.6%
HBR – Commercial	73.3%	75.0%
HBR – Medicare	90.8%	86.3%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Premium & Service Revenues ($B)	FY 2025	$154–$156 (Dec 12, 2024)	$164–$166 (Apr 25, 2025)	Raised (+$10B vs Dec; +$6B vs Feb)
Premium & Service Revenues ($B)	FY 2025	$158–$160 (Feb 4, 2025)	$164–$166 (Apr 25, 2025)	Raised (+$6B)
Total Revenues ($B)	FY 2025	$166.5–$169.5 (Dec 12, 2024)	$178.5–$181.5 (Apr 25, 2025)	Raised
GAAP Diluted EPS	FY 2025	>$6.19 (Dec 12, 2024)	>$6.19 (Apr 25, 2025)	Maintained
Adjusted Diluted EPS	FY 2025	>$7.25 (Dec 12, 2024)	>$7.25 (Apr 25, 2025)	Maintained
HBR (%)	FY 2025	88.4–89.0 (Dec 12, 2024)	88.9–89.5 (Apr 25, 2025)	Raised midpoint (reflecting mix and trends)
SG&A Expense Ratio (%)	FY 2025	8.1–8.7 (Dec 12, 2024)	7.7–8.2 (Apr 25, 2025)	Lowered (mix, leverage)
Adjusted SG&A Expense Ratio (%)	FY 2025	8.1–8.7 (Dec 12, 2024)	7.7–8.2 (Apr 25, 2025)	Lowered
Diluted Shares (MM)	FY 2025	491–494	491–494	Maintained
Effective Tax Rate (%)	FY 2025	21.5–22.5	21.5–22.5	Maintained

Management specified the $6B P&SR raise: +$5B Marketplace (enrollment outperformance) and +$1B Medicare Advantage retention .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024, Q4 2024)	Current Period (Q1 2025)	Trend
Medicaid margin recovery, rates vs acuity	Redeterminations elevated Medicaid HBR; progressing on rate alignment; mid-4% net rate increases on 1/1/25 cohort	Underlying improvement masked by $130M flu; projecting full-year composite rate ≥4%; continued constructive state dialogues	Improving, albeit near-term flu headwind
Marketplace integrity (FTR, agent-of-record lock)	Integrity checkpoints expected to mute OE throughput; effectuation consistent with norms	Strong Q1 effectuation and retention; expecting attrition later; first Wakely in late June/early July; monitoring FTR impact into Q2/Q3	Near-term strength; prudent posture on RA/FTR
Enhanced APTCs policy	2025 guidance assumed continuation; investor-day framework sized downside if lapse	CEO: bipartisan momentum to extend; CFO still sizes downside; conservative planning including dual rate filings in many states	Guarded optimism; contingency planning active
Medicare (STARS, breakeven path)	STARS improved to ~55% in ≥3.5⭐; path to MA breakeven 2027 reiterated	Maintaining 2027 breakeven; derisked plan across STAR outcomes; 2026 rate calc includes more recent claims data	Continued execution; visibility improving
PDP specialty drug trend	IRA changes lifted PDP; strong 2024 finish; demo risk corridor protecting margins	High specialty utilization in non-LIS cohort; planning to reflect in 2026 bids; still targeting ~1% pretax margin in 2025	Elevated trend; managed via corridor and SG&A
SG&A discipline and leverage	SG&A ratios declining with scale, mix; cash flow timing expected to normalize	Adjusted SG&A 7.9%; lowering FY SG&A midpoint by 45 bps; OCF $1.5B in Q1	Positive leverage continuing

Management Commentary

CEO on Q1 strength and EPS outlook: “We are pleased to reiterate our full year 2025 adjusted diluted earnings per share outlook of greater than $7.25” .
CEO on policy backdrop: “We do not see broad support for benefit cuts in Medicaid...there is growing Bipartisan recognition...that the expiration of the enhanced premium tax credits must be addressed” .
CFO on segment drivers: Medicaid HBR ~93.6% including ~$130M flu costs; Marketplace HBR higher due to new membership before risk adjustment; Medicare HBR lower early in year under IRA with inverted slope .
CFO on guidance recalibration: Raising premium & service revenue midpoint to $165B; adjusting consolidated HBR higher on mix and specialty drugs; lowering adjusted SG&A midpoint by 45 bps .

Q&A Highlights

Flu/ILI impact: ~$130M incremental Medicaid medical expense above expectations; isolated to Q1; flu trailed off in March; minimal spillover to other segments .
Risk adjustment and new Marketplace members: Early-year utilization in new cohort consistent with acuity that typically flows into RA; waiting for first Wakely data late June/early July before booking receivable .
Enhanced APTCs sensitivity: Management still sizes ~-$1 adjusted EPS downside if enhanced APTCs lapse; considering dual rate filings; sees bipartisan support for extension .
PDP risk corridor mechanics: 50/50 corridor beyond 2.5% variance vs bid pharmacy cost protects margins; still targeting ~1% pretax margin for 2025 .
Medicaid utilization and high-cost therapies: Behavioral health remains elevated; high-cost drugs (e.g., Elevidys) pressuring trend; working with states on program changes and rate updates .

Estimates Context

EPS beat: Adjusted diluted EPS $2.90 vs consensus $2.52* → beat of $0.38, driven by SG&A leverage, early-year Medicare PDP dynamics under IRA, and robust Marketplace membership .
Revenue vs consensus: Premium & service revenues $42.49B vs consensus $43.25B* → modest miss; total revenues were $46.62B, but consensus frameworks typically align to premium & service revenues .
Values retrieved from S&P Global.*

Key Takeaways for Investors

Strong EPS quality with operating leverage and early-year Medicare PDP HBR tailwind under IRA; guidance maintained at >$7.25 adjusted EPS amid revenue upgrades .
Marketplace growth is a core earnings driver; prudently monitor risk adjustment receipts and FTR timing into Q2/Q3, but retention and effectuation trends are favorable .
Medicaid margin recovery progressing; expect sequential HBR improvement as rates catch up to acuity, though high-cost drugs and behavioral health require ongoing state engagement .
PDP specialty drug trend is the principal 2026 bidding risk; management intends to price adequately and does not assume repeating the same level of demo protection .
Raised revenue guidance (+$6B P&SR) is a notable positive catalyst; longer-term earnings power expands with scale across Marketplace and Medicare and ongoing SG&A efficiency .
Policy watch: enhanced APTCs extension is a swing factor; management indicates bipartisan momentum, but contingency plans (dual rate filings) are in place .
Cash generation improved; DCP down on pharmacy claim mix; share count guidance stable—buybacks embedded in plan (per prior commentary) support EPS durability .

Appendix: Source Documents

Q1 2025 8-K 2.02 press release and Exhibit 99.1: financials, guidance, segment detail .
Q1 2025 press release: summary metrics, segment mix, balance sheet and supplemental data .
Q1 2025 earnings call transcript: prepared remarks and Q&A detail on flu costs, RA, APTCs, PDP corridor, Medicaid rates .
Prior quarters for trend: Q4 2024 press release and call ; Q3 2024 press release .

CENTENE CORP (CNC)·Q1 2025 Earnings Summary