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MH

MOLINA HEALTHCARE, INC. (MOH)·Q1 2025 Earnings Summary

Executive Summary

  • Adjusted EPS of $6.08 on total revenue of $11.147B; GAAP EPS was $5.45. Consolidated MCR was 89.2% and adjusted G&A ratio was 6.8% .
  • EPS beat S&P Global consensus by ~2% (consensus $5.96*) and revenue beat by ~3% (consensus $10.81B*) as reported totals exceeded estimates; management reaffirmed FY 2025 adjusted EPS of at least $24.50 and ~$42B premium revenue .
  • Marketplace MCR came in higher than expected at 81.7% due to prior-year risk adjustment true-up, member reconciliation, and new-store ConnectiCare, but normalized to ~77.7% excluding these items .
  • Guidance refinements: consolidated MCR nudged to 88.8% (from 88.7%), Marketplace MCR raised to 80% (from 79%), G&A ratio improved to ~6.9% (from 7.0%); EPS and premium revenue guidance reaffirmed .
  • Catalysts: contract win for integrated DSNP in Illinois (+~$800M premium, +$0.50 embedded EPS), robust buybacks ($500M), and improving Medicaid rate environment offsetting cost trend; embedded earnings increased to ~$8.65 per share .

What Went Well and What Went Wrong

What Went Well

  • Strong topline and EPS: Premium revenue rose 12% YoY to $10.628B; adjusted EPS $6.08 grew 6% YoY; management reaffirmed FY 2025 EPS and revenue guidance .
  • Medicaid rate environment improving: Q1 included on-/off-cycle increases; management raised full-year rate assumption to ~5% while maintaining Medicaid MCR guidance at 89.9% .
  • Strategic growth: Awarded integrated DSNP contract in Illinois (~$800M incremental premium; +$0.50 embedded EPS), contributing to targets of $46B premium in 2026 and at least $52B in 2027 .
    • “Embedded earnings have now increased from approximately $7.75 to $8.65 per share” — CEO Joseph Zubretsky .

What Went Wrong

  • Marketplace MCR pressure: Reported 81.7% with ~400 bps drag from 2024 risk adjustment true-up, member reconciliation, and new-store ConnectiCare; normalized to ~77.7% .
  • Higher cost trend conservatism: Full-year consolidated MCR increased to 88.8%; Marketplace MCR guidance raised to 80% (upper end of target range) due to nonrecurring Q1 items .
  • Contract headwind: Midyear loss of Virginia Medicaid contract now expected to reallocate members to other MCOs in 2025, contributing ~$0.40 EPS headwind within guidance .

Financial Results

Summary vs Prior Year, Prior Quarter, and Estimates

MetricQ1 2024Q4 2024Q1 2025 ActualQ1 2025 Consensus
Total Revenue ($USD Billions)$9.931 $10.499 $11.147 $10.814*
Premium Revenue ($USD Billions)$9.504 $9.983 $10.628 —
GAAP EPS (Diluted) ($)$5.17 $4.44 $5.45 —
Adjusted EPS (Diluted) ($)$5.73 $5.05 $6.08 $5.96*
Consolidated MCR (%)88.5% 90.2% 89.2% —
Adjusted G&A Ratio (%)7.1% 6.3% 6.8% —

Values with asterisk (*) retrieved from S&P Global.

Notes:

  • Adjusted EPS beat by ~$0.12 (+~2%), and total revenue beat by ~$0.33B (+~3%) vs S&P consensus* .
  • YoY: total revenue +~12%; adjusted EPS +~6% .
  • QoQ: total revenue +~6%; adjusted EPS +~20% .

Segment Premium and MCR

SegmentQ1 2024 Premium ($MM)Q1 2024 MCR (%)Q4 2024 Premium ($MM)Q4 2024 MCR (%)Q1 2025 Premium ($MM)Q1 2025 MCR (%)
Medicaid$7,492 89.7% $8,041 90.2% $8,130 90.3%
Medicare$1,442 88.7% $1,292 93.8% $1,468 88.3%
Marketplace$570 73.3% $650 83.3% $1,004 81.7%
Other————$26 87.7%
Consolidated$9,504 88.5% $9,983 90.2% $10,628 89.2%

Marketplace normalization: excluding prior-year risk adjustment/member reconciliation and new-store ConnectiCare items, Marketplace MCR ~77.7% .

KPIs (Membership)

MetricQ1 2024Q4 2024Q1 2025
Medicaid Ending Membership5,123,000 4,890,000 4,812,000
Medicare Ending Membership258,000 242,000 260,000
Marketplace Ending Membership346,000 403,000 662,000
Total Ending Membership5,727,000 5,535,000 5,752,000

Guidance Changes

MetricPeriodPrevious Guidance (Feb 5, 2025)Current Guidance (Apr 24, 2025)Change
Premium RevenueFY 2025~$42.0B ~$42.0B Maintained
Adjusted EPS (Diluted)FY 2025≥ $24.50 ≥ $24.50 Maintained
Consolidated MCRFY 202588.7% 88.8% Slightly raised (tighter margin)
Medicaid MCRFY 202589.9% 89.9% Maintained
Medicare MCRFY 202589% 89% Maintained
Marketplace MCRFY 202579% 80% Raised (reflecting nonrecurring Q1 items)
Adjusted G&A RatioFY 2025~7.0% ~6.9% Improved (lower)
Year-End Marketplace MembershipFY 2025~580K ~620K Raised (+40K)

EPS guidance drivers updated: +$0.40 share repurchases, +$0.30 volume (Medicaid/Marketplace), +$0.30 lower G&A; offsets −$0.60 Marketplace MCR, −$0.40 Virginia contract termination .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Medicaid rates vs trendOff-/on-cycle rate updates in H2’24; corridors buffering cost trend; legacy book ~89.3% MCR normalized Rate assumption raised to ~5% (85% known); trend raised to ~5% for conservatism; Medicaid MCR held at 89.9% Slight improvement in rate visibility; cautious on trend
Marketplace dynamicsOutperformance; reinvested margin in pricing; strong SEP adds; targeting ~79% MCR in 2025 Q1 nonrecurring headwinds (risk adjustment, member reconciliation, new-store); normalized ~77.7%; FY MCR raised to 80%; YE members ~620K Short-term noise; still within long-term range
Medicare (DSNP focus)MA MCR pressure late 2024; exited MAPD in 13 states; 2025 guide ~89% MCR Q1 Medicare MCR 88.3%; confident in DSNP and integration; IRA/Part D dynamics as expected Stabilizing within guidance
Embedded earnings & M&AEmbedded earnings grew to $5.75; ConnectiCare expected to close; pipeline active Embedded earnings increased to ~$8.65; Illinois DSNP adds ~$0.50 EPS; pipeline “replete” Strengthening
Legislative/regulatoryExpect marginal changes to Medicaid despite DC chatter; states responsive on rates Continued view of marginal changes; focus on actuarial soundness; integration bodes well Stable
G&A disciplineVendor credits; adj. G&A ~6.7% FY’24; leverage expected Adjusted G&A 6.8% in Q1; FY outlook improved to ~6.9%; flat trajectory Positive cost control

Management Commentary

  • “Our first quarter results reflect our team’s disciplined approach to medical cost management in an improving rate environment.” — CEO Joseph Zubretsky .
  • “Full year 2025 premium revenue guidance remains unchanged at approximately $42 billion… adjusted earnings per share guidance of at least $24.50.” — CEO Joseph Zubretsky .
  • “Embedded earnings have now increased from approximately $7.75 to $8.65 per share.” — CEO Joseph Zubretsky .
  • “In Marketplace, our first quarter reported MCR was 81.7… Altogether, these three nonrecurring items accounted for approximately 400 basis points… Excluding these items, the normalized Marketplace MCR was approximately 77.7%.” — CFO Mark Keim .
  • “We now expect the full year G&A ratio to be approximately 6.9%, better than previously guided… We reaffirm our full year EPS guidance of at least $24.50 per share.” — CFO Mark Keim .

Q&A Highlights

  • Marketplace mechanics: ~400 bps Q1 headwind splits roughly one-third risk adjustment finalization, one-third member reconciliation (tax-time discovery/clawbacks), one-third new-store ConnectiCare; integrity rules (agent of record lock) should reduce future churn .
  • Rates and trend posture: Medicaid rate updates of ~$150M (full-year ~5% rates, 85% known); trend lifted to ~5% purely for early-year conservatism—holding Medicaid MCR at 89.9% .
  • Effectuation/retention: Marketplace effectuation strong; renewal retention ~70% previously; YE membership outlook raised to ~620K .
  • G&A cadence: Expect flat trajectory across 2025; early-year implementation costs offset by back-half marketing .
  • M&A pipeline: Active across single-state operators struggling in current environment; embedded earnings expected to contribute meaningfully to 2026+ .

Estimates Context

MetricConsensus (Q1 2025)Actual (Q1 2025)Surprise
Adjusted EPS (Diluted) ($)5.96*6.08 +$0.12 (+~2%)
Revenue ($USD Billions)10.81*11.147 +$0.33B (+~3%)

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Earnings quality strong: Adjusted EPS beat and guidance reaffirmed despite short-term Marketplace noise; G&A guide improved, supporting margin durability .
  • Medicaid visibility improving: Rate updates trending modestly higher and increasingly “known,” while management prudently offsets with early-year trend conservatism; MCR guidance held at 89.9% .
  • Marketplace remains accretive: Nonrecurring Q1 items explained; normalized MCR ~77.7% and YE membership raised; full-year MCR reset to 80% still within long-term range .
  • Strategic growth intact: Illinois DSNP win, embedded earnings increased to ~$8.65, and active M&A pipeline underpin 2026–2027 revenue targets .
  • Capital deployment: $500M Q1 buybacks and debt at ~2x TTM EBITDA/47% debt-to-cap enhance EPS leverage while maintaining liquidity .
  • Near-term trading: Expect focus on Marketplace normalization and Medicaid rate/ trend updates in Q2; reaffirmed EPS a positive anchor amid managed care volatility .
  • Medium-term thesis: Integrated DSNP expansion and actuarial rate adequacy should compress consolidated MCR back toward ~89% over time; G&A leverage offers a hedge against cost pressure .

Additional Q1 2025 Press Releases: Primarily community grants and operational announcements; also the scheduling notice for the Q2 2025 earnings release (June 4, 2025), with no material changes to financial guidance in those communications .