Molina Healthcare (MOH) Q1 2025 Earnings Call April 24, 2025 04:37 PM ET Company Participants Jeffrey Geyer - Vice PresidentJoseph Zubretsky - President & CEOMark Keim - Senior EVP, CFO & TreasurerAndrew Mok - DirectorA.J. Rice - Managing DirectorJohn Stansel - VP - Equity ResearchLance Wilkes - Managing DirectorDave Windley - Managing Director Conference Call Participants Stephen Baxter - Senior Equity Research AnalystJoshua Raskin - Research AnalystJustin Lake - Analyst - Healthcare ServicesSarah James - ...

Core Viewpoint - Molina Healthcare Inc. reported strong first-quarter 2025 results, with adjusted EPS of $6.08, exceeding estimates and showing a year-over-year growth of 6.1% [1][2] Financial Performance - Total revenues reached $11.15 billion, reflecting a 12.2% year-over-year increase and slightly surpassing consensus estimates [1][3] - Premium revenues amounted to $10.63 billion, an 11.8% increase year over year, driven by contract wins, buyouts, and rate hikes, although partially offset by Medicaid redeterminations [3][4] - Total operating expenses were $10.7 billion, up 12.7% year over year, primarily due to rising medical care costs and higher administrative expenses [5][6] Membership and Income - Total membership increased by 0.4% year over year to approximately 5.8 million, although it fell short of consensus estimates by 3.3% [4] - Adjusted net income decreased by 0.3% year over year to $333 million [6] Financial Position - As of March 31, 2025, cash and cash equivalents rose to $4.9 billion from $4.7 billion at the end of 2024, while total assets increased to $16.4 billion [7] - Long-term debt increased to $3.6 billion from $2.9 billion at the end of 2024 [7][8] Guidance - The company reaffirmed its 2025 guidance, expecting premium revenues of around $42 billion, indicating a 9% improvement from 2024 [9] - Adjusted EPS is projected to be a minimum of $24.50, reflecting an 8% increase from the previous year [9][10]

Financial Performance - Total revenue for Q1 2025 was $11,147 million, a 12.2% increase from $9,931 million in Q1 2024[7] - Premium revenue increased to $10,628 million, up 11.8% from $9,504 million year-over-year[7] - Net income for Q1 2025 was $298 million, slightly down from $301 million in Q1 2024, resulting in a diluted net income per share of $5.45[7][8] - Operating income for the quarter was $433 million, compared to $426 million in the same period last year, reflecting a 1.6% increase[7] - Comprehensive income for Q1 2025 was $327 million, up from $298 million in Q1 2024[8] - The consolidated medical care ratio (MCR) was 89.2%, up from 88.5% in Q1 2024, primarily due to higher medical benefits utilization[88] - General and administrative expense (G&A) ratio improved to 6.9% from 7.2% in Q1 2024, indicating better operating discipline[88] Membership and Service Expansion - Molina Healthcare served approximately 5.8 million members across 22 states as of March 31, 2025[16] - Membership increased to 5.8 million as of March 31, 2025, reflecting a growth of 25,000 members, or 0.4%, compared to the previous year[88] - The company is focused on expanding its operations in new states and integrating acquisitions to support growth[83] Medical Care Costs - The company reported a decrease in medical care costs to $9,479 million from $8,414 million year-over-year, reflecting improved cost management[7] - For the three months ended March 31, 2025, total medical care costs amounted to $9,479 million, a decrease from $9,665 million in the prior year[57] - Medical care costs totaled $9,479 billion in Q1 2025, compared to $8,414 billion in Q1 2024[88] Assets and Liabilities - Total assets increased to $16,386 million from $15,630 million at the end of 2024, marking a 4.8% growth[10] - Long-term debt rose to $3,574 million, up from $2,923 million at the end of 2024, indicating a significant increase in leverage[10] - Cash and cash equivalents at the end of the period were $4,955 million, compared to $4,572 million at the end of Q1 2024[14] - The ending balance of medical claims and benefits payable as of March 31, 2025, was $4,804 million, compared to $4,571 million as of March 31, 2024[57] Acquisitions - The acquisition of ConnectiCare was completed for $350 million in cash, with acquisition costs amounting to $2 million recorded as general and administrative expenses[38] - The provisional fair value of assets acquired in the ConnectiCare acquisition included current assets of $450 million and goodwill of $197 million[41] - The company closed the acquisition of ConnectiCare for $350 million on February 1, 2025, expanding its presence in the Marketplace and Medicare segments[109] Cash Flow and Financing Activities - Net cash provided by operating activities was $190 million in Q1 2025, down from $214 million in Q1 2024, mainly due to timing differences in payments[137] - Net cash used in investing activities was $123 million in Q1 2025, a decrease of $365 million compared to $488 million in Q1 2024, reflecting changes in investment activity[138] - Net cash provided by financing activities was $147 million in Q1 2025, an increase of $209 million compared to a cash outflow of $62 million in Q1 2024[139] Stock Repurchase - The company repurchased approximately 1,679,000 shares for $500 million in the first quarter of 2025, exhausting the $1 billion repurchase authorization from October 2024[69] - The company has authorized an additional $1 billion for stock repurchases in April 2025, extending through December 31, 2026[71] Tax and Regulatory Considerations - The effective tax rate may fluctuate due to various factors, including projected pretax earnings and changes in tax laws[34] - The effective income tax rate decreased to 23.7% in Q1 2025 from 24.5% in Q1 2024, influenced by increased tax benefits and lower state taxes[104] Future Risks - Future risks include potential Medicaid funding reductions and regulatory changes impacting the healthcare industry[83]

Molina (MOH) came out with quarterly earnings of $6.08 per share, beating the Zacks Consensus Estimate of $5.86 per share. This compares to earnings of $5.73 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 3.75%. A quarter ago, it was expected that this provider of Medicaid-related services would post earnings of $5.81 per share when it actually produced earnings of $5.05, delivering a surprise of -13.08%.Over the last four qu ...

"Our first quarter results reflect our team's disciplined approach to medical cost management in an improving rate environment," said Joseph Zubretsky, President and Chief Executive Officer. "Our 2025 earnings and growth profiles are solid, and we remain confident in our ability to achieve our 13% to 15% long-term adjusted EPS growth target." News Release Investor Contact: Jeffrey Geyer, Jeffrey.Geyer@molinahealthcare.com, 305-317-3012 Media Contact: Caroline Zubieta, Caroline.Zubieta@molinahealthcare.com, ...

Healthcare plan provider Molina Healthcare, Inc. (MOH) is set to report first-quarter 2025 results on April 23, 2025, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $5.86 per share on revenues of $11.12 billion. (See the Zacks Earnings Calendar to stay ahead of market-making news.)The first-quarter earnings estimate declined 2.5% over the past 60 days. However, the bottom-line projection indicates a year-over-year increase of 2.3%. The Z ...

Molina (MOH) is expected to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended March 2025. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on April 23. On the ...

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Core Viewpoint - Molina Healthcare's fourth-quarter 2024 earnings report showed mixed results, with adjusted EPS missing estimates but total revenues increasing significantly year over year. The company faces challenges from rising medical costs and lower-than-expected membership growth, which may impact future performance [2][3][4]. Financial Performance - Adjusted EPS for Q4 2024 was $5.05, missing the Zacks Consensus Estimate of $5.81, but representing a 15.3% increase from the previous year [2]. - Total revenues reached $10.5 billion, a 16% year-over-year improvement, although it slightly missed consensus expectations [2]. - For the full year 2024, total revenues were $40.65 billion, up from $34.07 billion in 2023, exceeding the estimate of $40.58 billion [4]. Operational Insights - Premium revenues in Q4 2024 were $9.98 billion, a 19.4% increase year over year, surpassing estimates [5]. - Total membership grew by 10.8% year over year to approximately 5.5 million, although it fell short of the Zacks Consensus Estimate by 3.1% [6]. - The consolidated medical care ratio (MCR) was 90.2%, up from 89.1% a year ago, indicating rising medical costs [8]. Expense and Income Analysis - Total operating expenses for Q4 2024 were $10.1 billion, a 15.9% increase year over year, driven by higher medical care costs and administrative expenses [7]. - Investment income decreased by 2.6% year over year to $111 million, but it exceeded the consensus estimate [6]. Future Guidance - For 2025, Molina expects premium revenues to reach around $42 billion, indicating a 9% increase from 2024 [11]. - Adjusted EPS is projected to be at least $24.50, reflecting an 8% rise from the previous year [11]. - Total membership is anticipated to grow to 5.9 million by the end of 2025, with a consolidated MCR expected to remain at 88.7% [12]. Market Position and Trends - The consensus estimate for Molina has seen a downward trend, with a shift of -11.22% in the past month [13]. - The company currently holds a Zacks Rank 4 (Sell), indicating expectations of below-average returns in the near term [15]. - In comparison, Cigna, a competitor in the same industry, reported a revenue increase of 28.4% year over year, highlighting competitive pressures [16].

Financial Performance - Premium revenue for 2024 reached $38,627 million, a 18.9% increase from $32,529 million in 2023[17] - Total revenue for 2024 was $40,650 million, up 19.4% from $34,072 million in 2023[17] - Net income for 2024 was $1,179 million, compared to $1,091 million in 2023, reflecting an 8.0% increase[17] - The company achieved a 19% revenue growth and 12% earnings per share growth from 2019 to 2024[26] - The company targets 11% to 13% revenue growth and 13% to 15% earnings per share growth, aiming for $52 to $55 billion in premium revenue by 2027[27] - The company paid $997 million in total dividends to the parent company in 2024, indicating strong cash flow management[46] - Investment income increased by $58 million in 2024, or 15%, due to growth in invested assets[46] Membership Growth - Membership grew to approximately 5.5 million members in 2024, up from 4.995 million in 2023, representing an 11.0% increase[20] - Medicaid enrollment is expected to increase by over 100,000 in 2025, reaching a total of five million members by year-end[49] - Medicare enrollment is projected to increase by approximately 3% in 2025, totaling 250,000 members, including 39,000 from the ConnectiCare acquisition[65] - Marketplace enrollment is expected to increase by almost 50% in 2025, reaching a total of 580,000 members, contributing to an estimated 60% increase in Marketplace premium revenue[78] - Approximately 1 million new Medicaid members were added since March 31, 2020, but an estimated loss of 675,000 members occurred due to the resumption of redeterminations[88] - The company expects to retain approximately 30% of the membership gained since March 31, 2020[88] Medicaid and Medicare Revenue - Medicaid premium revenue constituted 79% of consolidated premium revenue for the year ended December 31, 2024[52] - California Medicaid contracts generated approximately $4,121 million, or 13% of consolidated Medicaid premium revenue in 2024, with an addition of 500,000 new members[53] - New York Medicaid contracts accounted for approximately $3,373 million, or 11% of consolidated Medicaid premium revenue in 2024[54] - Texas Medicaid contracts represented approximately $4,126 million, or 14% of consolidated Medicaid premium revenue in 2024[55] - For the year ended December 31, 2024, Medicaid program PMPM premium rates ranged from $290 to $1,380[58] - For the year ended December 31, 2024, Medicare program PMPM premium rates ranged from $1,140 to $4,310[73] Acquisitions and Growth Strategy - Recent acquisitions and RFP successes in 2024 are expected to contribute nearly $7 billion in incremental annual premium revenue, mostly realized by 2026[30] - The company closed the acquisition of Bright Health Medicare in January 2024 and ConnectiCare in February 2025, aiming for operational synergies and incremental earnings accretion[158] - The company plans to continue focusing on organic growth through new state procurement opportunities and inorganic growth through accretive acquisitions[28] Regulatory and Compliance Risks - The company is subject to stringent regulatory requirements, which may lead to additional costs for compliance with evolving laws and regulations[122] - The Consolidated Appropriations Act of 2023 allowed states to resume redeterminations, leading to disenrollment of members gained during the PHE[86] - The company is exposed to operating sanctions and financial fines for noncompliance with encounter data submission requirements[184] - Non-compliance with laws regarding PHI, PII, or non-public personal information could lead to civil and criminal penalties, adversely affecting the company's financial condition and operations[204] - New laws and regulations may require significant costs and changes in business operations, potentially hindering growth and leading to legal claims or regulatory investigations[205] Operational Challenges - The company operates with very low profit margins, which are in the single digits, making it sensitive to small changes in operating performance[196] - The company faces risks related to outsourcing services to third parties, which could lead to operational disruptions and increased costs[151] - Cybersecurity threats pose significant risks, including potential data breaches that could harm operations and reputation[152] - The company maintains cybersecurity insurance, but coverage may not be sufficient to cover all financial losses from incidents[155] - Integration of acquired businesses is complex and may not yield anticipated benefits, affecting financial performance[159] Market Competition - Molina Healthcare's Medicaid managed care industry faces increasing competition from large national health plans, with primary competitors including Centene Corporation and CVS Health[118] - The Medicare market is highly competitive, with significant players such as CVS Health Corporation and UnitedHealth Group Inc.[119] Employee Engagement and Benefits - The company is focused on employee engagement and development, with annual surveys showing improvement that exceeds industry benchmarks[134] - Molina Healthcare offers a comprehensive suite of employee benefits, including health insurance, 401(k) matching, and wellness programs[138] Financial Risks - A substantial portion of premium revenue is subject to complex contract provisions, which, if misinterpreted, could require adjustments that negatively impact financial results[164] - Medicaid premium revenues may be adversely affected by retroactive adjustments or delays in rate changes by states, creating uncertainty in revenue recognition[166] - Loss of significant contracts could lead to stranded administrative costs, adversely affecting the company's financial condition and cash flows[163] - The company's medical care ratio was 89.1% for the year ended December 31, 2024; a one percentage point increase could have reduced net income per diluted share by approximately $5.24[171] - The company relies on state-provided eligibility lists for premium payments, and inaccuracies could lead to reimbursement obligations that adversely affect results[178] Future Outlook - The economic impact of transitioning from MMPs to D-SNPs by January 1, 2026, remains uncertain for premium revenue[192] - Changes in laws and regulations could impose additional capital requirements and increase administrative costs, negatively impacting profitability[212] - Rising pharmaceutical costs, including new specialty drugs, could jeopardize the actuarial soundness of capitation rates, adversely impacting financial results[207] - Large-scale medical emergencies could significantly increase utilization rates and medical costs, negatively affecting the company's financial condition[208]