MOLINA HEALTHCARE, INC. Q1 FY2025 earnings call

• First quarter results: Reported adjusted EPS of $6.08 on $10.6 billion of premium revenue, 89.2% consolidated MCR, 3.9% adjusted pre-tax margin. - Growth initiatives: Won RFPs in Medicaid (defended position in Nevada) and Medicare dual eligible (awarded contract in Illinois, projecting ~$800 million incremental premium revenue and $0.50 per share to embedded earnings). - 2025 guidance: Reaffirmed full-year premium revenue at $42 billion and EPS at least $24.50, with changes in rate assumptions, MCR guidance, and G&A ratio. - Political and legislative landscape: Medicaid changes likely marginal, Medicare Advantage final rate notice positive, Marketplace membership stable despite program integrity initiatives.

In the first quarter, Medicaid had an MCR of 90.3%, with medical costs increasing moderately due to LTSS, high-cost drugs, behavioral health, and seasonal illnesses, mostly offset by new rate cycle updates. Medicare reported an MCR of 88.3% in line with expectations, with medical cost trend captured by rates and risk adjustment. Marketplace had an MCR of 81.7% in Q1, higher than expected due to prior year items (final risk adjustment, member reconciliations) and ConnectiCare acquisition MCR; normalized MCR was approximately 77.7%.

• Reaffirmed full-year premium revenue at $42 billion and EPS at least $24.50. - Medicaid rates slightly higher than expected, cost trend increased for conservatism. - Marketplace MCR guidance increased to 80% from 79% due to non-recurring items. - Embedded earnings increased to ~$8.65 per share, with $0.50 from Illinois duals contract and $0.40 from Virginia contract adjustment.

• Potential Medicaid funding cuts or program changes impacting membership or risk pool acuity. - Uncertainty around legislative process and its impact on benefits, providers, and enrollment. - Marketplace program integrity initiatives and final decision on enhanced subsidies affecting membership and pricing.

Q: Expand on risk adjustment and member reconciliation in Marketplace.

A: Joe and Mark discussed non-recurring items like final prior year risk adjustment, member reconciliation, and ConnectiCare acquisition impact.

Q: Impact of seasonal illness in Medicaid.

A: Joe mentioned seasonal illness (like flu) led to 10-15M hot vs normal, but was in guidance.

Q: M&A backdrop uncertainty.

A: Joe said M&A pipeline full, not impacted by uncertainty, pipeline replete with opportunities.