10-QPeriod: Q1 FY2019

Cigna Group Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 2, 2019For Securities:CI

Summary

Cigna Group (CI) reported strong first-quarter 2019 results, significantly driven by the recent acquisition of Express Scripts. Total revenues surged by 232% year-over-year to $37.9 billion, primarily due to the inclusion of Express Scripts' pharmacy and medical management businesses. Shareholders' net income grew 50% to $1.37 billion, or $3.56 per diluted share. Adjusted income from operations, a key non-GAAP metric, also increased by 48% to $1.5 billion, though diluted EPS on this basis saw a slight decrease to $3.90 due to share dilution from the acquisition. The Health Services segment, largely comprising the Express Scripts business, showed substantial revenue growth. The Integrated Medical segment also demonstrated resilience with a 13% increase in adjusted revenues and improved profitability. Despite a significant increase in interest expense related to acquisition financing, the company's overall financial performance reflects a successful integration of Express Scripts, positioning Cigna for continued growth in the health services landscape.

Financial Highlights

49 data points
Beta

Revenue

$37.95B

36.6% Gross Margin

Net Income

$1.37B

3.6% Net Margin

EPS (Diluted)

$3.56

Total Assets

$154.35B

Cash & Equivalents

$4.98B

Free Cash Flow

$3.00B

Financial Statements
Beta
Revenue$37.95B
Cost of Revenue$24.05B
Gross Profit$13.90B
SG&A Expenses$3.30B
Operating Income$2.23B
Net Income$1.37B
EPS (Basic)$3.61
EPS (Diluted)$3.56
Shares Outstanding (Diluted)384.02M

Key Highlights

  • 1Total Revenues increased 232% to $37.9 billion, driven by the acquisition of Express Scripts.
  • 2Shareholders' Net Income increased 50% to $1.37 billion ($3.56 per diluted share).
  • 3Adjusted Income from Operations increased 48% to $1.5 billion ($3.90 per diluted share), though diluted EPS saw a slight decrease due to share dilution from the acquisition.
  • 4The Health Services segment, largely encompassing Express Scripts, showed significant revenue contribution.
  • 5The Integrated Medical segment experienced a 13% increase in adjusted revenues and improved profitability.
  • 6Selling, General, and Administrative expenses increased, primarily due to the inclusion of Express Scripts' operations and integration costs.
  • 7Interest expense significantly increased due to debt financing for the Express Scripts acquisition.

Frequently Asked Questions

The primary driver of Cigna's revenue growth was the acquisition of Express Scripts, which was completed in December 2018. This acquisition significantly boosted total revenues by 232% year-over-year.

The acquisition of Express Scripts positively impacted Cigna's profitability, as evidenced by a 50% increase in Shareholders' Net Income and a 48% increase in Adjusted Income from Operations. However, the diluted earnings per share saw a slight decrease due to the increased number of shares outstanding following the acquisition.

Cigna's performance is driven by its Health Services segment (largely Express Scripts) and the Integrated Medical segment. The Health Services segment saw substantial revenue growth due to the acquisition. The Integrated Medical segment also performed well, with a 13% increase in adjusted revenues and improved profitability.

The acquisition of Express Scripts was financed significantly through debt, leading to a substantial increase in interest expense. Despite this, Cigna's debt-to-capitalization ratio improved slightly quarter-over-quarter, and the company aims to deleverage within 18-24 months.