10-QPeriod: Q1 FY2015

CENTENE CORP Quarterly Report for Q1 Ended Mar 31, 2015

Filed April 28, 2015For Securities:CNC

Summary

Centene Corporation (CNC) reported significant growth in its first quarter 2015 results, demonstrating robust expansion across its managed care operations. Total revenues surged by 48.3% year-over-year to $5.13 billion, largely driven by a substantial 42% increase in premium and service revenues, which reached $4.76 billion. This growth was fueled by expanded program participation in key states like Florida, Illinois, and Ohio, as well as new contracts and market entries. The company's membership base grew by an impressive 44% to 4.4 million members compared to the prior year. Net earnings attributable to Centene Corporation more than doubled, reaching $63 million ($0.51 diluted EPS) for the quarter, compared to $33 million ($0.28 diluted EPS) in the first quarter of 2014. This demonstrates the company's ability to leverage its expanding scale, with operating expenses growing at a slower pace than revenues. The health benefits ratio remained stable at 89.8%, indicating effective cost management. Despite a year-over-year decrease in operating cash flow from $252 million to $45 million, primarily due to timing differences in state payments, the company maintains a strong liquidity position and is well-positioned for continued growth.

Financial Highlights

51 data points
Beta

Revenue

$5.13B

Net Income

$63.00M

1.2% Net Margin

EPS (Diluted)

$0.26

Total Assets

$6.70B

Cash & Equivalents

$1.67B

Free Cash Flow

$18.00M

Financial Statements
Beta
Revenue$5.13B
Operating Expenses$5.00B
Operating Income$129.00M
Interest Expense$10.00M
Net Income$63.00M
EPS (Basic)$0.27
EPS (Diluted)$0.26
Shares Outstanding (Basic)237.57M
Shares Outstanding (Diluted)245.14M

Key Highlights

  • 1Total revenues increased by 48.3% to $5.13 billion in Q1 2015 compared to Q1 2014.
  • 2Premium and service revenues grew by 42.0% to $4.76 billion, driven by significant expansion in states like Florida, Illinois, and Ohio.
  • 3Managed care membership grew by 44% year-over-year to 4.4 million members as of March 31, 2015.
  • 4Net earnings attributable to Centene Corporation increased by 90.9% to $63 million.
  • 5Diluted earnings per share rose to $0.51 from $0.28 in the prior year's quarter.
  • 6The Health Benefits Ratio (HBR) was 89.8%, a slight increase from 89.3% in Q1 2014.
  • 7Operating cash flow decreased significantly to $45 million from $252 million, attributed to timing of state payments.

Frequently Asked Questions

The substantial 48.3% year-over-year increase in total revenues to $5.13 billion was primarily driven by strong growth in premium and service revenues (up 42.0% to $4.76 billion). This was fueled by the full-year impact of program expansions and new contracts initiated in 2014 in states such as Florida, Illinois, and Ohio, as well as participation in new Health Insurance Marketplaces.

Centene demonstrated effective expense management. While medical costs increased by 40.8% and general and administrative expenses rose by 36.1%, these increases were lower than the revenue growth rate. The Health Benefits Ratio (HBR) remained stable at 89.8%, indicating control over medical costs relative to premium revenues. The General & Administrative expense ratio also improved to 8.5% from 8.8%.

The decrease in operating cash flow from $252 million in Q1 2014 to $45 million in Q1 2015 is primarily due to timing differences in payments received from state governments. Specifically, changes in how states settle reimbursements for the health insurer fee and adjustments in payment schedules for capitation contributed to this reduction. While impacting short-term cash flow, the company expects its available cash, credit facility, and future operations to be sufficient.

Centene anticipates continued growth driven by the full-year benefits of business commenced in 2014, upcoming contract expansions (e.g., Indiana, Mississippi, Missouri, Texas), planned acquisitions (e.g., Agate Resources, Inc.), and new contract awards. The company expects to make significant capital contributions to its insurance subsidiaries and invest in capital expenditures to support this expansion.