10-QPeriod: Q1 FY2018

CENTENE CORP Quarterly Report for Q1 Ended Mar 31, 2018

Filed April 24, 2018For Securities:CNC

Summary

Centene Corporation (CNC) reported a strong first quarter in 2018, demonstrating robust revenue growth and improved profitability. Total revenues increased by 13% year-over-year to $13.2 billion, driven by expansions in various state programs, growth in the Health Insurance Marketplace, and the reinstatement of the health insurer fee. The company also saw a significant improvement in its health benefits ratio (HBR) to 84.3% from 87.6% in the prior year, indicating better management of medical costs relative to premium revenues. Diluted EPS surged to $1.91 from $0.79 in the same period last year, reflecting operational efficiencies and strategic growth initiatives. Key operational highlights include a 6% increase in managed care membership to 12.8 million. The company continued its acquisition strategy, completing the acquisition of Community Medical Group (CMG) and expanding its ownership in Interpreta. Additionally, Centene made a strategic investment in RxAdvance, a pharmacy benefit manager, signaling a commitment to technological innovation and integrated services. The company is also progressing with its significant Fidelis Care acquisition, which is expected to close around July 1, 2018, subject to regulatory approvals.

Financial Highlights

52 data points
Beta

Revenue

$13.19B

95.9% Gross Margin

Net Income

$340.00M

2.6% Net Margin

EPS (Diluted)

$0.96

Total Assets

$25.17B

Cash & Equivalents

$5.68B

Free Cash Flow

$1.63B

Financial Statements
Beta
Revenue$13.19B
Cost of Revenue$543.00M
Gross Profit$12.65B
SG&A Expenses$1.32B
Operating Expenses$12.65B
Operating Income$540.00M
Interest Expense$68.00M
Net Income$340.00M
EPS (Basic)$0.98
EPS (Diluted)$0.96
Shares Outstanding (Basic)347.84M
Shares Outstanding (Diluted)355.38M

Key Highlights

  • 1Total revenues grew 13% year-over-year to $13.2 billion, driven by membership growth and expanded state programs.
  • 2Managed care membership increased by 6% to 12.8 million members.
  • 3Health Benefits Ratio (HBR) improved to 84.3% from 87.6% in Q1 2017, indicating better cost management.
  • 4Diluted EPS significantly increased to $1.91 per share, up from $0.79 in the prior year's quarter.
  • 5Completed strategic acquisitions (CMG) and increased stake in Interpreta, alongside an investment in RxAdvance.
  • 6Progress made on the pending acquisition of Fidelis Care, with key regulatory approvals obtained.
  • 7Strong operating cash flow of $1.85 billion was generated during the quarter.

Frequently Asked Questions

Centene's revenue growth was primarily driven by expansions and new programs in various states, increased participation in the Health Insurance Marketplace, and the reinstatement of the health insurer fee. Membership growth also contributed significantly to the 13% year-over-year increase in total revenues.

Centene's profitability improved substantially. Net earnings attributable to Centene Corporation more than doubled to $340 million from $139 million in Q1 2017. This was supported by a lower health benefits ratio (HBR) of 84.3% compared to 87.6% and significant growth in diluted earnings per share to $1.91 from $0.79.

Centene received key regulatory approvals for the Fidelis Care acquisition from the New York Department of Health and the New York Department of Financial Services in April 2018. The transaction is expected to close around July 1, 2018, subject to remaining regulatory approvals and other closing conditions.

Centene experienced a 6% increase in managed care membership, reaching 12.8 million members as of March 31, 2018. This growth was observed across various segments, including Medicaid, Medicare, and the Health Insurance Marketplace.