10-QPeriod: Q2 FY2020

CENTENE CORP Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 28, 2020For Securities:CNC

Summary

Centene Corporation (CNC) reported strong revenue growth of 51% year-over-year for the second quarter of 2020, reaching $27.7 billion. This growth was primarily driven by the successful acquisition of WellCare Health Plans, Inc. and increased membership across its Medicaid, Medicare, and Health Insurance Marketplace offerings. Despite the revenue surge, the company navigated challenges related to the COVID-19 pandemic, which notably led to a decrease in medical utilization, thereby improving the Health Benefits Ratio (HBR) to 82.1% from 86.7% in the prior year period. This decrease in utilization, coupled with a more favorable SG&A expense ratio, contributed to a significant increase in net earnings attributable to Centene Corporation, which grew by 144% to $1.2 billion, or $2.05 per diluted share.

Financial Highlights

53 data points
Beta

Revenue

$27.71B

97.0% Gross Margin

Net Income

$1.21B

4.4% Net Margin

EPS (Diluted)

$2.05

Total Assets

$68.35B

Cash & Equivalents

$12.96B

Free Cash Flow

$3.48B

Financial Statements
Beta
Revenue$27.71B
Cost of Revenue$833.00M
Gross Profit$26.88B
SG&A Expenses$2.25B
Operating Expenses$25.69B
Operating Income$2.02B
Interest Expense$187.00M
Net Income$1.21B
EPS (Basic)$2.08
EPS (Diluted)$2.05
Shares Outstanding (Basic)579.19M
Shares Outstanding (Diluted)587.50M

Key Highlights

  • 1Total revenues surged by 51% to $27.7 billion in Q2 2020, largely attributed to the WellCare acquisition and membership growth.
  • 2Net earnings attributable to Centene Corporation increased by 144% to $1.2 billion, or $2.05 per diluted share.
  • 3Managed care membership grew significantly by 64% year-over-year to 24.6 million, driven by Medicaid and Medicare expansion.
  • 4The Health Benefits Ratio (HBR) improved to 82.1% from 86.7% in Q2 2019, benefiting from reduced medical utilization due to the COVID-19 pandemic.
  • 5The SG&A expense ratio slightly decreased to 8.8% from 9.1% in the prior year period, aided by operating leverage and the inclusion of WellCare.
  • 6The company reported strong operating cash flows of $3.7 billion for the quarter.
  • 7The significant increase in assets on the balance sheet, particularly Goodwill and Intangible Assets, reflects the impact of the WellCare acquisition.

Frequently Asked Questions

The acquisition of WellCare Health Plans, Inc. was a primary driver of Centene's significant revenue growth in Q2 2020. It contributed substantially to the increase in total revenues and managed care membership. The integration of WellCare also impacted operating expenses and boosted goodwill and intangible assets on the balance sheet.

The COVID-19 pandemic led to a notable decrease in medical utilization during the second quarter, which positively impacted the Health Benefits Ratio (HBR) by reducing medical costs. However, the company also incurred incremental costs related to supporting members, providers, and employees during the crisis and observed uncertainty regarding future utilization trends and economic impacts.

Centene experienced substantial membership growth, with managed care membership increasing by 64% year-over-year to 24.6 million. This growth was primarily driven by expansions in its Medicaid and Medicare programs, as well as continued growth in the Health Insurance Marketplace.

Despite the uncertainties posed by COVID-19, Centene's management expressed confidence in navigating the pandemic landscape. They noted that the impact of various COVID-19 related items was expected to slightly benefit 2020 results, largely due to reduced medical utilization. The company also emphasized its strong liquidity position and access to capital.