10-QPeriod: Q2 FY2021

CENTENE CORP Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 27, 2021For Securities:CNC

Summary

Centene Corporation (CNC) reported its second quarter and first six months of 2021 financial results, showcasing revenue growth driven by expansion in its Medicaid and Medicare segments, partly offset by the repeal of the health insurer fee. Total revenues grew 12% year-over-year in Q2 2021 to $31.0 billion. However, the company experienced a significant net loss of $535 million in Q2 2021, primarily due to a $1.25 billion legal settlement reserve related to its pharmacy benefits manager subsidiary, Envolve Pharmacy Solutions. This legal settlement significantly impacted diluted loss per share, resulting in a loss of $0.92 per share for the quarter. The company continues to expand its membership, particularly in Medicaid, which saw a 0.8 million member increase year-over-year in its managed care business. Strategic acquisitions, such as PANTHERx and Apixio, are contributing to revenue growth and expanding capabilities. Centene is also progressing with its planned acquisition of Magellan Health, which is expected to close in the second half of 2021. Despite the Q2 net loss driven by the legal settlement, the company highlighted strong operating cash flows of $1.7 billion for the quarter.

Financial Highlights

53 data points
Beta

Revenue

$31.02B

96.4% Gross Margin

Net Income

-$535.00M

-1.7% Net Margin

EPS (Diluted)

$-0.92

Total Assets

$71.54B

Cash & Equivalents

$11.20B

Free Cash Flow

$1.44B

Financial Statements
Beta
Revenue$31.02B
Cost of Revenue$1.11B
Gross Profit$29.92B
SG&A Expenses$2.14B
Operating Expenses$31.44B
Operating Income-$418.00M
Interest Expense$163.00M
Net Income-$535.00M
EPS (Basic)$-0.92
EPS (Diluted)$-0.92
Shares Outstanding (Basic)582.80M
Shares Outstanding (Diluted)582.80M

Key Highlights

  • 1Total revenues increased 12% year-over-year to $31.0 billion in Q2 2021, driven by Medicaid membership growth and acquisitions.
  • 2A significant legal settlement reserve of $1.25 billion for Envolve Pharmacy Solutions resulted in a net loss of $535 million for Q2 2021.
  • 3Diluted loss per share was $(0.92) in Q2 2021, compared to diluted earnings per share of $2.05 in Q2 2020, largely due to the legal settlement.
  • 4Managed care membership grew by 0.8 million members year-over-year, reaching 25.4 million.
  • 5Operating cash flow remained strong, generating $1.7 billion for the six months ended June 30, 2021.
  • 6The company is proceeding with the acquisition of Magellan Health, expected to close in the second half of 2021.
  • 7Health Benefits Ratio (HBR) increased to 88.3% in Q2 2021 from 82.1% in Q2 2020, indicating higher medical costs relative to premium revenues.

Frequently Asked Questions

The net loss of $535 million in Q2 2021 was primarily due to a $1.25 billion legal settlement reserve established for issues related to services provided by Envolve Pharmacy Solutions, Inc., the company's pharmacy benefits manager subsidiary.

Total revenues grew by 12% year-over-year to $31.0 billion in the second quarter of 2021. This growth was driven by increases in Medicaid membership, growth in the Medicare business, and contributions from recent acquisitions like PANTHERx. The repeal of the health insurer fee partially offset this growth.

Centene announced its definitive agreement to acquire Magellan Health in January 2021. The transaction, valued at approximately $2.2 billion, is subject to regulatory approvals and other customary closing conditions, with an expected closing in the second half of 2021.

The Health Benefits Ratio (HBR) increased to 88.3% in Q2 2021 from 82.1% in Q2 2020. This increase was attributed to lower utilization in Q2 2020 due to the COVID-19 pandemic, higher utilization in the Marketplace business in Q2 2021, and an unfavorable 2020 risk adjustment impacting 2021 results. The company is actively managing these costs through provider contracts and utilization monitoring.