10-QPeriod: Q1 FY2022

CENTENE CORP Quarterly Report for Q1 Ended Mar 31, 2022

Filed April 26, 2022For Securities:CNC

Summary

Centene Corporation (CNC) reported a strong first quarter of 2022, with total revenues surging 24% year-over-year to $37.2 billion, driven by robust growth across its Medicaid and Medicare segments, as well as contributions from recent acquisitions. The company's strategic initiatives, including its Value Creation Plan focused on SG&A savings and margin expansion, are showing traction. The acquisition of Magellan Health in January 2022 is a significant development, aimed at enhancing integrated healthcare solutions and is expected to contribute to future growth, though it also led to an increase in SG&A expenses in the current quarter. Despite a slight increase in the health benefits ratio (HBR) to 87.3%, the company's profitability improved, with diluted EPS rising 21% to $1.44. Operating cash flows were notably strong at $1.2 billion. Centene continues to expand its membership across its core government-sponsored programs and is actively managing its capital through share repurchases and strategic investments. While navigating the ongoing uncertainties of the COVID-19 pandemic and regulatory landscapes, Centene appears well-positioned for continued growth and value creation.

Financial Highlights

54 data points
Beta

Revenue

$37.19B

11.8% Gross Margin

Net Income

$849.00M

2.3% Net Margin

EPS (Diluted)

$1.44

Total Assets

$82.90B

Cash & Equivalents

$11.24B

Free Cash Flow

$909.00M

Financial Statements
Beta
Revenue$37.19B
Cost of Revenue$1.99B
Gross Profit$4.41B
SG&A Expenses$2.75B
Operating Expenses$35.93B
Operating Income$1.25B
Interest Expense$160.00M
Net Income$849.00M
EPS (Basic)$1.46
EPS (Diluted)$1.44
Shares Outstanding (Basic)583.23M
Shares Outstanding (Diluted)590.66M

Key Highlights

  • 1Total revenues increased by 24% to $37.2 billion, driven by strong performance in Medicaid and Medicare, and acquisitions.
  • 2Managed care membership grew by 1.9 million (8%) year-over-year to 26.2 million.
  • 3Diluted EPS increased by 21% to $1.44, reflecting improved profitability.
  • 4Operating cash flows were robust, reaching $1.2 billion, a significant increase from the prior year.
  • 5The acquisition of Magellan Health in January 2022 for approximately $2.6 billion is a key strategic move to offer integrated healthcare solutions.
  • 6The Health Benefits Ratio (HBR) slightly increased to 87.3% from 86.8% in the prior year, attributed to normalized medical utilization.
  • 7The company has approximately $800 million remaining under its share repurchase program.

Frequently Asked Questions

Centene's revenue growth of 24% was primarily driven by organic Medicaid growth, partly due to the ongoing suspension of eligibility redeterminations, a 28% membership increase in its Medicare business, the recent acquisitions of Magellan Health and Circle Health, and new contracts in North Carolina. Additionally, a significant increase in premium tax revenue and retroactive state directed payments contributed to the growth.

The acquisition of Magellan Health, completed in January 2022 for approximately $2.6 billion, is expected to enable Centene to provide integrated healthcare solutions. While it contributed to revenue growth and expanded service offerings, it also led to an increase in SG&A expenses and acquisition-related costs in the first quarter of 2022.

Centene is closely monitoring the expected end of the COVID-19 public health emergency, anticipated in July 2022, with redeterminations beginning in August 2022. The company anticipates potential impacts on its membership and will continue to monitor related announcements. They also note that new variants or waves of the pandemic could create further uncertainties.

Centene maintains a significant investment portfolio, primarily in fixed-income securities, with a stated goal of ensuring liquidity for short-term requirements. The company reported $1.2 billion in operating cash flow for Q1 2022 and has sufficient cash, cash equivalents, investments, and credit facility access to fund operations and capital expenditures for at least 12 months. They also manage their debt through refinancing and share repurchase programs.