10-QPeriod: Q1 FY2023

CENTENE CORP Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 25, 2023For Securities:CNC

Summary

Centene Corporation (CNC) reported strong financial performance for the first quarter of 2023, demonstrating robust revenue growth and improved profitability. Total revenues reached $38.9 billion, a 5% increase year-over-year, driven primarily by growth in its Medicaid and Commercial segments, particularly the Health Insurance Marketplace (Ambetter Health) which saw a significant 52% increase in membership. The company also highlighted a significant improvement in net earnings attributable to Centene Corporation, which rose to $1.13 billion from $849 million in the prior year quarter, translating to a substantial increase in diluted EPS to $2.04 from $1.44. This growth was supported by effective cost management, a favorable health benefits ratio (HBR) of 87.0%, and a strategic focus on operational efficiencies outlined in their Value Creation Plan. The successful divestiture of non-core businesses, including Magellan Specialty Health, Centurion, and HealthSmart, has streamlined operations and is expected to contribute to future margin expansion.

Financial Highlights

54 data points
Beta

Revenue

$38.89B

12.0% Gross Margin

Net Income

$1.13B

2.9% Net Margin

EPS (Diluted)

$2.04

Total Assets

$82.98B

Cash & Equivalents

$16.16B

Free Cash Flow

$4.04B

Financial Statements
Beta
Revenue$38.89B
Cost of Revenue$870.00M
Gross Profit$4.65B
SG&A Expenses$3.01B
Operating Expenses$37.67B
Operating Income$1.22B
Interest Expense$180.00M
Net Income$1.13B
EPS (Basic)$2.05
EPS (Diluted)$2.04
Shares Outstanding (Basic)550.78M
Shares Outstanding (Diluted)553.85M

Key Highlights

  • 1Total revenues grew 5% year-over-year to $38.9 billion, driven by strong membership growth across segments, especially in the Commercial Marketplace (Ambetter Health).
  • 2Net earnings attributable to Centene Corporation increased significantly to $1.13 billion from $849 million in Q1 2022.
  • 3Diluted earnings per share (EPS) rose to $2.04, a substantial increase from $1.44 in the prior year period.
  • 4The company completed several strategic divestitures in early 2023, including Magellan Specialty Health, Centurion, and HealthSmart, as part of its Value Creation Plan.
  • 5Managed care membership increased by 2.2 million (8%) year-over-year to 28.5 million as of March 31, 2023.
  • 6Operating cash flows were strong at $4.3 billion, a significant improvement from $1.15 billion in the prior year quarter, boosted by timing of payments and increased unearned revenue.
  • 7The Health Benefits Ratio (HBR) remained stable at 87.0%, indicating effective management of medical costs relative to premium revenues.

Frequently Asked Questions

Centene's revenue growth was primarily driven by a 5% increase in total revenues to $38.9 billion. This was fueled by strong membership growth, particularly in the Commercial Marketplace (Ambetter Health) which saw a 52% increase in membership, and organic growth in the Medicaid segment. Increased Medicaid premium tax revenue also contributed positively.

Profitability significantly improved, with net earnings attributable to Centene Corporation rising to $1.13 billion, a 33% increase from $849 million in the first quarter of 2022. This translated to a substantial increase in diluted EPS to $2.04, up from $1.44 in the prior year.

Centene completed the divestitures of Magellan Specialty Health, Centurion, and HealthSmart in early 2023 as part of its Value Creation Plan. These divestitures are expected to streamline operations and contribute to margin expansion. The results for the quarter reflect these divestitures, with a decrease in 'Other' segment revenues and cost of services, while positively impacting the company's strategic focus.

Centene experienced an 8% year-over-year increase in managed care membership, reaching 28.5 million. The company anticipates continued membership growth in Medicaid, partly due to the ongoing suspension of eligibility redeterminations and upcoming legislative changes like Medicaid expansion in North Carolina and continuous coverage provisions for children. The transition of members from Medicaid to the Health Insurance Marketplace after eligibility redeterminations is also seen as a growth opportunity.