01—Abstract
Summary
Summary of the 10-Q filed July 26, 2024. Cited figures are marked; the original filing is the authoritative source.
Centene Corporation (CNC) reported its second quarter 2024 financial results, demonstrating revenue growth and improved profitability driven by expansion in its Commercial Marketplace business and effective cost management.
Total revenues rose by 6% year-over-year to $39.8 billiona, with premium and service revenues showing a 3% increase. The company achieved a Health Benefits Ratio (HBR) of 87.6% and an SG&A expense ratio of 8.0%, indicating operational efficiency. Key growth drivers include a 34% year-over-year increase in Commercial Marketplace membership, now available in 29 states, and a 47% surge in Medicare Prescription Drug Plan (PDP) membership.
While Medicaid membership saw a decline due to ongoing eligibility redeterminations, Centene is well-positioned to capture members transitioning to other coverage options. The company also reported strong earnings per share (EPS) of $2.16b, up from $1.92 in the prior year, and maintained a solid liquidity position with $5.7 billion in working capital.
02—Key points
Key Highlights
- Total revenues increased by 6% to $39.8 billion in Q2 2024, driven by membership growth in the Marketplace and increased premium tax revenue.
- Commercial Marketplace membership surged by 34% year-over-year, now offered in 29 states, showcasing strong growth potential.
- Medicare Prescription Drug Plan (PDP) membership experienced significant growth, increasing by 47% year-over-year.
- The Health Benefits Ratio (HBR) was 87.6%, and the SG&A expense ratio was 8.0%, reflecting disciplined cost management.
- Diluted Earnings Per Share (EPS) was $2.16, an improvement from $1.92 in the prior year's second quarter.
- Medicaid membership decreased due to redeterminations, but the company is actively working to support members transitioning to new coverage.
- Working capital improved to $5.7 billion at the end of the quarter, indicating a strong liquidity position.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Centene Corp kept $0.03.
- Revenue$39.84B100.0%
- Cost of revenue−$35.31B88.6%
- Gross profit$4.53B11.4%
- Operating costs−$3.30B8.3%
- Operating income$1.23B3.1%
- Interest, other & tax−$83.0M0.2%
- Net income$1.15B2.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed July 26, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $39.84B$37.61B | +5.9% |
| Cost of Revenue | $680.00M$877.00M | −22.5% |
| Gross Profit | $4.53B$4.61B | −1.9% |
| SG&A Expenses | $2.89B$3.02B | −4.0% |
| Operating Expenses | $38.61B$36.44B | +6.0% |
| Operating Income | $1.23B$1.17B | +5.0% |
| Net Income | $1.15B$1.06B | +8.3% |
| EPS (Basic) | $2.16$1.93 | +11.9% |
| EPS (Diluted) | $2.16$1.92 | +12.5% |
| Shares Outstanding (Basic) | 529.60M548.93M | −3.5% |
| Shares Outstanding (Diluted) | 530.75M550.31M | −3.6% |
05—Questions
Frequently Asked Questions
What is driving the revenue growth for Centene?
Centene's revenue growth is primarily driven by the expansion of its Commercial Marketplace business, which saw a 34% increase in membership year-over-year, and strong performance in its Medicare Prescription Drug Plan (PDP) offerings, which grew by 47%. Increased premium tax revenue also contributed to the overall top-line growth.
How is Centene managing its expenses, particularly medical costs?
Centene is focusing on managing expenses through improved operational efficiencies and disciplined cost control. The Health Benefits Ratio (HBR) remained stable at 87.6%, indicating effective management of medical costs relative to premium revenues. The SG&A expense ratio also improved to 8.0%. While higher acuity in Medicaid due to redeterminations and Medicare Star rating impacts are noted, strategies like strong 2024 product design and execution in the Marketplace are helping to offset these pressures.
What is the impact of Medicaid redeterminations on Centene's business?
Medicaid redeterminations have led to a decrease in Medicaid membership. However, Centene is actively engaged with state agencies and has positioned its Ambetter Health product to assist members transitioning to new coverage options. The company anticipates that remaining reductions will be limited as most states have substantially completed their unwinding processes.
What is Centene's outlook regarding liquidity and capital resources?
Centene maintains a strong liquidity position, with working capital of $5.7 billion as of June 30, 2024. The company expects operating cash flows, available cash, and its revolving credit facility to be sufficient to cover its general operations and capital expenditures for at least the next 12 months. Centene also has a significant remaining authorization under its stock repurchase program.
06—Continue