10-QPeriod: Q2 FY2024

CENTENE CORP Quarterly Report for Q2 Ended Jun 30, 2024

Filed July 26, 2024For Securities:CNC

Summary

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 billion, 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 $2.16, up from $1.92 in the prior year, and maintained a solid liquidity position with $5.7 billion in working capital.

Financial Highlights

53 data points
Beta

Revenue

$39.84B

11.4% Gross Margin

Net Income

$1.15B

2.9% Net Margin

EPS (Diluted)

$2.16

Total Assets

$83.14B

Cash & Equivalents

$17.61B

Free Cash Flow

$1.99B

Financial Statements
Beta
Revenue$39.84B
Cost of Revenue$680.00M
Gross Profit$4.53B
SG&A Expenses$2.89B
Operating Expenses$38.61B
Operating Income$1.23B
Net Income$1.15B
EPS (Basic)$2.16
EPS (Diluted)$2.16
Shares Outstanding (Basic)529.60M
Shares Outstanding (Diluted)530.75M

Key Highlights

  • 1Total revenues increased by 6% to $39.8 billion in Q2 2024, driven by membership growth in the Marketplace and increased premium tax revenue.
  • 2Commercial Marketplace membership surged by 34% year-over-year, now offered in 29 states, showcasing strong growth potential.
  • 3Medicare Prescription Drug Plan (PDP) membership experienced significant growth, increasing by 47% year-over-year.
  • 4The Health Benefits Ratio (HBR) was 87.6%, and the SG&A expense ratio was 8.0%, reflecting disciplined cost management.
  • 5Diluted Earnings Per Share (EPS) was $2.16, an improvement from $1.92 in the prior year's second quarter.
  • 6Medicaid membership decreased due to redeterminations, but the company is actively working to support members transitioning to new coverage.
  • 7Working capital improved to $5.7 billion at the end of the quarter, indicating a strong liquidity position.

Frequently Asked Questions

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.

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.

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.

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.