01—Abstract
Summary
Summary of the 10-Q filed April 25, 2025. Cited figures are marked; the original filing is the authoritative source.
Centene Corporation (CNC) reported strong first-quarter 2025 results, demonstrating robust revenue growth and improved profitability.
Total revenues surged by 15% year-over-year to $46.6 billiona, driven primarily by significant expansion in the Medicare Prescription Drug Plan (PDP) and Health Insurance Marketplace (Ambetter Health) businesses. Despite a slight increase in the Health Benefits Ratio (HBR) due to seasonal factors in Medicaid, the company effectively managed expenses, leading to a decrease in the SG&A expense ratio and a substantial 39% increase in operating earnings. Net earnings attributable to Centene Corporation rose 13% to $1.31 billion, with diluted earnings per share (EPS) increasing by 22% to $2.63.
The company also reported strong operating cash flows of $1.5 billionb. Management highlighted strategic wins in contract renewals and expansions across its Medicaid segment, alongside growth in its Medicare and Commercial businesses, positioning Centene favorably for future performance amidst evolving healthcare regulations.
02—Key points
Key Highlights
- Total revenues increased by 15% year-over-year to $46.6 billion, driven by strong performance in Medicare PDP and Health Insurance Marketplace segments.
- Net earnings attributable to Centene Corporation grew by 13% to $1.31 billion, with diluted EPS up 22% to $2.63.
- Operating cash flow was robust at $1.5 billion for the quarter.
- The Health Benefits Ratio (HBR) slightly increased to 87.5% from 87.1% due to seasonal factors and acuity changes in Medicaid, partially offset by improvements in Medicare.
- The Selling, General & Administrative (SG&A) expense ratio improved to 7.9% from 8.9%, reflecting leverage over higher revenues.
- Centene secured several key contract renewals and expansions within its Medicaid segment, strengthening its market position.
- Managed care membership saw a slight year-over-year decrease of 2% to 27.9 million members, primarily due to Medicaid redeterminations.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2025, Centene Corp kept $0.03.
- Revenue$46.62B100.0%
- Cost of revenue−$41.33B88.7%
- Gross profit$5.29B11.3%
- Operating costs−$3.75B8.1%
- Operating income$1.53B3.3%
- Interest, other & tax−$223.0M0.5%
- Net income$1.31B2.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2025filed April 25, 2025Financial Statements
Q1 FY2025 against Q1 FY2024
| Line item | Q1 FY2025Q1 FY2024 | Change |
|---|---|---|
| Revenue | $46.62B$40.41B | +15.4% |
| Cost of Revenue | $698.00M$669.00M | +4.3% |
| Gross Profit | $5.29B$4.74B | +11.7% |
| SG&A Expenses | $3.35B$3.22B | +4.2% |
| Operating Expenses | $45.09B$39.30B | +14.7% |
| Operating Income | $1.53B$1.11B | +38.7% |
| Net Income | $1.31B$1.16B | +12.7% |
| EPS (Basic) | $2.64$2.17 | +21.7% |
| EPS (Diluted) | $2.63$2.16 | +21.8% |
| Shares Outstanding (Basic) | 496.21M535.11M | −7.3% |
| Shares Outstanding (Diluted) | 498.18M538.06M | −7.4% |
05—Questions
Frequently Asked Questions
What drove the significant revenue growth in the first quarter of 2025?
Revenue growth was primarily driven by a 17% increase in premium and service revenues, reaching $42.5 billion. This growth was substantially fueled by an increase in Medicare Prescription Drug Plan (PDP) membership and premiums, along with strong performance and geographic expansion in the Health Insurance Marketplace (Ambetter Health) business. The Medicare segment saw a revenue increase of 48% and the Commercial segment saw a 31% increase.
How did Centene manage its expenses, particularly medical costs, in the quarter?
While the overall Health Benefits Ratio (HBR) slightly increased to 87.5%, this was attributed to specific factors like seasonal illnesses in the Medicaid segment and post-redetermination acuity changes. The company effectively managed other operating expenses, resulting in an improved SG&A expense ratio of 7.9% compared to 8.9% in the prior year, demonstrating operational leverage. Medical costs did increase by 18% year-over-year, aligning with revenue growth and the slight HBR increase.
What is the impact of regulatory changes, such as the Inflation Reduction Act (IRA), on Centene's business?
The IRA has led to a meaningful shift in cost-sharing responsibilities for Medicare Prescription Drug Plans (PDPs), requiring Centene to bear a larger portion of Part D benefit costs. This has resulted in higher premiums for PDPs and a change in the quarterly progression of the Medicare segment's HBR. Centene is actively managing these changes and has benefited from programs like the Medicare Part D Premium Stabilization Demonstration to mitigate impacts.
What is the outlook for Centene's membership, especially in the Medicaid segment?
Managed care membership decreased by 2% year-over-year to 27.9 million members. The Medicaid segment experienced a decline primarily due to ongoing redeterminations following the end of the COVID-19 public health emergency. However, the company has secured several key contract renewals and expansions within this segment, indicating a strategic focus on retaining and growing its position in government-sponsored programs.
06—Continue