01—Abstract
Summary
Summary of the 8-K filed April 26, 2024. Cited figures are marked; the original filing is the authoritative source.
Centene Corporation (NYSE: CNC) reported first-quarter 2024 results on April 26, 2024, with GAAP diluted EPS of $2.16a and adjusted diluted EPS of $2.26, up about 7% from $2.11 a year earlier.
Total revenues were $40.4 billionb and premium and service revenues rose 4% to $36.3 billion, driven by Marketplace membership growth (up 41% year over year) and overall market growth, partly offset by Medicaid redeterminations-related declines and divestitures. Management raised full-year 2024 adjusted diluted EPS guidance by $0.10 to greater than $6.80 and raised premium and service revenue guidance by $1.0 billion to $135.5–$138.5 billion. The GAAP EPS guidance floor was updated to greater than $5.94.
The quality of the quarter was more mixed. The health benefits ratio edged up to 87.1% from 87.0%, and the SG&A ratio rose to 8.9% from 8.6%, reflecting the higher-cost Marketplace mix, Medicare distribution costs, and restructuring and deal-related charges. Operating cash flow was negative $456 millionc, pressured by experience rebate timing, a delayed state premium payment (received in April), and pharmacy rebate timing tied to the new PBM transition.
Management attributed much of this to timing rather than earnings quality, but investors will want to see the cash flow normalize in subsequent quarters. Balance sheet items included $37.5 billiond in cash, investments and restricted deposits, medical claims liabilities of $18.1 billion, and total debt of $18.0 billion. Days in claims payable fell to 53.
The company repurchased 681 thousand shares in Q1 and an additional 2.7 million shares in April for $200 million, leaving $5.0 billion authorized. Several state contract awards and renewals were also disclosed, including Oklahoma, Florida, and Michigan Medicaid contracts.
02—Key points
Key Highlights
- Q1 2024 adjusted diluted EPS of $2.26 (up ~7% YoY) vs. GAAP diluted EPS of $2.16.
- Full-year 2024 adjusted diluted EPS guidance raised by $0.10 to greater than $6.80; GAAP diluted EPS floor updated to greater than $5.94.
- Premium and service revenues of $36.3B (+4% YoY), with full-year guidance raised by $1.0B to $135.5–$138.5B.
- Commercial premium and service revenues surged 48% to $7.8B, driven by a 41% increase in Marketplace membership to 4.35 million.
- Health benefits ratio of 87.1% (vs. 87.0%) and SG&A ratio of 8.9% (vs. 8.6%) both moved modestly higher, reflecting Marketplace mix and restructuring costs.
- Operating cash flow was negative $456M, primarily from timing items (delayed state payment received in April, rebate timing, PBM transition).
- Medicare PDP membership rose to 6.4 million from 4.5 million, while Medicaid membership declined about 19% YoY to 13.3 million amid redeterminations and divestitures; $200M of share repurchases in April with $5.0B authorization remaining.
03—Questions
Frequently Asked Questions
Why did Centene raise its 2024 guidance, and what drove the change?
Centene raised full-year adjusted diluted EPS guidance by $0.10 to greater than $6.80 and premium and service revenue guidance by $1.0 billion. The company cited strong first-quarter results and growth in its core businesses, particularly Marketplace membership, which grew 41% year over year on strong product positioning and overall market growth.
Is the negative operating cash flow a concern?
Operating cash flow was negative $456M in Q1 2024. Management attributed this mainly to timing: experience rebate payments, a state premium payment delayed into April (since received), and pharmacy rebate remittance timing tied to the January 2024 PBM transition. Investors should monitor whether cash flow normalizes in coming quarters, since the company cited these items as temporary.
Why are the SG&A and health benefits ratios higher than last year?
The SG&A ratio rose to 8.9% from 8.6%, mainly because Marketplace operates at a meaningfully higher SG&A ratio than Medicaid, and Medicare distribution costs increased. Severance from a restructuring and higher acquisition and divestiture costs also contributed. These were partly offset by cost-reduction initiatives and the Circle Health divestiture. The health benefits ratio rose slightly to 87.1% from 87.0%.
How is Centene's membership mix changing?
Total membership was roughly flat at 28.4 million. Marketplace membership grew to 4.35 million (+41% YoY) and Medicare PDP grew to 6.4 million (+44%), while Traditional Medicaid and total Medicaid declined about 19% year over year to 13.3 million, largely due to Medicaid redeterminations. Marketplace and PDP growth carry different margin profiles than Medicaid, which is reflected in the higher SG&A ratio.
04—Continue