10-QPeriod: Q2 FY2020

Elevance Health, Inc. Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 29, 2020For Securities:ELV

Summary

Elevance Health, Inc. (formerly Anthem, Inc.) reported strong financial results for the second quarter ended June 30, 2020. Total operating revenue saw a significant increase of 15.9% year-over-year to $29.2 billion, driven by growth in premiums and the launch of its IngenioRx pharmacy benefit management (PBM) services. Net income more than doubled to $2.3 billion, or $8.91 per diluted share, reflecting improved operating gains across all segments and a temporary decrease in benefit expenses due to deferred healthcare utilization amid the COVID-19 pandemic. The company also maintained a solid balance sheet with total assets growing to nearly $88 billion and a healthy cash position. The company's strategic acquisition of Beacon Health Options, Inc. in February 2020 is expected to further diversify its business into health services. Despite the ongoing economic uncertainties related to COVID-19, Elevance Health demonstrated resilience, with management highlighting robust performance and a focus on adapting services for members and providers. Investors can take note of the strong revenue growth, substantial net income improvement, and strategic expansion into behavioral health as key takeaways from this report.

Financial Highlights

51 data points
Beta

Revenue

$29.26B

92.4% Gross Margin

Net Income

$2.28B

7.8% Net Margin

EPS (Diluted)

$8.91

Total Assets

$87.98B

Cash & Equivalents

$6.03B

Free Cash Flow

$5.28B

Financial Statements
Beta
Revenue$29.26B
Cost of Revenue$2.23B
Gross Profit$27.04B
SG&A Expenses$4.05B
Operating Income$3.36B
Interest Expense$201.00M
Net Income$2.28B
EPS (Basic)$9.02
EPS (Diluted)$8.91
Shares Outstanding (Basic)252.20M
Shares Outstanding (Diluted)255.40M

Key Highlights

  • 1Total operating revenue increased 15.9% to $29.2 billion for the three months ended June 30, 2020, compared to the prior year.
  • 2Net income more than doubled to $2.3 billion for the three months ended June 30, 2020, a 99.8% increase year-over-year.
  • 3Diluted EPS rose to $8.91 for the three months ended June 30, 2020, from $4.36 in the same period last year.
  • 4The company completed the acquisition of Beacon Health Options, Inc., expanding its behavioral health services capabilities.
  • 5Benefit expense decreased by 4.0% for the three months ended June 30, 2020, attributed to lower healthcare claims volume due to COVID-19 related deferrals of routine care.
  • 6Operating cash flow significantly increased to $8.0 billion for the six months ended June 30, 2020, up from $3.1 billion in the prior year, aided by higher net income and tax payment deferrals.
  • 7Medical membership grew by 3.9% to 42.5 million as of June 30, 2020, driven by increases in Government and Commercial & Specialty businesses.

Frequently Asked Questions

The substantial increase in operating revenue was primarily driven by higher product revenue from the launch and full transition of IngenioRx, its pharmacy benefit management (PBM) services, and increased premium revenue, particularly in the Government Business segment, due to membership growth and rate adjustments.

The COVID-19 pandemic had a mixed impact. While it led to a decrease in benefit expense due to lower utilization of healthcare services, it also introduced uncertainties regarding future medical expenses, potential premium delays, and investment performance. The company implemented various measures to support members, providers, and employees and actively managed its liquidity.

The acquisition of Beacon Health Options, Inc. aligns with Elevance Health's strategy to diversify into health services and enhance its integrated care delivery models, particularly in the behavioral health space. This acquisition is expected to contribute to future growth and diversification of the company's offerings.

The company demonstrated strong operating cash flow, significantly increasing to $8.0 billion for the six months ended June 30, 2020. This was supported by higher net income, strategic tax payment deferrals permitted by the CARES Act and IRS Notice 2020-23, and higher premium receipts. Elevance Health also maintained robust cash, cash equivalents, and investments totaling $32.0 billion.