Centene(US:CNC)2020-07-27 22:40Financial Performance - Centene Corporation reported GAAP net earnings of $1,206 million for the three months ended June 30, 2020, compared to $495 million for the same period in 2019, reflecting a significant increase [11]. - Adjusted net earnings for the same period were $1,410 million, up from $561 million year-over-year, indicating a growth of approximately 151% [11]. - GAAP diluted earnings per share (EPS) increased to $2.05 for the three months ended June 30, 2020, compared to $1.18 in the prior year, representing a growth of 73.7% [11]. - Total revenues for the three months ended June 30, 2020, were $27,712 million, a 51.0% increase from $18,356 million in the same period of 2019 [14]. - Net earnings attributable to Centene Corporation for the three months ended June 30, 2020, were $1,206 million, compared to $495 million in the same period of 2019, representing a 143.6% increase [15]. - Total revenues for the six months ended June 30, 2020, reached $53,737 million, compared to $36,800 million for the same period in 2019, an increase of about 46% [53]. - The Managed Care segment generated $26,740 million in total revenues for Q2 2020, compared to $17,546 million in Q2 2019, marking a growth of about 52% [52]. - The Specialty Services segment reported total revenues of $4,092 million for Q2 2020, compared to $3,403 million in Q2 2019, indicating a growth of about 20% [52]. Expenses and Costs - The company incurred acquisition-related expenses of $71 million in Q2 2020, compared to $23 million in Q2 2019, highlighting increased costs associated with acquisitions [12]. - Selling, general, and administrative expenses (GAAP) rose to $2,255 million in Q2 2020, up from $1,574 million in Q2 2019, marking a 43.3% increase [12]. - Adjusted selling, general, and administrative expenses were $2,185 million for Q2 2020, compared to $1,553 million in Q2 2019, reflecting a year-over-year increase of 40.6% [12]. - Medical costs for the three months ended June 30, 2020, were $20,307 million, compared to $14,354 million in the same period of 2019, indicating a 41.5% increase [14]. - Total operating expenses for the three months ended June 30, 2020, were $25,694 million, up from $17,713 million in the same period of 2019, representing a 45.0% increase [14]. Acquisitions - The Company acquired WellCare Health Plans, Inc. on January 23, 2020, for a total consideration of $17,605 million, including $11,431 million in common shares and $6,079 million in cash [24]. - The acquisition added a Medicare prescription drug plan to the Company's existing business lines and enhanced its Medicaid offerings [24]. - The WellCare acquisition was accounted for as a business combination, with assets and liabilities recognized at fair value as of the acquisition date [24]. - The Company recognized $71 million and $384 million of acquisition-related costs for the three and six months ended June 30, 2020, respectively [24]. - The acquisition resulted in $10,637 million of goodwill, primarily due to expected synergies and the assembled workforce of WellCare [29]. Membership and Market Position - Managed care membership reached 24.6 million, an increase of 9.6 million members, or 64% year-over-year [70]. - The company expects a decrease in membership due to increased competition in the Oregon market, pending contract negotiations [75]. - Medicaid revenue grew by 50% to $18,129 million in Q2 2020, up from $12,119 million in Q2 2019 [78]. Cash Flow and Investments - Cash provided by operating activities for the six months ended June 30, 2020, was $3,474 million, up from $2,233 million in the prior year, indicating a 55.7% increase [18]. - The company reported a net cash used in investing activities of $3,032 million for the six months ended June 30, 2020, compared to $929 million in the same period of 2019 [18]. - The company completed an exchange offer for $1,200 million of 5.25% Senior Notes and $750 million of 5.375% Senior Notes as part of the WellCare acquisition, recorded at a fair value of $2,055 million [44]. - As of June 30, 2020, the company had unregulated cash and investments of $2.0 billion, a decrease from $7.2 billion at December 31, 2019 [95]. Risks and Challenges - The company anticipates challenges in achieving expected synergies and value creation from the WellCare Acquisition, which may not be realized within the expected timeframe [8]. - The company faces risks related to competition, membership and revenue declines, and changes in healthcare practices and costs [9]. - Forward-looking statements indicate potential impacts from COVID-19 on financial performance and operational results, with uncertainties surrounding market conditions and regulatory changes [7]. - Incremental COVID-19 costs are expected to continue impacting financial results as the pandemic evolves [68]. Tax and Regulatory - The effective tax rate for Q2 2020 was 38.2%, compared to 25.7% in Q2 2019, reflecting the reinstatement of the health insurer fee [85]. - The effective tax rate for the six months ended June 30, 2020, was 39.9%, compared to 24.9% in the same period of 2019, reflecting the reinstatement of the health insurer fee [90].