Yahoo Finance Centene Corp (CNC) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic Insights
Adjusted EPS: Reported at $2.26 for Q1 2024, with a full-year guidance increase to greater than $6.80.
Premium and Service Revenue: $36.3 billion in Q1 2024, a 7% increase from Q1 2023.
Consolidated HBR: 87.1% for Q1 2024, aligning with full-year guidance.
Medicaid Membership: 13.3 million members, slightly above the forecast of 13.2 million.
Marketplace Membership: Grew to 4.3 million by the end of Q1 2024.
Medicare Advantage Revenue: Projected at about $16 billion for 2024, representing 12% of total premium and service revenue.
Adjusted SG&A Expense Ratio: Maintained at 8.7% in Q1 2024.
Cash Flow: Used $456 million in operations during Q1 2024, influenced by timing of payments and transitions.
Share Repurchases: 3.4 million shares for $251 million from January 1 to mid-April 2024.
Debt to Adjusted EBITDA: Stood at 2.9x at the end of Q1 2024.
Medical Claims Liability: Represented 53 days in claims payable, a slight decrease from previous quarters.
Release Date: April 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you discuss the margin performance on the exchanges and how confident you are that this performance is sustainable given the rapid membership growth and operational changes? A: (Sarah M. London, CEO & Director) - The confidence in the overall HBR is strong, reflecting consistent performance over the last two cycles despite rapid market growth. The company has implemented robust clinical initiatives that have matured, aiding in overall management. Operational agility was demonstrated in response to the Change Healthcare incident, maintaining solid visibility and quick recovery in outpatient visibility.
Q: What factors are influencing the revised premium and service revenue guidance, and how do you see Medicaid MLR progressing through the year? A: (Andrew Lynn Asher, EVP & CFO) - The revised guidance considers state-directed payments and expected redetermination attrition. Medicaid MLR is expected to improve from the Q1 level of 90.9%, with initiatives to drive it down and rate adjustments expected in the mid-year rate cycle.
Q: What is your outlook for exchange margins relative to your target range, and how are you approaching the PDP strategy given the changes in 2025? A: (Sarah M. London, CEO & Director) - The expectation for Marketplace remains within the target range of 5% to 7.5% for 2024. Drew Asher added that PDP changes in 2025 are significant, with an expected increase in direct subsidy driving revenue yield, necessitating careful underwriting and consideration of new risk models.
Q: How do you view the Medicare Advantage strategy for 2025, especially considering potential membership changes and the importance of Medicare Advantage to Centene's overall strategy? A: (Sarah M. London, CEO & Director) - The focus remains on building a high-quality, durable Medicare franchise, especially for low-income complex members. The strategy includes improving STARS ratings and operational efficiencies. Medicare Advantage remains crucial, particularly due to its strategic link with Medicaid.
Q: Can you provide insights into the PBM migration's progress and its impact, including savings levers and state dialogues on GLP-1 coverage? A: (Sarah M. London, CEO & Director and Andrew Lynn Asher, EVP & CFO) - The PBM migration has been successful, with ongoing improvements expected. State uptake of GLP-1s for weight loss is limited, with Centene providing data to states to align costs with benefits. The focus is on managing pharmacy costs effectively while navigating state preferences and regulations.
Q: Regarding the long-term target for Medicaid HBR and the visibility on rate and acuity matching post-redeterminations, when do you expect clarity on the impact of redeterminations on the risk pool? A: (Sarah M. London, CEO & Director) - Clarity on the shifting risk pool has been ongoing, with proactive modeling and dialogue with states. The expectation is that any dislocation between rate and acuity will be addressed in upcoming rate cycles, with a full alignment and margin improvement anticipated by 2025-2026.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
