Cvs Health Corporation · NYSE:CVS
Cvs Health — Q3 2019 Earnings Presentation
23 slides from Cvs Health's earnings presentation, Nov 6, 2019
Slide 1: Third Quarter 2019 Earnings Conference Call
Third Quarter 2019 Earnings Conference Call Larry Merlo President & Chief Executive Officer Eva Boratto Executive Vice President & Chief Financial Officer
Slide 2: Cautionary Statement Concerning Forward-Looking Statements
Cautionary Statement Concerning Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of CVS Health Corporation. By their nature, all forward-looking statements involve risks and uncertainties. Actua
Slide 3: Strong Execution Across Our Businesses Yields Guidance Beat, Raise and Narrow
Strong Execution Across Our Businesses Yields Guidance Beat, Raise and Narrow • Exceeded our financial expectations – Q3 Adjusted EPS of $1.84, 5 cents above the high end of our guidance range • 4 cents attributed to net realized capital gains and favorable prior years’ development – Performance dri
Slide 4: Enterprise priorities to accelerate growth
1. 2. Grow and Deliver Enterprise priorities to differentiate our transformational businesses products and services accelerate growth Consumer obsessed – be local, make it simple, improve health 3. 4. Create a consumer- Modernize enterprise centric technology functions and infrastructure capabilitie
Slide 5: Continued Progress on Strategic Priorities
Continued Progress on Strategic Priorities 1. 2. 3. 4. Grow and differentiate our businesses Deliver transformational Create consumer-centric Modernize enterprise A. HealthHUB® Conversions products and services technology infrastructure functions and capabilities – 16 HUBS open in 4 metro areas: FL,
Slide 6: 2020 PBM Selling Season Revenue Improved
2020 PBM Selling Season Revenue Improved As of October 2019 ($, billions) 4.9 (3.6) (7.7) (6.4) Gross Centene Other Net new business carve-in non-renewals new business Net New Business improved ~$1 billion since 2Q update Note: IngenioRx network revenue recorded on a net basis 6
Slide 7: Third Quarter 2019 Financial Review
Third Quarter 2019 Financial Review
Slide 8: Strong Q3 Consolidated Results
Strong Q3 Consolidated Results in millions, except per share data Q3 2019 Q3 2018 Change % Adjusted Revenues $64,810 $47,281 37.1% Adjusted Operating Income $3,947 $2,650 48.9% GAAP EPS $1.17 $1.36 -14.0% Adjusted EPS $1.84 $1.73 6.4% Cash Flow from Operations $2,928 $1,097 166.9% • Interest expense
Slide 9: Q3 Results: Pharmacy Services Segment
Q3 Results: Pharmacy Services Segment in millions Q3 2019 Q3 2018 Change % Total Revenues $36,018 $33,864 6.4% Adjusted Operating Income $1,439 $1,362 5.7% Total Pharmacy Claims Processed(1) 509.5 466.3 9.3% • Revenue drivers include: – Benefits from net new business and our Maintenance Choice progr
Slide 10: Q3 Results: Retail / LTC Segment
Q3 Results: Retail / LTC Segment in millions Q3 2019 Q3 2018 Change % Total Revenues $21,466 $20,856 2.9% Adjusted Operating Income $1,516 $1,622 (6.5%) Prescriptions Filled(1) 352.3 331.2 6.4% • Revenue growth includes increased prescription volume, partially offset by continued reimbursement press
Slide 11: Q3 Results: Retail Pharmacy
Q3 Results: Retail Pharmacy Change vs. Q3 2018 Same Store Sales(1) 3.6% Pharmacy Sales 4.5% Pharmacy Prescription Volume(2) 7.8% Front Store Sales 0.6% Retail Pharmacy Script Share of 26.6%(2)(3) Up 110 bps • Retail pharmacy script share increase driven primarily by continued adoption of patient car
Slide 12: Q3 Results: Health Care Benefits Segment
Q3 Results: Health Care Benefits Segment in millions, except MBR Q3 2019 Total Revenues $17,181 Adjusted Operating Income $1,423 Medical Membership 22.8 Medical Benefit Ratio (MBR) 83.3% • Medical membership comparable to June 30, 2019; up ~ 708,000 members from December 31, 2018 • MBR reflects mode
Slide 13: Q3 Results: Cash Flow & Capital Allocation
Q3 Results: Cash Flow & Capital Allocation • Remain committed to disciplined capital allocation priorities; on track with deleveraging plans outlined at Investor Day in June • In Q3, generated $2.9 billion in cash flow from operations – Using available, unrestricted cash to pay down debt; projected
Slide 14: 2019 Guidance
2019 Guidance ¥ CVvSHealth.
Slide 15: Enterprise Outlook
Guidance: Full-Year 2019 Enterprise Outlook in millions, except per share data Full-Year 2019 Consolidated Total Revenues $251,600 to $254,180 Adjusted Operating Income $15,220 to $15,400 GAAP EPS $4.90 to $4.98 Adjusted EPS $6.97 to $7.05 • Narrowing and raising consolidated full year Adjusted Oper
Slide 16: Pharmacy Services Outlook
Guidance: Full-Year 2019 Pharmacy Services Outlook in millions Full-Year 2019 Total Revenues(1) $137,600 to $139,150 Adjusted Operating Income $5,100 to $5,160 Total Pharmacy Claims(2) 1,960 to 1,980 • Increased Revenue, Adjusted Operating Income and Pharmacy Claims guidance, reflecting momentum in
Slide 17: Retail / LTC Outlook
Guidance: Full-Year 2019 Retail / LTC Outlook in millions Full-Year 2019 Total Revenues $85,640 to $86,410 Adjusted Operating Income $6,680 to $6,740 Prescriptions Filled(1) 1,420 to 1,425 • Narrowing full-year guidance range – Business performing in-line with expectations – Maintaining strong scrip
Slide 18: Health Care Benefits Outlook
Guidance: Full-Year 2019 Health Care Benefits Outlook in millions, except medical cost trend and MBR Full-Year 2019 Total Revenues $68,880 to $69,470 Adjusted Operating Income $5,180 to $5,240 Core Commercial Medical Cost Trend 6.0% +/- 50 bps Medical Membership 22.7 to 23.0 Medical Benefit Ratio (M
Slide 19: Other Items
Guidance: Full-Year 2019 Other Items in millions, except tax rate and shares Full-Year 2019 Net Synergies At least $400 Incremental Investment Spending $325 to $350 Interest Expense $3,050 to $3,060 Effective Tax Rate ~ 26% Weighted-Average Share Count 1,305 Cash Flow from Operations $10,100 to $10,
Slide 20: Considerations: Q4 2019 Guidance
Guidance: Q4 2019 Considerations • The first three quarters had the highest year-over-year earnings growth as we lap the addition of Aetna • Adjusted operating income for HCB expected to be lowest in Q4 due to typical seasonality of the business and spending to support January 1 readiness for Medica
Slide 21: Performance Against Our Scorecard
Performance Against Our Scorecard Timing Target Update as of Q3 2019 2019 $6.75 - $6.90 New guidance of $6.97 to $7.05 2020 $7.00+ (Low single digits%) On Track Adjusted EPS Growth 2021 Mid single digits % 2022+ Low double digits % 2019 $300M - $350M Fully integrated mail operations ahead of p
Slide 22: Appendix
Appendix ¥ CVvSHealth.
Slide 23: Debt Maturity Schedule as of September 30, 2019
Debt Maturity Schedule as of September 30, 2019 10 9 8 7 6 5 4 3 2 1 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2035 2036 2037 2038 2039 2041 2042 2043 2044 2045 2047 2048 CVS AET Standalone Deal Financing 23