Cvs Health Corporation · NYSE:CVS
Cvs Health — Q4 2019 Earnings Presentation
26 slides from Cvs Health's earnings presentation, Feb 12, 2020
Slide 1: Fourth Quarter 2019 Earnings Conference Call
FOURTH QUARTER 2019 Earnings conference call Larry Merlo President & Chief Executive Officer Eva Boratto Executive Vice President & Chief Financial Officer ©2019 CVS Health and/or one of its affiliates. Confidential and proprietary.
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: Financial highlights
Financial highlights Successful year across the Enterprise Exceeded our 2019 financial 2020 Full-Year Adjusted EPS guidance expectations of $7.04 to $7.17; growth of 4.0% at the mid-point vs. 2019 baseline of $6.83 • Q4 Adjusted EPS of $1.73 • Ahead of 2020 guidance from June 2019 Investor • 2019 Fu
Slide 4: Enterprise priorities to accelerate growth
Grow and Deliver Enterprise priorities differentiate our transformational businesses products and services to accelerate growth Consumer focused – be local, make it simple, improve health Create a consumer- Modernize Enterprise centric technology functions and infrastructure capabilities 4 ©2020 CVS
Slide 5: Grow and differentiate our businesses
Integrated value offerings Zero to low co-pay plan options for Commercial members at MinuteClinics ® for 2020 Pharmacist Panels operating in four metro areas CONTINUED PROGRESS ON STRATEGIC PRIORITIES HealthHUB® conversions on track • >50 HealthHUB® locations opened during 2019 in four metro areas:
Slide 6: Deliver transformational products and services
CONTINUED PROGRESS ON STRATEGIC PRIORITIES Oncology Transform Oncology Care program rolled out to over 30 providers and ~200 care Commercial insured members across 14 states Deliver Chronic Kidney Chronic Kidney Disease (CKD) care transformational Disease care management program is currently availab
Slide 7: Create a consumer-centric technology infrastructure
CarePass subscription program has CarePass ® ~1.6M enrolled members as of Q4 ‘19 membership • The average CarePass member is and delivery shopping CVS ~25% more often after joining the program CONTINUED PROGRESS ON STRATEGIC PRIORITIES Digital 34% of MinuteClinic® visits scheduled scheduling digital
Slide 8: Modernize Enterprise functions and capabilities
Client Investing in improving client service delivery with continued progress CONTINUED PROGRESS service toward process simplification and ON STRATEGIC PRIORITIES delivery delivering net savings Continued technology modernization Modernize Modernization with business system and application rationali
Slide 9: 2019 Financial Review
2019 Financial Review 9 ©2020 CVS Health and/or one of its affiliates. Confidential and proprietary.
Slide 10: Consolidated results: full-year 2019
FULL-YEAR 2019 RESULTS Consolidated results in millions, except per share data 2019 2018 Change % Interest expense of $3.0 billion Adjusted revenues $256,776 $194,043 32.3% Adjusted effective tax rate of 25.6% Adjusted operating income $15,339 11,261 36.2% Weighted-average diluted share count: GAAP
Slide 11: Consolidated results: Q4
Q4 RESULTS Consolidated results in millions, except per share data Q4 2019 Q4 2018 Change % Adjusted revenues $66,889 $54,341 23.1% Interest expense of $734 million Adjusted operating income $3,766 $3,719 1.3% Adjusted effective tax rate of 25.9% GAAP EPS $1.33 ($0.37) NM Weighted-average diluted sh
Slide 12: Pharmacy Services segment
Q4 RESULTS Pharmacy Services segment Revenue growth drivers • Total pharmacy claims volume, Specialty, including IngenioRx onboarding, and brand inflation, partially in millions Q4 2019 Q4 2018 Change % offset by continued price compression and increased generic dispensing rate (GDR) Total revenues
Slide 13: Retail / LTC segment
Q4 RESULTS Retail / LTC segment Revenue growth drivers in millions Q4 2019 Q4 2018 Change % • Increased prescription volume and brand inflation, partially offset by continued reimbursement Total revenues $22,580 $22,029 2.5% pressure and increased generic dispensing rate (GDR) Adjusted • GDR1 of 87.
Slide 14: Retail pharmacy
Q4 RESULTS Retail pharmacy in millions Change vs. Q4 2018 Retail pharmacy script share increase driven primarily by continued adoption of Same store sales1 3.2% patient care programs Pharmacy sales 4.1% Growth in Front Store sales primarily driven by increases in health and beauty product Pharmacy p
Slide 15: Health Care Benefits segment
Q4 RESULTS Health Care Benefits segment YE 2019 medical membership in line with expectations in millions, except MBR Q4 2019 Q4 20181 Change % Strong membership growth in Government Total revenues $17,150 $6,239 174.9% products Adjusted FY MBR of 84.2% and 4Q MBR in line with operating income $779 $
Slide 16: Cash flow and capital allocation
Q4 RESULTS Cash flow and capital allocation Strong cash generation and Paid ~$650 million in Q4 shareholder commitment to disciplined capital dividends; and $2.6 billion for Full- allocation priorities Year 2019 Generated $2.6 billion in cash flow Continuing to reinvest in the business from operatio
Slide 17: 2020 Guidance
2020 Guidance 17 ©2020 CVS Health and/or one of its affiliates. Confidential and proprietary.
Slide 18: 2020 Outlook
2020 Outlook Strategic plan execution and successful integration drive 2020 outlook 2020 Full-Year Adjusted EPS Integration costs expected to be ~$450 guidance of $7.04 to $7.17, growth of million in 2020; excluded from ~3% to ~5% vs. 2019 baseline of non-GAAP financial measures $6.83 2019 capital m
Slide 19: Enterprise outlook
GUIDANCE: FULL-YEAR 2020 Enterprise outlook in millions, except per share data Full-Year 2020 Consolidated total revenues $261,970 to $265,480 Enterprise expectations driven by growth 2.0% to 3.5% across all business segments Adjusted operating income $15,530 to $15,760 1.25% to 2.75% Projected GAAP
Slide 20: Pharmacy Services outlook
GUIDANCE: FULL-YEAR 2020 Pharmacy Services outlook Projected revenue decline attributable to net selling season losses and continued price in millions Full-Year 2020 compression $137,500 to $139,450 • Strong Specialty revenue expectations of about Total revenues1 $45B, ~10% increase year-over-year (
Slide 21: Projected 2020 PBM selling season revenue
AS OF JANUARY 2020 Projected 2020 PBM selling season revenue ($, billions) 5.1 2020 net new business improved (0.9) $2.8B since 3Q 2019 update Have completed ~65% of 2021 Pharmacy Services selling season renewals with strong retention, including FEP and WellCare (6.4) (7.8) (3.6) Gross Centene Other
Slide 22: Retail / LTC outlook
GUIDANCE: FULL-YEAR 2020 Retail / LTC outlook Projected adjusted script growth driven by continued successful in millions Full-Year 2020 execution of patient care programs, including pharmacy clinical care Total revenues $87,530 to $88,800 1.0% to 2.5% Projected pharmacy growth and Enterprise Modern
Slide 23: Health Care Benefits outlook
GUIDANCE: FULL-YEAR 2020 Health Care Benefits outlook Projected total revenue growth is driven by strong Government product growth in millions, except medical cost trend, MBR Full-Year 2020 Commercial signed more pharmacy $74,060 to $74,830 business for January 2020 than in all of 2019 Total revenue
Slide 24: Other items
GUIDANCE: FULL-YEAR 2020 Other items in millions, except tax rates Full-Year 2020 Interest expense $2,870 to $2,890 Adjusted effective tax rate ~ 27.5% Up ~190 bps from 2019 Weighted-average diluted share count 1,320 Cash flow from operations $10,500 to $11,000 Cash available for debt repayment $4,2
Slide 25: Other considerations
GUIDANCE: FULL-YEAR 2020 Other considerations First quarter expected to be the lowest earnings Cash available for debt pay down is affected by the quarter for the year due to seasonality in Pharmacy timing of certain payables and receivables from Services and Retail/LTC 2019 and is expected to be su
Slide 26: Performance against our scorecard
Performance against our scorecard Timing Target Update as of February 12, 2020 2019 $6.75 - $6.90 Actual results of $7.08 2020 $7.00+ (Low single digits%) FY guidance of $7.04 to $7.17 Adjusted EPS growth 2021 Mid single digits % 2022+ Low double digits % 2019 $300M - $350M Actual results of ~$500M