Cvs Health Corporation · NYSE:CVS
Cvs Health — Investor Day (June 2019)
24 slides from Cvs Health's investor day presentation, Jun 4, 2019
Slide 1: Advancing the Enterprise to Unlock Value
Advancing the Enterprise to Unlock Value Eva Boratto Executive Vice President & Chief Financial Officer
Slide 2: Cautionary statement regarding forward-looking statements
Cautionary statement regarding 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. Actual
Slide 3: Continued focus on enhancing long-term shareholder value
Continued focus on enhancing long-term shareholder value Optimizing capital allocation Generating significant cash flow from operations Launching transformative products Sustainable long-term Steps of value creation growth to drive long-term growth 3
Slide 4: Agenda
Agenda 2019 guidance review Value creation through integration synergies, modernization & transformation Financial outlook & capital allocation strategy 4
Slide 5: Reaffirming all elements of 2019 guidance
Enterprise Outlook: 2019 full year1 Reaffirming all elements of 2019 guidance ($ in billions, except per share data) Consolidated Revenues $251.2 to $254.4 3 Adjusted Operating Income $15.0 to $15.2 GAAP Diluted EPS $4.90 to $5.05 3 Adjusted EPS $6.75 to $6.90 3 Cash Available to Repay Debt $4.2 to
Slide 6: Agenda
Agenda 2019 guidance review Value creation through integration synergies, modernization & transformation Financial outlook & capital allocation strategy 6
Slide 7: Executing on integration synergies to reach ~$900M run rate
1 1 . I N T E G R AT I O N S Y N E R G I E S Executing on integration synergies to reach ~$900M run rate ~$900M Business integration ~$800M Plan design Specialty / Coram / PBM Operations / Other General & administrative functions Vendor contracting $300-$350M Streamline corporate functions M
Slide 8: Generating net savings with enterprise modernization
2 . E N T E R P R I S E M O D E R N I Z AT I O N Generating net savings with enterprise modernization Areas of net savings • Technology modernization 1 $1.5B-$2.0B − Rationalization − Centers of excellence • Productivity improvements 1 − Optimize call centers $900M-$1.1B − Vendor management − Busine
Slide 9: Driving long-term value through transformation
3 . T R A N S F O R M AT I O N Driving long-term value through transformation Medical cost Membership Expanded use of Increased customer Open platform savings growth CVS assets satisfaction and and new retention businesses Commercial insured Plan sponsors Pharmacy Improving the Payor agnostic consum
Slide 10: Substantial long-term value creation through strategic initiatives & consumer-centric products
Substantial long-term value creation through strategic initiatives & consumer-centric products $1.5B - $2.0B ~$900M ~$850M Projected to drive a run rate of ~$3.5B in operating income in 20221 1. Integration 2. Enterprise 3. Transformation synergies modernization 10
Slide 11: Agenda
Agenda 2019 guidance review Value creation through integration synergies, modernization & transformation Financial outlook & capital allocation strategy 11
Slide 12: Balancing near-term execution with long-term vision
Balancing near-term execution with long- term vision 1 2 3 4 5 6 Mitigate Execute Focus on Refine and Optimize Enhance headwinds streamlining integration roll out new enterprise shareholder and expense process and front doors to portfolio and returns through reduction exceed synergy health care eval
Slide 13: Well positioned for long-term growth
Well positioned for long-term growth 2022+ Low double digits5 2021 Mid single digits 2020 Low single Projected Adjusted 2019 digits 2020P Key Elements1 EPS growth1,3,6 (%) $6.75 $7.00+ Adjusted EPS3,6 to 6.90 Revenue up low single digits % Tax rate ~ 28.5% 13
Slide 14: Health Care Benefits – 2020 year-over-year drivers
Health Care Benefits – 2020 year-over-year drivers Total Revenues1 Adjusted Operating Income1,3,4 Divestiture of Aetna PDP Competitive environment Health insurance fee reinstatement Divestiture of Aetna PDP and stranded costs Outpace industry growth in gov’t services Health insurance fee reinstateme
Slide 15: Retail / LTC – 2020 year-over-year drivers
Retail / LTC – 2020 year-over-year drivers Total Revenues1 Adjusted Operating Income1,3 Front store continued shift to digital Front store margin Front store formats & personalization Generics Omnicare Omnicare Outpace industry growth in Rx Reimbursement pressure Rx growth Synergies / enterprise mod
Slide 16: Pharmacy Services – 2020 year-over-year drivers
Pharmacy Services – 2020 year-over-year drivers Total Revenues1 Adjusted Operating Income1,3 Anthem Anthem Net new business / Centene migration Net new business / Centene migration Specialty Pricing pressure Purchasing economics Rebate guarantees Specialty Synergies / enterprise modernization 2020P
Slide 17: Investing in capabilities to drive sustainable long-term value
Investing in capabilities to drive sustainable long-term value $2.3B to $2.6B Annual projected capital expenditures1 Key areas of capital spending Historical Projected Remodels Innovative HealthHUB®s New stores Transformative products and modernization Technology Initiatives New stores Data analytic
Slide 18: Strong cash flow generation and effective capital deployment
Strong cash flow generation and effective capital deployment Plan to reduce debt significantly to reach leverage ratio target of low 3x’s Leverage Ratio1,3,7 ~4.7x at transaction close3 Focused on debt reduction in the near term • Committed to returning to low 3x’s leverage ratio target Mid ~3x • Si
Slide 19: Thoughtful capital allocation strategy to drive long-term value creation
Thoughtful capital allocation strategy to drive long-term value creation Near term (2020P-2021P)1 Debt Paydown ~45% Additional Retained ~10% Capital Needs ~25% of Insurance Capital Subsidiaries ~20% Deployment to Shareholders – Net Capital Dividends Only Expect $10B - $12B1,8 cash available annually
Slide 20: Long-term assumptions – 2022 and beyond
Long-term assumptions – 2022 and beyond1 Health Care Benefits Retail / LTC Pharmacy Services Other Commercial retention Generics Claims growth Capital deployment Competitive HealthHUB / Generics Impact of digital environment services growth Improvement Introduction of Membership growth Interest expe
Slide 21: Scorecard to evaluate success
Scorecard to evaluate success Target1 Timing $6.75 - $6.90 2019 $7.00+ (Low single digits%) 2020 Adjusted EPS Growth3 Mid single digits % 2021 Low double digits % 2022+ $300M - $350M 2019 Integration synergies ~ $800M 2020 ~ $900M 2021+ Enterprise modernization $1.5B - $2B Run Rate 2022 ~ $850M 2022
Slide 22: Steps to unlocking significant value well underway
K E Y TA K E AW AY S Steps to unlocking significant value well underway Strong progress executing our plan to grow and differentiate our businesses Significant upside to synergy targets Positioned for long-term enterprise growth Thoughtful allocation and prioritization of capital 22
Slide 23: Endnotes
Endnotes 1. Currently enacted laws and regulations were used in all the Company’s projections. 2. After income taxes, the Health Insurer Fee is projected to be a headwind for the Health Care Benefits segment. 3. This financial measure is a non-GAAP financial measure. For an explanation of this finan
Slide 24: Endnotes
Endnotes 7. The Company defines its leverage ratio as Adjusted Debt divided by adjusted earnings before interest, tax, depreciation and amortization (Adjusted EBITDA). Adjusted Debt is defined as short-term debt and total long-term debt (including the current portion of long-term debt), plus the pre