Cvs Health Corporation · NYSE:CVS
Cvs Health — Q2 2020 Earnings Presentation
27 slides from Cvs Health's earnings presentation, Aug 5, 2020
Slide 1: Second Quarter 2020 Earnings Conference Call
SECOND QUARTER 2020 Earnings conference call August 5, 2020 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 This presentation includes 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-lo
Slide 3: #CVSHeartAtWork
#CVSHeartAtWork 3 ©2020 CVS Health and/or one of its affiliates. Confidential and proprietary.
Slide 4: Financial Highlights
Financial Highlights Second quarter revenue of $65.3B and Adjusted EPS of $2.64 demonstrate the advancement of our integrated health care strategy Q2 Adj EPS growth of ~40% YoY; $7.1B Impact of COVID-19 Raising FY20 Adj EPS guidance to Cash Flow from Operations • Contributed estimated $0.70 – $0.80
Slide 5: Cash flow and capital allocation
Cash flow and capital allocation Second quarter results demonstrate strong cash flow from operations and liquidity position Strong cash generation Strong liquidity: access to Continue to prioritize paying ~$13 billion down debt and maintaining • Commitment to disciplined capital dividend allocation
Slide 6: Delivering care solutions across triad of care
Delivering care solutions across triad of care The environment surrounding COVID-19 is accelerating our transformation, giving us new opportunities to demonstrate the power of our integrated offering and to deliver solutions at scale that meet client and consumer needs 1 2 3 In the Community In the
Slide 7: Supporting local communities through our differentiated COVID-19 testing capabilities
Supporting local communities through our differentiated COVID-19 testing capabilities COVID-19 Testing Adaptable Digital Experience Return ReadySM Comprehensive B2B Vast majority of tests are ~2M Tests administered through end of July scheduled digitally using our >40 testing solution with clients f
Slide 8: Advancing our integrated offerings
Advancing our integrated offerings Our integrated, innovation-driven health care model is providing benefits to members and consumers across the health care system that will continue into the future as their needs evolve • 205 HealthHUB® locations across 22 states; expect ~1,500 by the end of 2021 •
Slide 9: Q2 2020 Financial Review
Q2 2020 Financial Review 9 ©2020 CVS Health and/or one of its affiliates. Confidential and proprietary.
Slide 10: Consolidated results
Q2 RESULTS Consolidated results Intersegment revenue elimination equal to 13.0% in millions, of segment total revenues except per share data Q2 2020 Q2 2019 Change % Total revenues $65,341 $63,431 3.0% Interest expense of $765 million Adjusted Other income of $45 million operating income $5,328 $4,0
Slide 11: Health Care Benefits segment
Q2 RESULTS Health Care Benefits segment in millions, except MBR Q2 2020 Q2 2019 Change % Revenue growth primarily driven by strong membership growth in Government products Total revenues $18,468 $17,403 6.1% Adjusted operating income increase primarily driven Adjusted by unprecedented lower benefit
Slide 12: Pharmacy Services segment
Q2 RESULTS Pharmacy Services segment Revenue growth driven by growth in Specialty pharmacy and brand inflation, largely offset by previously disclosed client losses and continued price compression • Specialty Pharmacy revenue growth of ~15% YoY in millions Q2 2020 Q2 2019 Change % reflects new clien
Slide 13: 2021 PBM selling season
AS OF JULY 2020 2021 PBM selling season ($, billions) Approximately $50 billion up for 4.3 (0.9) renewal 3.4 ~90% of the selling season complete Retention rate of ~98%1 Driving pharmacy penetration in Aetna book to deliver ~$250M in incremental revenue2 Gross Net new business Non-renewals new busine
Slide 14: Retail / LTC segment
Q2 RESULTS Retail / LTC segment Revenue growth driven primarily by pharmacy drug mix, growth in Retail pharmacy prescription volume and brand in millions Q2 2020 Q2 2019 Change % inflation, partially offset by continued reimbursement pressure, impact of recent generic introductions, Total revenues $
Slide 15: Retail pharmacy
Q2 RESULTS Retail pharmacy Change vs. Q2 2019 Improvement in same store sales driven by strength in Pharmacy; Retail pharmacy script share Same store sales1 2.4% increased Pharmacy sales 4.6% Prescriptions filled impacted by reduced new therapy prescriptions and lower LTC prescription Pharmacy adjus
Slide 16: Estimated impact of COVID-19 on Q2 financials
Q2 RESULTS Estimated impact of COVID-19 on Q2 financials Pharmacy Services Retail / LTC Health Care Benefits Corporate / Other • Prescription volume • Prescription volume • Decline in utilization • Incremental costs for impacted by a reduction in impacted by a reduction in partially offset by employ
Slide 17: July Business Update
July Business Update 17 ©2020 CVS Health and/or one of its affiliates. Confidential and proprietary.
Slide 18: July business update
July business update March April May June July 2020 YoY 2020 YoY 2020 YoY 2020 YoY 2020 YoY3 Sequential improvement in June adjusted Retail same store sales1 17.5% 1.5% (1.1%) 7.1% 4.6% prescription volume and total claims processed reflects 90-day maintenance Pharmacy sales 17.2% 5.4% (0.5%) 9.2% 4
Slide 19: 2020 Guidance
2020 Guidance 19 ©2020 CVS Health and/or one of its affiliates. Confidential and proprietary.
Slide 20: Enterprise Outlook
Guidance: 2020 Full Year Enterprise: Expect~$2B of COVID-19 related investments for the year; ~40% incurred in Q2. Expect Enterprise Outlook ~$1.5B in HCB, benefiting customers and members, including premium credits, minimum MLR rebates and contractual requirements; ~35% incurred in Q2. Expect ~$400
Slide 21: Appendix
Appendix 21 ©2020 CVS Health and/or one of its affiliates. Confidential and proprietary.
Slide 22: 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 22 ©2020 CV
Slide 23: Grow and differentiate our businesses
Integrated value offerings HealthHUB® conversions status: • 205 HealthHUB® locations opened across 22 states • HealthHUB® conversions resumed in certain states; year-end 2020 count dependent on duration of stay-at-home guidelines and other COVID-19 related constraints CONTINUED PROGRESS • Expect ~1,
Slide 24: Deliver transformational products and services
CONTINUED PROGRESS Oncology ~70 provider systems participating in ON STRATEGIC PRIORITIES Transform Oncology program across 20 care states ~20% of Aetna’s insured eligible Deliver oncology population is enrolled in the program transformational Chronic Kidney Chronic Kidney Disease care management pr
Slide 25: Create a consumer-centric technology infrastructure
CarePass® CarePass subscription program has ~2.8M enrolled members as of Q2 2020, membership ~30% growth from Q1 2020 CONTINUED PROGRESS ON STRATEGIC PRIORITIES Retail Retail prescription home delivery volume prescription up >500% in Q2 versus Q1 2020 Create a home delivery Virtual care Launched our
Slide 26: Modernize Enterprise functions and capabilities
Client service Investing in improving client service delivery with continued progress toward process CONTINUED PROGRESS delivery simplification and cost savings ON STRATEGIC PRIORITIES • Enhancing self-service capabilities to eliminate unnecessary member and Modernize patient inquiries and mailings
Slide 27: ©2020 CVS Health and/or one of its affiliates. Confidential and proprietary.
27 ©2020 CVS Health and/or one of its affiliates. Confidential and proprietary.