Cvs Health Corporation · NYSE:CVS
Cvs Health — Q1 2019 Earnings Presentation
26 slides from Cvs Health's earnings presentation, May 1, 2019
Slide 1: First Quarter 2019 Earnings Conference Call
First Quarter 2019 Earnings Conference Call Larry Merlo President & Chief Executive Officer Eva Boratto Executive Vice President & Chief Financial Officer May 1, 2019
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: Strong First Quarter Creates Positive Momentum for 2019
Strong First Quarter Creates Positive Momentum for 2019 • Exceeded our financial expectations – Adjusted EPS of $1.62, above the high end of our guidance range • Raising full-year Adjusted EPS guidance to $6.75 to $6.90, up from previous guidance of $6.68 to $6.88 • Operational achievements – Smooth
Slide 4: Notable Progress on Actions to Mitigate Near-Term Headwinds Impacting Business
Notable Progress on Actions to Mitigate Near- Term Headwinds Impacting Business • Strong Retail/LTC adjusted prescription growth of 5.5% in Q1 supported by clinical care programs and network relationships • Long-Term Care business on track to achieve targeted margin improvements given our cost manag
Slide 5: Bringing to Market New Approaches to Health Care Delivery and Management
Bringing to Market New Approaches to Health Care Delivery and Management • In our Houston HealthHUB® stores, we are demonstrating our ability to bring more health care services into communities, meeting people where they are – Using data and analytics capabilities to offer people the Next Best Actio
Slide 6: 2020 PBM Selling Season
2020 PBM Selling Season • Our retention rate currently stands in the mid 90%s, excluding the impact of Centene – Selling season has been somewhat unusual with no single factor contributing to the lower than expected retention • Our service levels and performance metrics remain at historically high l
Slide 7: HHS Proposal Regarding the Safe Harbor for Rebates Under Medicare Part D
HHS Proposal Regarding the Safe Harbor for Rebates Under Medicare Part D • On April 5, CMS issued clarifying guidance for plan sponsors that bids should reflect current law and not the newly proposed rebate rule – Guidance stated that a number of issues needed to be addressed before rule can be fina
Slide 8: Broader Health Care Discussion
Broader Health Care Discussion • The renewed focus nationally on what the next phase of access to affordable, quality health care will be has generated significant attention in recent weeks – Regardless of what shape and form the next stage of health care takes, we remain confident that the private
Slide 9: First Quarter 2019 Financial Review
First Quarter 2019 Financial Review 9 © 2019 CVS Health
Slide 10: Presentation Changes for 2019 - Consistent With February Earnings Call
Presentation Changes for 2019 - Consistent With February Earnings Call • New items for 2019: – Individual SilverScript (SSI) PDP moved from Pharmacy Services segment to Health Care Benefits segment • 2018 HCB reflects the addition of SSI revenue and related income • Previous intra-segment revenue fo
Slide 11: Q1 Results: Consolidated
Q1 Results: Consolidated Change vs. Q1 Q1 2019 2018 Adjusted Revenues $61.6 billion 34.9% Adjusted Operating Income $3.6 billion 56.8% GAAP EPS $1.09 11.6% Adjusted EPS $1.62 9.5% Cash Flow From Operations $1.9 billion (17.3%) • Adjusted interest expense of $782 million, up ~ $531 million vs. LY • A
Slide 12: Q1 Results: Pharmacy Services Segment
Q1 Results: Pharmacy Services Segment Change vs. Q1 Q1 2019 2018 Total Revenues $33.6 billion 3.1% Adjusted Operating Income $947 million (4.2%) Claims Processed(1) 482 million 2.8% • Key Revenue growth drivers include: – Brand name drug price inflation as well as increased total pharmacy claims vol
Slide 13: 2018 PBM Cost Trend Report
2018 PBM Cost Trend Report • Total commercial cost trend increased 3.3% due to increased utilization, including improvements in adherence – Unit cost for non-specialty medications decreased 4.2% – Held unit cost growth to 1.7% for specialty products despite even higher list price increases – Unit co
Slide 14: Q1 Results: Retail Pharmacy / LTC Segment
Q1 Results: Retail Pharmacy / LTC Segment Change vs. Q1 Q1 2019 2018 Total Revenues $21.1 billion 3.3% Adjusted Operating Income $1.5 billion (18.9)% (1) Prescriptions Dispensed 346.8 million 5.5% • Revenue growth primarily driven by increased prescription volume and brand name drug price inflation,
Slide 15: Q1 Results: Retail Pharmacy
Q1 Results: Retail Pharmacy Change vs. Q1 2018 Same Store Sales(1) 3.8% Pharmacy sales 4.9% (2) Pharmacy prescription volume 6.7% Front store sales (Unfavorable impact of ~ 80 bps from shift of Easter holiday later in April) 0.4% Retail Pharmacy market share of 26.2%(2)(3) Up 140 bps • Retail pharma
Slide 16: Q1 Results: Health Care Benefits Segment
Q1 Results: Health Care Benefits Segment Q1 2019 Total Revenues $17.9 billion Adjusted Operating Income $1.6 billion Medical Membership as of March 31, 2019 22.8 million Medical Benefit Ratio (MBR) 84.0% • Membership growth of over 700,000 members vs. 12/31/2018; driven by strong Medicare Advantage
Slide 17: Cash Flow & Capital Allocation
Financial Update: Cash Flow & Capital Allocation • In Q1, generated $1.9 billion in cash from operations • Reduced long-term debt by nearly $900 million in Q1 – $375 million of long-term notes at maturity – $500 million of outstanding term loan ahead of maturity • Paid more than $600 million in shar
Slide 18: Debt Maturity Schedule
Financial Update: Debt Maturity Schedule 12 $, billions 10 8 6 4 2 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2035 2036 2037 2038 2039 2041 2042 2043 2044 2045 2047 2048 CVS Standalone AET Standalone Deal Financing 3-year Term Loan 18 © 2019 CVS Health
Slide 19: 2019 Guidance
2019 Guidance 19 © 2019 CVS Health
Slide 20: Enterprise Outlook
Guidance: 2019 Full-Year Enterprise Outlook Full-Year 2019 in millions, except per share data Consolidated Revenues $251,230 to $254,380 Adjusted Operating Income $14,970 to $15,180 GAAP EPS $4.90 to $5.05 Adjusted EPS $6.75 to $6.90 20 © 2019 CVS Health
Slide 21: Pharmacy Services Outlook
Guidance: 2019 Full-Year Pharmacy Services Outlook in millions Full-Year 2019 Total Revenues $137,180 to $138,950 Total Claims (1) 1,940 to 1,970 Adjusted Operating Income $4,860 to $4,920 • Factors impacting outlook (no material change from February earnings call): – Pricing compression, exacerbate
Slide 22: Retail / LTC Outlook
Guidance: 2019 Full-Year Retail / LTC Outlook in millions Full-Year 2019 Total Revenues $85,510 to $86,610 Prescriptions (1) 1,410 to 1,430 Adjusted Operating Income $6,630 to $6,710 • Factors impacting outlook (no material change from February earnings call): – Strong script growth at CVS Pharmacy
Slide 23: Health Care Benefits Outlook
Guidance: 2019 Full-Year Health Care Benefits Outlook in millions, except medical cost trend and MBR data Full-Year 2019 Total Revenues $68,520 to $69,210 Adjusted Operating Income $5,180 to $5,240 Core Commercial Medical Cost Trend 6.0% +/- 50 bps YE Medical Membership 22.7 to 23.0 Medical Benefit
Slide 24: Other Items
Guidance: 2019 Full-Year Other Items in millions, except tax rate Full-Year 2019 Net Synergies $300 to $350 Incremental Investment Spending $325 to $350 Interest Expense $3,095 to $3,145 Effective Tax Rate ~ 26% Weighted Average Share Count 1,308 Cash Flow From Operations $9,800 to $10,300 Net Capit
Slide 25: Introducing Enterprise Modernization Initiative
Introducing Enterprise Modernization Initiative • CVS and Aetna have a strong history of executing successful cost reduction and productivity initiatives and, through our integration, we are seeing the opportunity to make productivity gains across the enterprise • Enterprise Modernization initiative
Slide 26: Quarterly Earnings Progression
Guidance: Remainder of Year Quarterly Earnings Progression • Year-over-year growth of consolidated adjusted operating income will be highest through the first three quarters of the year as we wrap the addition of Aetna • In Retail / LTC and PBM, we expect to see adjusted operating income growth in t