Cvs Health Corporation · NYSE:CVS
Cvs Health — Q2 2019 Earnings Presentation
24 slides from Cvs Health's earnings presentation, Aug 7, 2019
Slide 1: Second Quarter 2019 Earnings Conference Call
Second Quarter 2019 Earnings Conference Call Larry Merlo President & Chief Executive Officer 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: Strong Execution Across Our Businesses Yields Guidance Beat and Raise
Strong Execution Across Our Businesses Yields Guidance Beat and Raise • Exceeded our financial expectations – Q2 Adjusted EPS of $1.89, 17 cents above the high end of our guidance range – Performance driven by strong operating results across our enterprise with Retail/LTC and Pharmacy Services excee
Slide 4: Enterprise priorities to accelerate growth
1. 2. Grow and Deliver Enterprise priorities to differentiate our transformational businesses products and services accelerate growth Consumer obsessed – be local, make it simple, improve health 3. 4. Create a consumer- Modernize enterprise centric technology functions and infrastructure capabilitie
Slide 5: Continued Progress on Key Priorities
Continued Progress on Key Priorities 1. 2. 3. 4. Grow and differentiate our Deliver transformational Create consumer-centric Modernize enterprise businesses products and services technology infrastructure functions and capabilities A. Conversion of HealthHUBs A. Launching a Hospital-to-Home A. Launc
Slide 6: 2020 PBM Selling Season Update
2020 PBM Selling Season Update 2020 Year-to-date Selling Season Revenue Impact ($, billions) 3.8 (3.6) (7.6) (7.4) Gross Centene Other Net new business carve-in non-renewals new business Note: As of July 2019. Anthem revenue recorded on a net basis vs. gross. 6
Slide 7: Legislative & Policy Update
Legislative & Policy Update • Encouraged by the recent policy advancements: – Withdrawal of “Rebate Rule” supports recognition of PBM value and the significant cost impact that would have resulted from eliminating the power of formularies to drive discounts and lower premiums for Med D beneficiaries
Slide 8: Second Quarter 2019 Financial Review
Second Quarter 2019 Financial Review
Slide 9: Strong Second Quarter Consolidated Results
Strong Second Quarter Consolidated Results in millions, except per share data Q2 2019 Q2 2018 Change % Adjusted Revenues $63,431 $46,720 35.8% Adjusted Operating Income $4,031 $2,599 55.1% GAAP EPS $1.49 ($2.52) NM Adjusted EPS $1.89 1.69 11.8% Cash Flow from Operations $5,338 $2,934 81.9% • Adjuste
Slide 10: Q2 Results: Pharmacy Services Segment
Q2 Results: Pharmacy Services Segment in millions Q2 2019 Q2 2018 Change % Total Revenues $34,842 $33,427 4.2% Adjusted Operating Income $1,296 $1,181 9.7% Total Claims(1) 489.0 470.1 4.0% • Key revenue growth drivers include: – Brand name drug price inflation as well as increased total pharmacy cla
Slide 11: Q2 Results: Retail / LTC Segment
Q2 Results: Retail / LTC Segment in millions Q2 2019 Q2 2018 Change % Total Revenues $21,447 $20,672 3.7% Adjusted Operating Income $1,669 $1,821 (8.3%) Prescription Dispensed(1) 349.1 329.7 5.9% • Revenue growth primarily driven by increased prescription volume and brand name drug price inflation,
Slide 12: Q2 Results: Retail Pharmacy
Q2 Results: Retail Pharmacy Change vs. Q2 2018 Same Store Sales(1) 4.2% Pharmacy Sales 4.7% Pharmacy Prescription Volume(2) 7.2% Front Store Sales 2.9% (Favorably impacted by ~ 80 bps from shift of Easter holiday to later in April) Retail Pharmacy Market Share of 26.5%(2)(3) Up 120 bps • Retail phar
Slide 13: Q2 Results: Health Care Benefits Segment
Q2 Results: Health Care Benefits Segment in millions, except MBR Q2 2019 Total Revenues $17,403 Adjusted Operating Income $1,438 Medical Membership as of June 30, 2019 22.8 Medical Benefit Ratio (MBR) 84.0% • Medical membership consistent compared to March 31, 2019, up ~ 735,000 members from Decembe
Slide 14: Cash Flow & Capital Allocation
Cash Flow & Capital Allocation • In Q2, generated $5.3 billion in cash from operations • Reduced long-term debt by $1 billion in Q2 • In July, repaid balance of $1.5 billion on term loan • Paid more than $600 million in shareholder dividends in Q2 – Dividends will remain flat and share repurchases s
Slide 15: 2019 Guidance
2019 Guidance ¥ CVvSHealth.
Slide 16: Enterprise Outlook
Guidance: 2019 Full-Year Enterprise Outlook in millions, except per share data Full-Year 2019 Consolidated Revenues $251,400 to $254,160 Adjusted Operating Income $15,160 to $15,360 GAAP EPS $4.93 to $5.04 Adjusted EPS $6.89 to $7.00 • Increase in guidance range reflects: – Outperformance in the seg
Slide 17: Pharmacy Services Outlook
Guidance: 2019 Full-Year Pharmacy Services Outlook in millions Full-Year 2019 Total Revenues $137,400 to $138,950 Adjusted Operating Income $5,060 to $5,120 Total Claims(1) 1,950 to 1,970 • Factors reflected in updated guidance: – Year-to-date outperformance – Acceleration of synergies • Brand price
Slide 18: Retail / LTC Outlook
Guidance: 2019 Full-Year Retail / LTC Outlook in millions Full-Year 2019 Total Revenues $85,640 to $86,610 Adjusted Operating Income $6,680 to $6,760 Prescriptions Dispensed(1) 1,420 to 1,430 • Factors reflected in updated guidance: – Year-to-date outperformance – Strong script growth at CVS Pharmac
Slide 19: Health Care Benefits Outlook
Guidance: 2019 Full-Year Health Care Benefits Outlook in millions, except 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 YE Medical Membership 22.7 to 23.0 Medical Benefit Ratio 84% +/-
Slide 20: Other Items
Guidance: 2019 Full-Year Other Items in millions, except tax rate Full-Year 2019 Net Synergies ~ $400 Incremental Investment Spending $325 to $350 Interest Expense $3,095 to $3,125 Effective Tax Rate ~ 26% Weighted-Average Share Count 1,305 Cash Flow from Operations $10,100 to $10,600 Net Capital Ex
Slide 21: Quarterly Earnings Progression
Guidance: Remainder of Year Quarterly Earnings Progression • The first three quarters will have the highest year-over-year earnings growth as we wrap the addition of Aetna • Expect adjusted operating income for HCB to be lowest in Q4 due to cyclical nature of business • GAAP EPS guidance for Q3 of $
Slide 22: Evaluating Continued Performance Against Our Scorecard for Success
Evaluating Continued Performance Against Our Scorecard for Success Timing Target Update as of Q2 2019 2019 $6.75 - $6.90 New guidance of $6.89 to $7.00, an increase of 11 cents at the midpoint 2020 $7.00+ (Low single digits%) Adjusted EPS Growth 2021 Mid single digits % 2022+ Low double digits % 2
Slide 23: Appendix
Appendix ¥ CVvSHealth.
Slide 24: Debt Maturity Schedule as of July 31, 2019
Debt Maturity Schedule as of July 31, 2019 10 9 8 7 6 5 4 3 2 1 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 24