WOONSOCKET, R.I., May 3, 2023
/PRNewswire/ -- CVS Health Corporation (NYSE: CVS) today announced
operating results for the three months ended March 31, 2023.
FIRST QUARTER HIGHLIGHTS
- Total revenues increased to $85.3
billion, up 11.0% compared to prior year
- GAAP diluted EPS of $1.65 and
Adjusted EPS of $2.20
- Generated cash flow from operations of $7.4 billion
KEY FINANCIAL DATA
|
Three Months
Ended
March
31,
|
In millions, except per share amounts
|
2023
|
|
2022
|
|
Change
|
Total
revenues
|
$
85,278
|
|
$
76,826
|
|
$ 8,452
|
Operating
income
|
3,446
|
|
3,545
|
|
(99)
|
Adjusted operating
income (1)
|
4,370
|
|
4,607
|
|
(237)
|
Diluted earnings per
share
|
$ 1.65
|
|
$ 1.77
|
|
$ (0.12)
|
Adjusted EPS
(2)
|
$ 2.20
|
|
$ 2.30
|
|
$ (0.10)
|
|
Note: Financial
information for the three months ended March 31, 2022 throughout
this press release has been revised to conform with certain current
period financial statement changes as described on page
2.
|
2023 FULL-YEAR GUIDANCE
- Revised GAAP diluted EPS guidance range to $6.90 to $7.12 from
$7.73 to $7.93
- Revised Adjusted EPS guidance range to $8.50 to $8.70 from
$8.70 to $8.90
- Confirmed cash flow from operations guidance range of
$12.5 billion to $13.5 billion
CEO Commentary
"We delivered another strong quarter while executing on the
strategy we outlined in December
2021, leading to the close of the Signify Health acquisition
followed quickly by Oak Street Health. These additions are core to
our strategy and will help unlock future growth as we push further
into value-based care, which prioritizes keeping people
healthy."
-Karen S. Lynch, CVS Health
President and CEO
IN THE
SPOTLIGHT
|
On March 29, 2023,
completed the acquisition of Signify Health for approximately $7.8
billion, adding best-in-class capabilities for in-home services and
a platform to accelerate growth in value-based care, representing a
critical step in advancing the Company's health care services
strategy.
|
On May 2, 2023,
completed the acquisition of Oak Street Health for approximately
$10.6 billion, adding a leading multi-payor, value-based primary
care company with approximately 600 primary care providers and more
than 170 medical centers across 21 states.
|
Realigned the
composition of the Company's segments including the creation of a
Health Services segment, comprised of the Company's pharmacy
benefit management operations, health care services and provider
enablement solutions, as well as a Pharmacy & Consumer Wellness
segment, comprised of enterprise pharmacy fulfillment and retail
front store operations.
|
Returned $779 million
to shareholders through dividends and repurchased 22.8 million
shares of common stock.
|
The Company presents both GAAP and non-GAAP financial measures
in this press release to assist in the comparison of the Company's
past financial performance with its current financial performance.
See "Non-GAAP Financial Information" beginning on page 12 and
endnotes beginning on page 24 for explanations of non-GAAP
financial measures presented in this press release. See pages
14 through 15 and page 23 for reconciliations of
each non-GAAP financial measure used in this release to the most
directly comparable GAAP financial measure.
Consolidated First Quarter Results
|
Three Months
Ended
March
31,
|
In millions, except per share amounts
|
2023
|
|
2022
|
|
Change
|
Total
revenues
|
$
85,278
|
|
$
76,826
|
|
$
8,452
|
Operating
income
|
3,446
|
|
3,545
|
|
(99)
|
Adjusted operating
income (1)
|
4,370
|
|
4,607
|
|
(237)
|
Net income
|
2,142
|
|
2,355
|
|
(213)
|
Diluted earnings per
share
|
$ 1.65
|
|
$ 1.77
|
|
$ (0.12)
|
Adjusted EPS
(2)
|
$ 2.20
|
|
$ 2.30
|
|
$ (0.10)
|
Q1 2023 Financial Statement Changes
The Company's financial information for the three months ended
March 31, 2023 reflects the following items:
- Effective for the first quarter of 2023, the Company realigned
the composition of its segments to correspond with changes made to
its operating model and how the business is managed. As a result of
this realignment, the Company formed a new Health Services segment,
which in addition to providing a full range of pharmacy benefit
management ("PBM") solutions, also delivers health care services in
the Company's medical clinics, virtually, and in the home, as well
as provider enablement solutions. In addition, the Company created
a new Pharmacy & Consumer Wellness segment, which includes its
retail and long-term care pharmacy operations and related pharmacy
services, as well as its retail front store operations. This
segment will also provide pharmacy fulfillment services to support
the Health Services segment's specialty and mail order pharmacy
offerings. The Company also discontinued its former segment
reporting practice for activity under its Maintenance
Choice® program as described within the supplemental
information beginning on page 15. Following this segment
realignment, the Company's four reportable segments are: Health
Care Benefits, Health Services, Pharmacy & Consumer Wellness
and Corporate/Other.
- Effective January 1, 2023, the
Company adopted a new accounting standard related to the accounting
for long-duration insurance contracts using a modified
retrospective transition method. Refer to Note 1 ''Significant
Accounting Policies'' in the Company's Quarterly Report on Form
10-Q for the period ended March 31,
2023 for further information regarding the adoption of this
accounting standard.
- Effective for the first quarter of 2023, the impact of net
realized capital gains or losses are excluded from adjusted
operating income as further described on page 11.
Prior period financial information has been revised to conform
with the current period presentation.
Q1 2023 Financial Results
For the three months ended March 31,
2023 compared to the prior year:
- Total revenues increased 11.0% driven by growth across all
segments.
- Operating income decreased 2.8% primarily due to the write-down
of the Company's Omnicare® long-term care business ("LTC
business"), the decrease in adjusted operating income described
below and an increase in acquisition-related transaction and
integration costs compared to the prior year. The decrease in
operating income was partially offset by the absence of a
$484 million opioid litigation charge
recorded in the prior year and a decrease in amortization of
intangible assets compared to the prior year.
- Adjusted operating income decreased 5.1% primarily driven by
declines in the Pharmacy & Consumer Wellness segment, partially
offset by increases in the Health Services segment. See pages 3
through 5 for additional discussion of adjusted operating income
performance of the Company's segments.
- Interest expense remained relatively consistent, increasing to
$589 million from $586 million.
- The effective income tax rate increased to 25.6% compared to
21.5% primarily due to the absence of the impact of certain
discrete tax items concluded in the first quarter of 2022. The
Company's adjusted effective income tax rate (3)
remained relatively consistent compared to prior year.
Health Care Benefits Segment
The Health Care Benefits segment offers a full range of insured
and self-insured ("ASC") medical, pharmacy, dental and behavioral
health products and services. The segment results for the three
months ended March 31, 2023 and 2022 were as follows:
|
Three Months
Ended
March
31,
|
In millions,
except percentages
|
2023
|
|
2022
|
|
Change
|
Total
revenues
|
$
25,877
|
|
$
23,094
|
|
$
2,783
|
Adjusted operating
income (1)
|
1,824
|
|
1,861
|
|
(37)
|
Medical benefit ratio
("MBR") (4)
|
84.6 %
|
|
83.4 %
|
|
1.2 %
|
Medical membership
(5)
|
25.5
|
|
24.5
|
|
1.0
|
- Total revenues increased 12.1% for the three months ended
March 31, 2023 compared to the prior
year driven by growth across all product lines.
- Adjusted operating income decreased slightly in the three
months ended March 31, 2023 compared
to the prior year primarily driven by the continued progression
towards normalized utilization and lower impact from favorable
development of prior-years' health care cost estimates in the three
months ended March 31, 2023 compared
to the prior year. These decreases were largely offset by higher
net investment income and membership growth across all product
lines in the three months ended March 31,
2023.
- The MBR increased to 84.6% in the three months ended
March 31, 2023 compared to 83.4% in
the prior year reflective of the continued progression towards
normalized utilization and lower impact from favorable development
of prior-years' health care cost estimates in the three months
ended March 31, 2023 compared to the
prior year.
- Medical membership as of March 31,
2023 of 25.5 million increased 1.1 million members compared
with December 31, 2022, reflecting
increases across all product lines including an increase of
approximately 900,000 members related to the individual exchange
business within the Commercial product line.
- The segment experienced favorable development of prior-years'
health care cost estimates in its Government Services and
Commercial businesses during the three months ended March 31, 2023, primarily attributable to fourth
quarter 2022 performance.
- Prior years' health care costs payable estimates developed
favorably by $693 million during the
three months ended March 31, 2023.
This development is reported on a basis consistent with the prior
years' development reported in the health care costs payable table
in the Company's annual audited financial statements and does not
directly correspond to an increase in 2023 operating results.
See the supplemental information on page 18 for additional
information regarding the performance of the Health Care Benefits
segment.
Health Services Segment (formerly Pharmacy Services
Segment)
The Health Services segment provides a full range of PBM
solutions, delivers health care services in its medical clinics,
virtually, and in the home, and offers provider enablement
solutions. The segment results for the three months ended
March 31, 2023 and 2022 were as follows:
|
Three Months
Ended
March
31,
|
In millions
|
2023
|
|
2022
|
|
Change
|
Total
revenues
|
$
44,591
|
|
$
39,615
|
|
$
4,976
|
Adjusted operating
income (1)
|
1,680
|
|
1,471
|
|
209
|
Pharmacy claims
processed (6) (7)
|
587.3
|
|
566.5
|
|
20.8
|
- Total revenues increased 12.6% for the three months ended
March 31, 2023 compared to the prior
year primarily driven by increased pharmacy claims volume, growth
in specialty pharmacy and brand inflation, partially offset by
continued pharmacy client price improvements.
- Adjusted operating income increased 14.2% for the three months
ended March 31, 2023 compared to the
prior year primarily driven by improved purchasing economics,
including increased contributions from the products and services of
the Company's group purchasing organization, and increased pharmacy
claims volume. These increases were partially offset by continued
pharmacy client price improvements and decreased COVID-19
diagnostic testing in the segment's MinuteClinic®
walk-in medical clinics compared to the prior year.
- Pharmacy claims processed increased 3.7% on a 30-day equivalent
basis for the three months ended March 31,
2023 compared to the prior year. The increase was primarily
driven by net new business, increased utilization and the impact of
an elevated cough, cold and flu season compared to the prior year.
These increases were partially offset by a decrease in COVID-19
vaccinations. Excluding the impact of COVID-19 vaccinations,
pharmacy claims processed increased 4.8% on a 30-day equivalent
basis for the three months ended March 31,
2023 compared to the prior year.
See the supplemental information on page 20 for additional
information regarding the performance of the Health Services
segment.
Pharmacy & Consumer Wellness Segment (formerly Retail/LTC
Segment)
The Pharmacy & Consumer Wellness segment dispenses
prescriptions in its retail pharmacies and through its infusion
operations, provides ancillary pharmacy services including pharmacy
patient care programs, diagnostic testing and vaccination
administration, and sells a wide assortment of health and wellness
products and general merchandise. The segment also provides
pharmacy services to long-term care facilities and pharmacy
fulfillment services to support the Health Services segment's
specialty and mail order pharmacy offerings. The segment results
for the three months ended March 31, 2023 and 2022 were as
follows:
|
Three Months
Ended
March
31,
|
In millions
|
2023
|
|
2022
|
|
Change
|
Total
revenues
|
$
27,922
|
|
$
25,898
|
|
$
2,024
|
Adjusted operating
income (1)
|
1,134
|
|
1,573
|
|
(439)
|
Prescriptions filled
(6) (7)
|
404.8
|
|
395.1
|
|
9.7
|
- Total revenues increased 7.8% for the three months ended
March 31, 2023 compared to the prior
year primarily driven by increased prescription and front store
volume, pharmacy drug mix and brand inflation. These increases were
partially offset by continued pharmacy reimbursement pressure,
decreased COVID-19 vaccinations and diagnostic testing and the
impact of recent generic introductions.
- Adjusted operating income decreased 27.9% for the three months
ended March 31, 2023 compared to the
prior year primarily driven by continued pharmacy reimbursement
pressure, decreased COVID-19 vaccinations and diagnostic testing
and increased investments in the segment's operations and
capabilities. These decreases were partially offset by the
increased prescription volume described above and improved generic
drug purchasing.
- Prescriptions filled increased 2.5% on a 30-day equivalent
basis for the three months ended March 31,
2023 compared to the prior year primarily driven by
increased utilization and the impact of an elevated cough, cold and
flu season compared to the prior year. These increases were
partially offset by a decrease in COVID-19 vaccinations. Excluding
the impact of COVID-19 vaccinations, prescriptions filled increased
4.5% on a 30-day equivalent basis for the three months ended
March 31, 2023 compared to the prior
year.
See the supplemental information on page 21 for additional
information regarding the performance of the Pharmacy &
Consumer Wellness segment.
2023 Full-Year Guidance
The Company revised its
full-year 2023 GAAP diluted EPS guidance range to $6.90 to $7.12 from
$7.73 to $7.93 and its full-year 2023 Adjusted EPS
guidance range to $8.50 to
$8.70 from $8.70 to $8.90. The
Company also confirmed its full-year 2023 cash flow from operations
guidance range of $12.5 billion to
$13.5 billion.
The adjustments between full-year 2023 GAAP diluted EPS and
Adjusted EPS include amortization of intangible assets, net
realized capital losses, a loss on assets held for sale,
acquisition-related transaction and integration costs related to
the acquisitions of Signify Health, Inc. ("Signify Health") and Oak
Street Health, Inc. ("Oak Street Health"), office real estate
optimization charges and the corresponding income tax benefit or
expense related to the items excluded from adjusted income
attributable to CVS Health.
Teleconference and Webcast
The Company will be holding
a conference call today for investors at 8:00 a.m. (Eastern Time) to discuss its first
quarter results. An audio webcast of the call will be broadcast
simultaneously for all interested parties through the Investor
Relations section of the CVS Health website at
http://investors.cvshealth.com. This webcast will be archived and
available on the website for a one-year period following the
conference call.
About CVS Health
CVS Health is the leading health
solutions company, delivering care like no one else can. We reach
more people and improve the health of communities across America
through our local presence, digital channels and over 300,000
dedicated colleagues – including more than 40,000 physicians,
pharmacists, nurses, and nurse practitioners. Wherever and whenever
people need us, we help them with their health – whether that's
managing chronic diseases, staying compliant with their medications
or accessing affordable health and wellness services in the most
convenient ways. We help people navigate the health care system –
and their personal health care – by improving access, lowering
costs and being a trusted partner for every meaningful moment of
health. And we do it all with heart, each and every day. Follow
@CVSHealth on social media.
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. Statements in this press
release that are forward-looking include, but are not limited to,
Ms. Lynch's quotation, the information under the headings "2023
Full-Year Guidance" and "In The Spotlight" and the information
included in the reconciliations and endnotes. By their nature, all
forward-looking statements are not guarantees of future performance
or results and are subject to risks and uncertainties that are
difficult to predict and/or quantify. Actual results may differ
materially from those contemplated by the forward-looking
statements due to the risks and uncertainties related to the impact
of COVID-19 and CVS Health's acquisitions of Signify Health
and Oak Street Health as well as additional risks and
uncertainties as described in our Securities and Exchange
Commission ("SEC") filings, including those set forth in the Risk
Factors section and under the heading "Cautionary Statement
Concerning Forward-Looking Statements" in our most recently filed
Annual Report on Form 10-K, our Quarterly Report on Form 10-Q for
the quarterly period ended March 31,
2023 and our Current Reports on Form 8-K.
You are cautioned not to place undue reliance on CVS Health's
forward-looking statements. CVS Health's forward-looking statements
are and will be based upon management's then-current views and
assumptions regarding future events and operating performance, and
are applicable only as of the dates of such statements. CVS Health
does not assume any duty to update or revise forward-looking
statements, whether as a result of new information, future events,
uncertainties or
otherwise.
- Tables Follow -
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Statements of Operations
|
(Unaudited)
|
|
|
Three Months
Ended
March
31,
|
In millions, except per share amounts
|
2023
|
|
2022
|
Revenues:
|
|
|
|
Products
|
$ 58,147
|
|
$ 52,522
|
Premiums
|
24,352
|
|
21,631
|
Services
|
2,445
|
|
2,505
|
Net investment
income
|
334
|
|
168
|
Total
revenues
|
85,278
|
|
76,826
|
Operating
costs:
|
|
|
|
Cost of products
sold
|
51,455
|
|
45,509
|
Benefit
costs
|
20,448
|
|
17,923
|
Opioid litigation
charge
|
—
|
|
484
|
Loss on assets held
for sale
|
349
|
|
41
|
Operating
expenses
|
9,580
|
|
9,324
|
Total operating
costs
|
81,832
|
|
73,281
|
Operating
income
|
3,446
|
|
3,545
|
Interest
expense
|
589
|
|
586
|
Other income
|
(22)
|
|
(42)
|
Income before income
tax provision
|
2,879
|
|
3,001
|
Income tax
provision
|
737
|
|
646
|
Net income
|
2,142
|
|
2,355
|
Net income attributable
to noncontrolling interests
|
(6)
|
|
(1)
|
Net income attributable
to CVS Health
|
$
2,136
|
|
$
2,354
|
|
|
|
|
Net income per share
attributable to CVS Health:
|
|
|
|
Basic
|
$
1.66
|
|
$
1.79
|
Diluted
|
$
1.65
|
|
$
1.77
|
Weighted average shares
outstanding:
|
|
|
|
Basic
|
1,283
|
|
1,312
|
Diluted
|
1,291
|
|
1,328
|
Dividends declared per
share
|
$
0.605
|
|
$
0.55
|
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Balance Sheets
|
(Unaudited)
|
|
In millions
|
March 31,
2023
|
|
December 31,
2022
|
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
14,618
|
|
$
12,945
|
Investments
|
3,102
|
|
2,778
|
Accounts receivable,
net
|
28,331
|
|
27,276
|
Inventories
|
18,263
|
|
19,090
|
Assets held for
sale
|
625
|
|
908
|
Other current
assets
|
3,767
|
|
2,636
|
Total current
assets
|
68,706
|
|
65,633
|
Long-term
investments
|
21,612
|
|
21,096
|
Property and
equipment, net
|
12,872
|
|
12,873
|
Operating lease
right-of-use assets
|
17,660
|
|
17,872
|
Goodwill
|
84,057
|
|
78,150
|
Intangible assets,
net
|
26,368
|
|
24,803
|
Separate accounts
assets
|
3,231
|
|
3,228
|
Other
assets
|
4,824
|
|
4,620
|
Total assets
|
$
239,330
|
|
$
228,275
|
|
|
|
|
Liabilities:
|
|
|
|
Accounts
payable
|
$
12,527
|
|
$
14,838
|
Pharmacy claims and
discounts payable
|
20,047
|
|
19,423
|
Health care costs
payable
|
10,895
|
|
10,142
|
Policyholders'
funds
|
1,426
|
|
1,500
|
Accrued
expenses
|
21,515
|
|
18,745
|
Other insurance
liabilities
|
4,974
|
|
1,089
|
Current portion of
operating lease liabilities
|
1,679
|
|
1,678
|
Current portion of
long-term debt
|
1,778
|
|
1,778
|
Liabilities held for
sale
|
213
|
|
228
|
Total current
liabilities
|
75,054
|
|
69,421
|
Long-term operating
lease liabilities
|
16,571
|
|
16,800
|
Long-term
debt
|
56,450
|
|
50,476
|
Deferred income
taxes
|
4,095
|
|
4,016
|
Separate accounts
liabilities
|
3,231
|
|
3,228
|
Other long-term
insurance liabilities
|
5,678
|
|
5,835
|
Other long-term
liabilities
|
6,671
|
|
6,730
|
Total
liabilities
|
167,750
|
|
156,506
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
Preferred
stock
|
—
|
|
—
|
Common stock and
capital surplus
|
48,306
|
|
48,193
|
Treasury
stock
|
(33,802)
|
|
(31,858)
|
Retained
earnings
|
57,753
|
|
56,398
|
Accumulated other
comprehensive loss
|
(875)
|
|
(1,264)
|
Total CVS Health
shareholders' equity
|
71,382
|
|
71,469
|
Noncontrolling
interests
|
198
|
|
300
|
Total shareholders'
equity
|
71,580
|
|
71,769
|
Total liabilities and
shareholders' equity
|
$
239,330
|
|
$
228,275
|
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Three Months
Ended
March
31,
|
In millions
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
Cash receipts from
customers
|
$
87,798
|
|
$
74,192
|
Cash paid for
prescriptions dispensed and health services rendered
|
(50,223)
|
|
(44,365)
|
Insurance benefits
paid
|
(19,757)
|
|
(16,616)
|
Cash paid to other
suppliers and employees
|
(9,958)
|
|
(8,969)
|
Interest and
investment income received
|
426
|
|
199
|
Interest
paid
|
(773)
|
|
(782)
|
Income taxes
paid
|
(75)
|
|
(96)
|
Net cash provided by
operating activities
|
7,438
|
|
3,563
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Proceeds from sales
and maturities of investments
|
1,891
|
|
2,570
|
Purchases of
investments
|
(2,358)
|
|
(3,474)
|
Purchases of property
and equipment
|
(984)
|
|
(1,051)
|
Acquisitions (net of
cash acquired)
|
(7,094)
|
|
(7)
|
Other
|
31
|
|
(31)
|
Net cash used in
investing activities
|
(8,514)
|
|
(1,993)
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from issuance
of long-term debt
|
5,951
|
|
—
|
Repayments of
long-term debt
|
(362)
|
|
(14)
|
Repurchase of common
stock
|
(2,018)
|
|
(2,000)
|
Dividends
paid
|
(779)
|
|
(722)
|
Proceeds from exercise
of stock options
|
96
|
|
297
|
Payments for taxes
related to net share settlement of equity awards
|
(34)
|
|
(62)
|
Other
|
(128)
|
|
(149)
|
Net cash provided by
(used in) financing activities
|
2,726
|
|
(2,650)
|
Net increase (decrease)
in cash, cash equivalents and restricted cash
|
1,650
|
|
(1,080)
|
Cash, cash equivalents
and restricted cash at the beginning of the period
|
13,305
|
|
12,691
|
Cash, cash equivalents
and restricted cash at the end of the period
|
$
14,955
|
|
$
11,611
|
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Three Months
Ended
March
31,
|
In millions
|
2023
|
|
2022
|
Reconciliation of net
income to net cash provided by operating activities:
|
|
|
|
Net income
|
$
2,142
|
|
$
2,355
|
Adjustments required
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
1,001
|
|
1,049
|
Stock-based
compensation
|
103
|
|
89
|
Deferred income taxes
and other noncash items
|
155
|
|
(175)
|
Change in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
Accounts receivable,
net
|
(751)
|
|
(1,967)
|
Inventories
|
828
|
|
(400)
|
Other
assets
|
(1,255)
|
|
(348)
|
Accounts payable and
pharmacy claims and discounts payable
|
(1,203)
|
|
1,974
|
Health care costs
payable and other insurance liabilities
|
4,382
|
|
1,430
|
Other
liabilities
|
2,036
|
|
(444)
|
Net cash provided by
operating activities
|
$
7,438
|
|
$
3,563
|
Non-GAAP Financial Information
The Company uses non-GAAP financial measures to analyze
underlying business performance and trends. The Company believes
that providing these non-GAAP financial measures enhances the
Company's and investors' ability to compare the Company's past
financial performance with its current performance. These non-GAAP
financial measures are provided as supplemental information to the
financial measures presented in this press release that are
calculated and presented in accordance with GAAP. Non-GAAP
financial measures should not be considered a substitute for, or
superior to, financial measures determined or calculated in
accordance with GAAP. The Company's definitions of its non-GAAP
financial measures may not be comparable to similarly titled
measures reported by other companies.
Non-GAAP financial measures such as consolidated adjusted
operating income, adjusted earnings per share ("EPS") and adjusted
income attributable to CVS Health exclude from the relevant GAAP
metrics, as applicable: amortization of intangible assets and other
items, if any, that neither relate to the ordinary course of the
Company's business nor reflect the Company's underlying business
performance. Effective January 1,
2023, the Company's non-GAAP financial measures also exclude
the impact of net realized capital gains or losses, described in
further detail below. Prior period financial information throughout
this press release has been revised to conform with the current
period presentation.
The Company's Non-GAAP adjusted effective income tax rate
excludes from the relevant GAAP metric the corresponding tax
benefit or expense related to the amortization of intangible
assets, net realized capital gains or losses and other items, if
any, that neither relate to the ordinary course of the Company's
business nor reflect the Company's underlying business performance
and certain discrete tax items.
For the periods covered in this press release, the following
items are excluded from the non-GAAP financial measures described
above, as applicable, because the Company believes they neither
relate to the ordinary course of the Company's business nor reflect
the Company's underlying business performance:
- The Company's acquisition activities have resulted in the
recognition of intangible assets as required under the acquisition
method of accounting which consist primarily of trademarks,
customer contracts/relationships, covenants not to compete,
technology, provider networks and value of business acquired.
Definite-lived intangible assets are amortized over their estimated
useful lives and are tested for impairment when events indicate
that the carrying value may not be recoverable. The amortization of
intangible assets is reflected in the unaudited condensed
consolidated statements of operations in operating expenses within
each segment. Although intangible assets contribute to the
Company's revenue generation, the amortization of intangible assets
does not directly relate to the underwriting of the Company's
insurance products, the services performed for the Company's
customers or the sale of the Company's products or services.
Additionally, intangible asset amortization expense typically
fluctuates based on the size and timing of the Company's
acquisition activity. Accordingly, the Company believes excluding
the amortization of intangible assets enhances the Company's and
investors' ability to compare the Company's past financial
performance with its current performance and to analyze underlying
business performance and trends. Intangible asset amortization
excluded from the related non-GAAP financial measure represents the
entire amount recorded within the Company's GAAP financial
statements, and the revenue generated by the associated intangible
assets has not been excluded from the related non-GAAP financial
measure. Intangible asset amortization is excluded from the related
non-GAAP financial measure because the amortization, unlike the
related revenue, is not affected by operations of any particular
period unless an intangible asset becomes impaired or the estimated
useful life of an intangible asset is revised.
- The Company's net realized capital gains and losses arise from
various types of transactions, primarily in the course of managing
a portfolio of assets that support the payment of insurance
liabilities. Net realized capital gains and losses are reflected in
the unaudited condensed consolidated statements of operations in
net investment income (loss) within each segment. These capital
gains and losses are the result of investment decisions, market
conditions and other economic developments that are unrelated to
the performance of the Company's business, and the amount and
timing of these capital gains and losses do not directly relate to
the underwriting of the Company's insurance products, the services
performed for the Company's customers or the sale of the Company's
products or services. Accordingly, the Company believes excluding
net realized capital gains and losses enhances the Company's and
investors' ability to compare the Company's past financial
performance with its current performance and to analyze underlying
business performance and trends.
- During the three months ended March 31,
2023, the loss on assets held for sale relates to the
Company's long-term care ("LTC") reporting unit within the Pharmacy
& Consumer Wellness segment. During 2022, the Company
determined that its LTC business was no longer a strategic asset
and committed to a plan to sell it, at which time the LTC business
met the criteria for held-for-sale accounting and its net assets
were accounted for as assets held for sale. As of March 31, 2023, the net assets of the LTC
business continued to meet the criteria for held-for-sale
accounting and during the first quarter of 2023, a loss on assets
held for sale was recorded to write down the carrying value of the
LTC business to the Company's best estimate of the ultimate selling
price which reflects its estimated fair value less costs to sell.
During the three months ended March 31,
2022, the loss on assets held for sale relates to the
Company's international health care business domiciled in
Thailand ("Thailand business"), which was included in the
Commercial Business reporting unit in the Health Care Benefits
segment. The sale of the Thailand
business closed in the second quarter of 2022, and the ultimate
loss on the sale was not material.
- During the three months ended March 31,
2023, the acquisition-related transaction and integration
costs relate to the acquisitions of Signify Health and Oak Street
Health. The acquisition-related transaction and integration costs
are reflected in the Company's unaudited condensed consolidated
statement of operations in operating expenses within the
Corporate/Other segment.
- During the three months ended March 31,
2023, the office real estate optimization charges primarily
relate to the abandonment of leased real estate and the related
right-of-use assets and property and equipment in connection with
the planned reduction of corporate office real estate space in
response to the Company's new flexible work arrangement. The office
real estate optimization charges are reflected in the Company's
unaudited condensed consolidated statement of operations in
operating expenses within the Health Care Benefits, Corporate/Other
and Health Services segments.
- During the three months ended March 31,
2022, the opioid litigation charge relates to an agreement
to resolve substantially all opioid claims against the Company by
the State of Florida. The opioid
litigation charge is reflected within the Corporate/Other
segment.
- The corresponding tax benefit or expense related to the items
excluded from adjusted income attributable to CVS Health and
Adjusted EPS above. The nature of each non-GAAP adjustment is
evaluated to determine whether a discrete adjustment should be made
to the adjusted income tax provision. During the three months ended
March 31, 2022, the Company's
adjusted income tax provision also excludes the impact of certain
discrete tax items concluded in the first quarter of 2022.
See endnotes (1), (2) and (3) on page 24 for definitions of
non-GAAP financial measures. Reconciliations of each non-GAAP
financial measure to the most directly comparable GAAP financial
measure are presented on pages 14 through 15 and page
23.
Reconciliations of
Non-GAAP Financial Measures to the Most Directly Comparable GAAP
Financial Measures
|
|
Adjusted Operating
Income
|
(Unaudited)
|
|
The following are
reconciliations of consolidated operating income (GAAP measure) to
consolidated adjusted operating income, as well as reconciliations
of segment GAAP operating income to segment adjusted operating
income:
|
|
|
Three Months Ended
March 31, 2023
|
In millions
|
Health
Care
Benefits
|
|
Health
Services
|
|
Pharmacy
&
Consumer
Wellness
|
|
Corporate/
Other
|
|
Consolidated
Totals
|
Operating income (loss)
(GAAP measure)
|
$
1,408
|
|
$
1,638
|
|
$
717
|
|
$ (317)
|
|
$
3,446
|
Amortization of
intangible assets
|
295
|
|
41
|
|
65
|
|
1
|
|
402
|
Net realized capital
losses
|
99
|
|
—
|
|
3
|
|
3
|
|
105
|
Loss on assets held
for sale
|
—
|
|
—
|
|
349
|
|
—
|
|
349
|
Acquisition-related
transaction and integration costs
|
—
|
|
—
|
|
—
|
|
43
|
|
43
|
Office real estate
optimization charges
|
22
|
|
1
|
|
—
|
|
2
|
|
25
|
Adjusted operating
income (loss) (1)
|
$
1,824
|
|
$
1,680
|
|
$
1,134
|
|
$ (268)
|
|
$
4,370
|
|
|
|
Three Months Ended
March 31, 2022
|
In millions
|
Health
Care
Benefits
|
|
Health
Services
|
|
Pharmacy
&
Consumer
Wellness
|
|
Corporate/
Other
|
|
Consolidated
Totals
|
Operating income (loss)
(GAAP measure)
|
$
1,467
|
|
$
1,427
|
|
$
1,435
|
|
$ (784)
|
|
$
3,545
|
Amortization of
intangible assets
|
295
|
|
44
|
|
122
|
|
1
|
|
462
|
Net realized capital
losses
|
58
|
|
—
|
|
16
|
|
1
|
|
75
|
Loss on assets held
for sale
|
41
|
|
—
|
|
—
|
|
—
|
|
41
|
Opioid litigation
charge
|
—
|
|
—
|
|
—
|
|
484
|
|
484
|
Adjusted operating
income (loss) (1)
|
$
1,861
|
|
$
1,471
|
|
$
1,573
|
|
$ (298)
|
|
$
4,607
|
Adjusted Earnings
Per Share
|
(Unaudited)
|
|
The following are
reconciliations of net income attributable to CVS Health to
adjusted income attributable to CVS Health and calculations of GAAP
diluted EPS and Adjusted EPS:
|
|
|
Three Months
Ended
March 31,
2023
|
|
Three Months
Ended
March 31,
2022
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Total
Company
|
|
Per
Common
Share
|
Net income attributable
to CVS Health (GAAP measure)
|
$ 2,136
|
|
$
1.65
|
|
$ 2,354
|
|
$
1.77
|
Amortization of
intangible assets
|
402
|
|
0.31
|
|
462
|
|
0.35
|
Net realized capital
losses
|
105
|
|
0.08
|
|
75
|
|
0.06
|
Loss on assets held
for sale
|
349
|
|
0.27
|
|
41
|
|
0.03
|
Acquisition-related
transaction and integration costs
|
43
|
|
0.03
|
|
—
|
|
—
|
Office real estate
optimization charges
|
25
|
|
0.02
|
|
—
|
|
—
|
Opioid litigation
charge
|
—
|
|
—
|
|
484
|
|
0.36
|
Tax impact of non-GAAP
adjustments
|
(221)
|
|
(0.16)
|
|
(368)
|
|
(0.27)
|
Adjusted income
attributable to CVS Health (2)
|
$ 2,839
|
|
$
2.20
|
|
$ 3,048
|
|
$
2.30
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
|
1,291
|
|
|
|
1,328
|
Adjusted Effective
Income Tax Rate
|
(Unaudited)
|
|
The following are
reconciliations of the effective income tax rate (GAAP measure) to
the adjusted effective income tax rate:
|
|
|
Three Months
Ended
March
31,
|
|
2023
|
|
2022
|
Effective income tax
rate (GAAP measure)
|
25.6 %
|
|
21.5 %
|
Impact of non-GAAP
adjustments
|
(0.4)
|
|
3.5
|
Adjusted effective
income tax rate (3)
|
25.2 %
|
|
25.0 %
|
Supplemental
Information
(Unaudited)
The Company's segments maintain separate financial information,
and the Company's chief operating decision maker (the "CODM")
evaluates the segments' operating results on a regular basis in
deciding how to allocate resources among the segments and in
assessing segment performance. The CODM evaluates the performance
of the Company's segments based on adjusted operating income.
Adjusted operating income is defined as operating income (GAAP
measure) excluding the impact of amortization of intangible assets
and other items, if any, that neither relate to the ordinary course
of the Company's business nor reflect the Company's underlying
business performance as further described in endnote (1). Effective
for the first quarter of 2023, adjusted operating income also
excludes the impact of net realized capital gains or losses. The
Company uses adjusted operating income as its principal measure of
segment performance as it enhances the Company's ability to compare
past financial performance with current performance and analyze
underlying business performance and trends.
Segment financial information for the three months ended
March 31, 2023 reflects the following items:
- The realignment of the Company's segments to correspond with
changes made to its operating model as described on page 2,
including the discontinuance of the former Maintenance Choice
segment reporting practice as described in Note (b) of the table
below.
- The impact of the adoption of a new accounting standard related
to the accounting for long-duration insurance contracts, which the
Company adopted on January 1, 2023
using a modified retrospective transition method. Refer to Note 1
''Significant Accounting Policies'' in the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 2023 for further information regarding
the adoption of this accounting standard.
- The exclusion of the impact of net realized capital gains or
losses from adjusted operating income, as described on page
11.
Segment financial information for the three months ended
March 31, 2022 has been revised to conform with current period
presentation for these items, the impact of which are reflected in
the "Adjustments" lines of the table below.
The following is a reconciliation of financial measures of the
Company's segments to the consolidated totals:
In millions
|
Health
Care
Benefits
|
|
Health
Services
(a)
|
|
Pharmacy
&
Consumer
Wellness
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
(b)
|
|
Consolidated
Totals
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2023
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$ 25,877
|
|
$
44,591
|
|
$
27,922
|
|
$
188
|
|
$
(13,300)
|
|
$ 85,278
|
Adjusted operating
income (loss) (1)
|
1,824
|
|
1,680
|
|
1,134
|
|
(268)
|
|
—
|
|
4,370
|
March 31,
2022
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues, as
previously reported
|
$ 23,109
|
|
$
39,461
|
|
$
25,418
|
|
$
126
|
|
$
(11,288)
|
|
$ 76,826
|
Adjustments
|
(15)
|
|
154
|
|
480
|
|
—
|
|
(619)
|
|
—
|
Total revenues, as
adjusted
|
$ 23,094
|
|
$
39,615
|
|
$
25,898
|
|
$
126
|
|
$
(11,907)
|
|
$ 76,826
|
Adjusted operating
income (loss), as previously reported (1)
|
$
1,751
|
|
$ 1,636
|
|
$
1,605
|
|
$
(305)
|
|
$
(204)
|
|
$
4,483
|
Adjustments
|
110
|
|
(165)
|
|
(32)
|
|
7
|
|
204
|
|
124
|
Adjusted operating
income (loss), as adjusted
|
$
1,861
|
|
$ 1,471
|
|
$
1,573
|
|
$ (298)
|
|
$
—
|
|
$
4,607
|
|
|
|
|
|
|
|
(a)
|
Total revenues of the
Health Services segment include approximately $4.1 billion and $3.8
billion of retail co-payments for the three months ended March 31,
2023 and 2022, respectively.
|
(b)
|
Intersegment revenue
eliminations relate to intersegment revenue generating activities
that occur between the Health Care Benefits segment, the Health
Services segment, and/or the Pharmacy & Consumer Wellness
segment. Prior to January 1, 2023, intersegment adjusted operating
income eliminations occurred when members of the Health Services
segment's clients enrolled in Maintenance Choice elected to pick up
maintenance prescriptions at one of the Company's retail pharmacies
instead of receiving them through the mail. When this occurred,
both the Health Services and Pharmacy & Consumer Wellness
segments recorded the adjusted operating income on a stand-alone
basis. Effective January 1, 2023, the adjusted operating
income associated with such transactions is reported only in the
Pharmacy & Consumer Wellness segment, therefore no adjusted
operating income elimination is required.
|
Supplemental
Information
|
(Unaudited)
|
|
Health Care Benefits
Segment
|
|
The following table
summarizes the Health Care Benefits segment's performance for the
respective periods:
|
|
|
Three Months
Ended
March
31,
|
|
Change
|
In millions,
except percentages and basis points ("bps")
|
2023
|
|
2022
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
Premiums
|
$
24,339
|
|
$
21,614
|
|
$
2,725
|
|
12.6 %
|
Services
|
1,374
|
|
1,391
|
|
(17)
|
|
(1.2) %
|
Net investment
income
|
164
|
|
89
|
|
75
|
|
84.3 %
|
Total
revenues
|
25,877
|
|
23,094
|
|
2,783
|
|
12.1 %
|
Benefit
costs
|
20,595
|
|
18,019
|
|
2,576
|
|
14.3 %
|
MBR (Benefit costs as
a % of premium revenues) (4)
|
84.6 %
|
|
83.4 %
|
|
120
|
bps
|
Loss on assets held for
sale
|
$
—
|
|
$
41
|
|
$
(41)
|
|
(100.0) %
|
Operating
expenses
|
3,874
|
|
3,567
|
|
307
|
|
8.6 %
|
Operating expenses as
a % of total revenues
|
15.0 %
|
|
15.4 %
|
|
|
|
|
Operating
income
|
$
1,408
|
|
$
1,467
|
|
$ (59)
|
|
(4.0) %
|
Operating income as a
% of total revenues
|
5.4 %
|
|
6.4 %
|
|
|
|
|
Adjusted operating
income (1)
|
$
1,824
|
|
$
1,861
|
|
$ (37)
|
|
(2.0) %
|
Adjusted operating
income as a % of total revenues
|
7.0 %
|
|
8.1 %
|
|
|
|
|
Premium revenues (by
business):
|
|
|
|
|
|
|
|
Government
|
$
17,528
|
|
$
16,195
|
|
$
1,333
|
|
8.2 %
|
Commercial
|
6,811
|
|
5,419
|
|
1,392
|
|
25.7 %
|
The following table
summarizes the Health Care Benefits segment's medical membership
for the respective periods:
|
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
In thousands
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
Medical membership:
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
3,949
|
|
14,039
|
|
17,988
|
|
3,136
|
|
13,896
|
|
17,032
|
|
3,285
|
|
13,924
|
|
17,209
|
Medicare
Advantage
|
3,387
|
|
—
|
|
3,387
|
|
3,270
|
|
—
|
|
3,270
|
|
3,169
|
|
—
|
|
3,169
|
Medicare
Supplement
|
1,344
|
|
—
|
|
1,344
|
|
1,363
|
|
—
|
|
1,363
|
|
1,292
|
|
—
|
|
1,292
|
Medicaid
|
2,293
|
|
501
|
|
2,794
|
|
2,234
|
|
497
|
|
2,731
|
|
2,375
|
|
477
|
|
2,852
|
Total medical
membership
|
10,973
|
|
14,540
|
|
25,513
|
|
10,003
|
|
14,393
|
|
24,396
|
|
10,121
|
|
14,401
|
|
24,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
membership information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare Prescription
Drug Plan (standalone)
|
6,112
|
|
|
|
|
|
6,128
|
|
|
|
|
|
6,022
|
Supplemental
Information
|
(Unaudited)
|
|
The following table
shows the components of the change in health care costs payable
during the three months ended March 31, 2023 and
2022:
|
|
|
Three Months
Ended
March
31,
|
In millions
|
2023
|
|
2022
|
Health care costs
payable, beginning of period
|
$
10,142
|
|
$
8,678
|
Less: Reinsurance
recoverables
|
5
|
|
8
|
Less: Impact of
discount rate on long-duration insurance reserves
(a)
|
8
|
|
—
|
Health care costs
payable, beginning of period, net
|
10,129
|
|
8,670
|
Add: Components of
incurred health care costs
|
|
|
|
Current
year
|
21,068
|
|
18,504
|
Prior years
(b)
|
(693)
|
|
(676)
|
Total incurred health
care costs (c)
|
20,375
|
|
17,828
|
Less: Claims
paid
|
|
|
|
Current
year
|
11,957
|
|
10,225
|
Prior years
|
7,645
|
|
6,183
|
Total claims
paid
|
19,602
|
|
16,408
|
Add: Premium
deficiency reserve
|
—
|
|
13
|
Other
(d)
|
—
|
|
(13)
|
Health care costs
payable, end of period, net
|
10,902
|
|
10,090
|
Add: Reinsurance
recoverables
|
5
|
|
8
|
Add: Impact of
discount rate on long-duration insurance reserves
(a)
|
(12)
|
|
7
|
Health care costs
payable, end of period
|
$
10,895
|
|
$
10,105
|
|
|
|
|
|
|
|
(a)
|
Reflects the difference
between the current discount rate and the locked-in discount rate
on long-duration insurance reserves which is recorded within
accumulated other comprehensive loss on the unaudited condensed
consolidated balance sheets. Refer to Note 1 ''Significant
Accounting Policies'' in the Company's Quarterly Report on Form
10-Q for the period ended March 31, 2023 for further
information related to the adoption of the long-duration insurance
contracts accounting standard.
|
(b)
|
Negative amounts
reported for incurred health care costs related to prior years
result from claims being settled for amounts less than originally
estimated.
|
(c)
|
Total incurred health
care costs for the three months ended March 31, 2023 and 2022 in
the table above exclude $22 million and $21 million, respectively,
of benefit costs recorded in the Health Care Benefits segment that
are included in other insurance liabilities on the unaudited
condensed consolidated balance sheets and $51 million and $61
million, respectively, of benefit costs recorded in the
Corporate/Other segment that are included in other insurance
liabilities on the unaudited condensed consolidated balance sheets.
The incurred health care costs for the three months ended March 31,
2022 also exclude $13 million for premium deficiency reserves
related to the Company's Medicaid products.
|
(d)
|
As a result of the
divestiture of the Thailand business, the net assets associated
with this business were accounted for as assets held for sale and
the associated health care costs payable balance was reclassified
to accrued expenses on the unaudited condensed consolidated balance
sheet at March 31, 2022.
|
The following table
summarizes the Health Care Benefits segment's days claims payable
for the respective periods:
|
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
Days Claims Payable
(10)
|
48.1
|
|
51.3
|
|
51.0
|
Supplemental
Information
|
(Unaudited)
|
|
Health Services
Segment (formerly Pharmacy Services Segment)
|
|
The following table
summarizes the Health Services segment's performance for the
respective periods:
|
|
|
Three Months
Ended
March
31,
|
|
Change
|
In millions,
except percentages
|
2023
|
|
2022
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
Products
|
$
43,671
|
|
$
38,899
|
|
$
4,772
|
|
12.3 %
|
Services
|
920
|
|
716
|
|
204
|
|
28.5 %
|
Total
revenues
|
44,591
|
|
39,615
|
|
4,976
|
|
12.6 %
|
Cost of products
sold
|
42,416
|
|
37,622
|
|
4,794
|
|
12.7 %
|
Gross profit
(11)
|
2,175
|
|
1,993
|
|
182
|
|
9.1 %
|
Gross margin (Gross
profit as a % of total revenues) (11)
|
4.9 %
|
|
5.0 %
|
|
|
|
|
Operating
expenses
|
$
537
|
|
$ 566
|
|
$ (29)
|
|
(5.1) %
|
Operating expenses as
a % of total revenues
|
1.2 %
|
|
1.4 %
|
|
|
|
|
Operating
income
|
$ 1,638
|
|
$
1,427
|
|
$ 211
|
|
14.8 %
|
Operating income as a
% of total revenues
|
3.7 %
|
|
3.6 %
|
|
|
|
|
Adjusted operating
income (1)
|
$ 1,680
|
|
$
1,471
|
|
$ 209
|
|
14.2 %
|
Adjusted operating
income as a % of total revenues
|
3.8 %
|
|
3.7 %
|
|
|
|
|
Revenues (by
distribution channel):
|
|
|
|
|
|
|
|
Pharmacy network
(8)
|
$
27,592
|
|
$
24,128
|
|
$
3,464
|
|
14.4 %
|
Mail & specialty
(9)
|
16,145
|
|
14,668
|
|
1,477
|
|
10.1 %
|
Other
|
854
|
|
819
|
|
35
|
|
4.3 %
|
Pharmacy claims
processed (6) (7) (a)
|
587.3
|
|
566.5
|
|
20.8
|
|
3.7 %
|
Generic dispensing rate
(7) (12) (b)
|
88.4 %
|
|
87.7 %
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Excluding the impact of
COVID-19 vaccinations, pharmacy claims processed increased 4.8% on
a 30-day equivalent basis for the three months ended March 31, 2023
compared to the prior year.
|
(b)
|
Excluding the impact of
COVID-19 vaccinations, the Health Services segment's generic
dispensing rate was 88.5% and 88.8% in the three months ended March
31, 2023 and 2022, respectively.
|
Supplemental
Information
|
(Unaudited)
|
|
Pharmacy &
Consumer Wellness Segment (formerly Retail/LTC
Segment)
|
|
The following table
summarizes the Pharmacy & Consumer Wellness segment's
performance for the respective periods:
|
|
|
Three Months
Ended
March
31,
|
|
Change
|
In millions,
except percentages
|
2023
|
|
2022
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
Products
|
$
27,258
|
|
$
24,904
|
|
$
2,354
|
|
9.5 %
|
Services
|
667
|
|
1,010
|
|
(343)
|
|
(34.0) %
|
Net investment income
(loss)
|
(3)
|
|
(16)
|
|
13
|
|
81.3 %
|
Total
revenues
|
27,922
|
|
25,898
|
|
2,024
|
|
7.8 %
|
Cost of products
sold
|
21,876
|
|
19,382
|
|
2,494
|
|
12.9 %
|
Gross profit
(10)
|
6,046
|
|
6,516
|
|
(470)
|
|
(7.2) %
|
Gross margin (Gross
profit as a % of total revenues) (11)
|
21.7 %
|
|
25.2 %
|
|
|
|
|
Loss on assets held for
sale
|
$ 349
|
|
$ —
|
|
$ 349
|
|
100.0 %
|
Operating
expenses
|
$
4,980
|
|
$
5,081
|
|
$
(101)
|
|
(2.0) %
|
Operating expenses as
a % of total revenues
|
17.8 %
|
|
19.6 %
|
|
|
|
|
Operating
income
|
$ 717
|
|
$
1,435
|
|
$
(718)
|
|
(50.0) %
|
Operating income as a
% of total revenues
|
2.6 %
|
|
5.5 %
|
|
|
|
|
Adjusted operating
income (1)
|
$
1,134
|
|
$
1,573
|
|
$
(439)
|
|
(27.9) %
|
Adjusted operating
income as a % of total revenues
|
4.1 %
|
|
6.1 %
|
|
|
|
|
Revenues (by major
goods/service lines):
|
|
|
|
|
|
|
|
Pharmacy
|
$
21,495
|
|
$
19,532
|
|
$
1,963
|
|
10.1 %
|
Front Store
|
5,597
|
|
5,313
|
|
284
|
|
5.3 %
|
Other
|
833
|
|
1,069
|
|
(236)
|
|
(22.1) %
|
Net investment income
(loss)
|
(3)
|
|
(16)
|
|
13
|
|
81.3 %
|
Prescriptions filled
(6) (7) (a)
|
404.8
|
|
395.1
|
|
9.7
|
|
2.5 %
|
Same store sales
increase: (13)
|
|
|
|
|
|
|
|
Total
|
11.6 %
|
|
10.9 %
|
|
|
|
|
Pharmacy
|
12.7 %
|
|
10.1 %
|
|
|
|
|
Front Store
|
7.7 %
|
|
13.9 %
|
|
|
|
|
Prescription volume
(7)
|
5.0 %
|
|
6.1 %
|
|
|
|
|
Generic dispensing rate
(7) (12) (b)
|
89.4 %
|
|
87.5 %
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Excluding the impact of
COVID-19 vaccinations, prescriptions filled increased 4.5% on a
30-day equivalent basis for the three months ended March 31, 2023
compared to the prior year.
|
(b)
|
Excluding the impact of
COVID-19 vaccinations, the Pharmacy & Consumer Wellness
segment's generic dispensing rate was 89.7% in both the three
months ended March 31, 2023 and 2022.
|
Supplemental
Information
|
(Unaudited)
|
|
Corporate/Other
Segment
|
|
The following table
summarizes the Corporate/Other segment's performance for the
respective periods:
|
|
|
Three Months
Ended
March
31,
|
|
Change
|
In millions,
except percentages
|
2023
|
|
2022
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
Premiums
|
$
13
|
|
$
17
|
|
$
(4)
|
|
(23.5) %
|
Services
|
2
|
|
14
|
|
(12)
|
|
(85.7) %
|
Net investment
income
|
173
|
|
95
|
|
78
|
|
82.1 %
|
Total
revenues
|
188
|
|
126
|
|
62
|
|
49.2 %
|
Cost of products
sold
|
1
|
|
10
|
|
(9)
|
|
(90.0) %
|
Benefit
costs
|
52
|
|
61
|
|
(9)
|
|
(14.8) %
|
Opioid litigation
charge
|
—
|
|
484
|
|
(484)
|
|
(100.0) %
|
Operating
expenses
|
452
|
|
355
|
|
97
|
|
27.3 %
|
Operating
loss
|
(317)
|
|
(784)
|
|
467
|
|
59.6 %
|
Adjusted operating loss
(1)
|
(268)
|
|
(298)
|
|
30
|
|
10.1 %
|
Adjusted Earnings Per Share
Guidance
(Unaudited)
The following reconciliations of projected net income
attributable to CVS Health to projected adjusted income
attributable to CVS Health and calculations of projected GAAP
diluted EPS and projected Adjusted EPS contain forward-looking
information. All forward-looking information involves risks and
uncertainties. Actual results may differ materially from those
contemplated by the forward-looking information for a number of
reasons as described in our SEC filings, including those set forth
in the Risk Factors section and under the heading "Cautionary
Statement Concerning Forward-Looking Statements" in our most
recently filed Annual Report on Form 10-K and our Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 2023.
See "Non-GAAP Financial Information" earlier in this press release
and endnote (2) later in this press release for more information on
how we calculate Adjusted EPS.
|
Year Ending December
31, 2023
|
|
Low
|
|
High
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Total
Company
|
|
Per
Common
Share
|
Net income attributable
to CVS Health (GAAP measure)
|
$ 8,923
|
|
$ 6.90
|
|
$ 9,211
|
|
$ 7.12
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
1,862
|
|
1.44
|
|
1,842
|
|
1.42
|
Net realized capital
losses
|
105
|
|
0.08
|
|
105
|
|
0.08
|
Loss on assets held
for sale
|
349
|
|
0.27
|
|
349
|
|
0.27
|
Acquisition-related
transaction and integration costs
|
350
|
|
0.27
|
|
330
|
|
0.26
|
Office real estate
optimization charges
|
60
|
|
0.05
|
|
60
|
|
0.05
|
Tax impact of non-GAAP
adjustments
|
(659)
|
|
(0.51)
|
|
(648)
|
|
(0.50)
|
Adjusted income
attributable to CVS Health (2)
|
$
10,990
|
|
$ 8.50
|
|
$
11,249
|
|
$ 8.70
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
|
1,293
|
|
|
|
1,293
|
Endnotes
(1) The Company defines adjusted operating
income as operating income (GAAP measure) excluding the impact of
amortization of intangible assets, net realized capital gains or
losses and other items, if any, that neither relate to the ordinary
course of the Company's business nor reflect the Company's
underlying business performance, such as losses on assets held for
sale, acquisition-related transaction and integration costs, office
real estate optimization charges and opioid litigation charges. The
Company uses adjusted operating income as its principal measure of
segment performance as it enhances the Company's ability to compare
past financial performance with current performance and analyze
underlying business performance and trends. The consolidated
measure is not determined in accordance with GAAP and should not be
considered a substitute for, or superior to, the most directly
comparable GAAP measure, consolidated operating income. See
"Non-GAAP Financial Information" earlier in this press release for
additional information regarding the items excluded from
consolidated operating income in determining consolidated adjusted
operating income.
(2) Adjusted EPS is calculated by dividing
adjusted income attributable to CVS Health by the Company's
weighted average diluted shares outstanding. The Company defines
adjusted income attributable to CVS Health as net income
attributable to CVS Health (GAAP measure) excluding the impact of
amortization of intangible assets, net realized capital gains or
losses and other items, if any, that neither relate to the ordinary
course of the Company's business nor reflect the Company's
underlying business performance, such as losses on assets held for
sale, acquisition-related transaction and integration costs, office
real estate optimization charges, opioid litigation charges, as
well as the corresponding income tax benefit or expense related to
the items excluded from adjusted income attributable to CVS Health
and certain discrete tax items. See "Non-GAAP Financial
Information" earlier in this press release for additional
information regarding the items excluded from net income
attributable to CVS Health in determining adjusted income
attributable to CVS Health.
(3) The Company defines the adjusted effective
income tax rate as the effective income tax rate (GAAP measure)
excluding the corresponding tax benefit or expense related to the
items excluded from adjusted income attributable to CVS Health
above. The nature of each non-GAAP adjustment is evaluated to
determine whether a discrete adjustment should be made to the
adjusted effective income tax rate. During the three months ended
March 31, 2022, the Company's adjusted effective income tax
rate also excludes the impact of certain discrete tax items
concluded in the first quarter of 2022.
(4) Medical benefit ratio is calculated as
benefit costs divided by premium revenues and represents the
percentage of premium revenues spent on medical benefits for the
Company's insured members. Management uses MBR to assess the
underlying business performance and underwriting of its insurance
products, understand variances between actual results and expected
results and identify trends in period-over-period results. MBR
provides management and investors with information useful in
assessing the operating results of the Company's insured Health
Care Benefits products.
(5) Medical membership represents the number of
members covered by the Company's insured and ASC medical products
and related services at a specified point in time. Management uses
this metric to understand variances between actual medical
membership and expected amounts as well as trends in
period-over-period results. This metric provides management and
investors with information useful in understanding the impact of
medical membership on segment total revenues and operating
results.
(6) Pharmacy claims processed represents the
number of prescription claims processed through the Company's
pharmacy benefits manager and dispensed by either its retail
network pharmacies or the Company's mail and specialty pharmacies.
Prescriptions filled represents the number of prescriptions
dispensed through the Pharmacy & Consumer Wellness segment's
retail and long-term care pharmacies and infusion services
operations. Management uses these metrics to understand variances
between actual claims processed and prescriptions dispensed,
respectively, and expected amounts as well as trends in
period-over-period results. These metrics provide management and
investors with information useful in understanding the impact of
pharmacy claim volume and prescription volume, respectively, on
segment total revenues and operating results.
(7) Includes an adjustment to convert 90-day
prescriptions to the equivalent of three 30-day prescriptions. This
adjustment reflects the fact that these prescriptions include
approximately three times the amount of product days supplied
compared to a normal prescription.
(8) Health Services pharmacy network revenues
relate to claims filled at retail and specialty retail pharmacies,
including the Company's retail pharmacies and LTC pharmacies.
Effective January 1, 2023, pharmacy
network revenues also include activity associated with Maintenance
Choice, which permits eligible client plan members to fill their
maintenance prescriptions through mail order delivery or at a CVS
pharmacy retail store for the same price as mail order. Maintenance
Choice activity was previously reflected in mail & specialty
revenues. Prior period financial information has been revised to
conform with current period presentation.
(9) Health Services mail & specialty
revenues relate to specialty mail claims inclusive of Specialty
Connect® claims picked up at a retail pharmacy, as well
as mail order and specialty claims fulfilled by the Pharmacy &
Consumer Wellness segment. Effective January
1, 2023, mail & specialty revenues exclude Maintenance
Choice activity, which is now reflected within pharmacy network
revenues. Prior period financial information has been revised to
conform with current period presentation.
(10) Days claims payable is calculated by
dividing the health care costs payable at the end of each quarter
by the average health care costs per day during such quarter.
Management and investors use this metric as an indicator of the
adequacy of the Company's health care costs payable liability at
the end of each quarter and as an indicator of changes in such
adequacy over time.
(11) Gross profit is calculated as the
segment's total revenues less its cost of products sold. Gross
margin is calculated by dividing the segment's gross profit by its
total revenues and represents the percentage of total revenues that
remains after incurring direct costs associated with the segment's
products sold and services provided. Gross margin provides
investors with information that may be useful in assessing the
operating results of the Company's Health Services and Pharmacy
& Consumer Wellness segments.
(12) Generic dispensing rate is calculated by
dividing the segment's generic drug claims processed or
prescriptions filled by its total claims processed or prescriptions
filled. Management uses this metric to evaluate the effectiveness
of the business at encouraging the use of generic drugs when they
are available and clinically appropriate, which aids in decreasing
costs for client members and retail customers. This metric provides
management and investors with information useful in understanding
trends in segment total revenues and operating results.
(13) Same store sales and prescription volume
represent the change in revenues and prescriptions filled in the
Company's retail pharmacy stores that have been operating for
greater than one year, expressed as a percentage that indicates the
increase or decrease relative to the comparable prior period. Same
store metrics exclude revenues and prescriptions from LTC and
infusion services operations. Effective January 1, 2023, same store sales also include
digital sales initiated online or through mobile applications and
fulfilled through the Company's distribution centers. Prior period
financial information has been revised to conform with current
period presentation. Management uses these metrics to evaluate the
performance of existing stores on a comparable basis and to inform
future decisions regarding existing stores and new locations.
Same-store metrics provide management and investors with
information useful in understanding the portion of current
revenues and prescriptions resulting from organic growth in
existing locations versus the portion resulting from opening new
stores.
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multimedia:https://www.prnewswire.com/news-releases/cvs-health-reports-first-quarter-results-completes-acquisitions-of-signify-health-and-oak-street-health-301813971.html
SOURCE CVS Health Corporation