CVS CVS Health Corporation

Fourth Quarter Highlights

• Total revenues increased to $97.7 billion, up 4.2% compared to prior year
• GAAP diluted EPS of $1.30 and Adjusted EPS of $1.19

Full-Year Highlights

• Total revenues increased to $372.8 billion, up 4.2% compared to prior year
• GAAP diluted EPS of $3.66 and Adjusted EPS of $5.42
• Generated cash flow from operations of $9.1 billion

2025 Full-Year Guidance

• GAAP diluted EPS guidance range of $4.58 to $4.83
• Adjusted EPS guidance range of $5.75 to $6.00
• Cash flow from operations guidance of approximately $6.5 billion

CEO Commentary
"Our integrated model allows us to uniquely deliver a simpler, connected experience that saves time, saves money, and improves health. We have continued to see growth in key areas of our business, including the Pharmacy and Consumer Wellness segment, while we address the industry-wide challenges that have impacted our Health Care Benefits segment. Through the continued dedication of our colleagues, we will be positioned for strong performance in 2025 as we deliver simply better care for consumers while improving outcomes and reducing costs."
— David Joyner, CVS Health President and CEO

WOONSOCKET, R.I., Feb. 12, 2025 /PRNewswire/ -- CVS Health Corporation (NYSE: CVS) today announced operating results for the three months and year ended December 31, 2024.

Fourth quarter GAAP diluted EPS of $1.30 decreased from $1.58 in the prior year and Adjusted EPS of $1.19 decreased from $2.12 in the prior year, primarily due to a decline in the Health Care Benefits segment's operating results, which reflect continued utilization pressure and the unfavorable impact of the Company's Medicare Advantage star ratings for the 2024 payment year.

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 11 and endnotes beginning on page 23 for explanations of non-GAAP financial measures presented in this press release. See pages 13 through 15 and page 22 for reconciliations of each non-GAAP financial measure used in this release to the most directly comparable GAAP financial measure.

Consolidated fourth quarter and full-year results

For the three months and year ended December 31, 2024 compared to the prior year:

• Total revenues increased 4.2% in both the three months and year ended December 31, 2024 compared to the prior year driven by growth in the Health Care Benefits and Pharmacy & Consumer Wellness segments, partially offset by a decline in the Health Services segment.
• Operating income decreased 29.8% in the three months ended December 31, 2024 compared to the prior year primarily due to a decrease in adjusted operating income, partially offset by an increase in net realized capital gains and lower acquisition-related integration costs compared to the prior year.
• Operating income decreased 38.0% for the year ended December 31, 2024 compared to the prior year primarily due to a decrease in adjusted operating income and an increase in restructuring charges compared to the prior year. These decreases in operating income were partially offset by an increase in net realized capital gains, the absence of a $349 million loss on assets held for sale related to the write-down of the Company's Omnicare long-term care business recorded in the prior year, as well as lower acquisition-related transaction and integration costs.
• Adjusted operating income decreased 35.5% and 31.7% in the three months and year ended December 31, 2024. See pages 3 through 5 for a discussion of adjusted operating income performance of the Company's segments.
• Interest expense increased $68 million, or 9.9%, and $300 million, or 11.3%, respectively, due to higher debt in the three months and year ended December 31, 2024, primarily as a result of long-term debt issuances in 2024.
• The effective income tax rate in the fourth quarter decreased to 23.7% compared to 24.3% in the prior year, primarily due to the basis differences on the disposition of certain investments and utilization of tax credits partially offset by the mix of pre-tax income in the three months ended December 31, 2024 compared to the prior year.
• The effective income tax rate for the full year increased to 25.4% compared to 25.1% in the prior year, primarily due to the mix of pre-tax income and certain non-deductible expenses, partially offset by basis differences on the disposition of certain investments and utilization of tax credits in the year ended December 31, 2024 compared to the 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 and years ended December 31, 2024 and 2023 were as follows:

• Total revenues increased 23.3% and 23.7% for the three months and year ended December 31, 2024, respectively, compared to the prior year, primarily driven by growth in the Medicare and individual exchange product lines.
• During the three months ended December 31, 2024, the Health Care Benefits segment had an adjusted operating loss of $439 million compared to adjusted operating income of $676 million in the prior year. The change was primarily driven by increased utilization, the unfavorable impact of the Company's Medicare Advantage star ratings for the 2024 payment year and the impact of higher acuity in Medicaid following the resumption of redeterminations. These decreases were partially offset by the acceleration of anticipated losses related to the fourth quarter of 2024 recorded in the third quarter of 2024 in connection with a premium deficiency reserve, higher favorable prior-period development compared to the prior year, as well as an increase in net investment income.
• During the year ended December 31, 2024, the Health Care Benefits segment had an adjusted operating income of $307 million compared to adjusted operating income of $5,577 million in the prior year. The change was primarily driven by increased utilization, the unfavorable impact of the Company's Medicare Advantage star ratings for the 2024 payment year and higher acuity in Medicaid. These decreases were partially offset by an increase in net investment income and improved fixed cost leverage across the business due to membership growth.
• The MBR increased from 88.5% to 94.8% in the three months ended December 31, 2024 compared to the prior year driven by increased utilization, the unfavorable impact of the previously disclosed decline in the Company's Medicare Advantage star ratings for the 2024 payment year and the impact of higher acuity in Medicaid. These increases were partially offset by the impact of the premium deficiency reserve recorded in the third quarter of 2024 described above and higher favorable prior-period development.
• The MBR increased from 86.2% to 92.5% in the year ended December 31, 2024 compared to the prior year primarily driven by increased utilization, the unfavorable impact of the Company's Medicare Advantage star ratings for the 2024 payment year and higher acuity in Medicaid.
• Medical membership as of December 31, 2024 of 27.1 million remained relatively consistent compared with September 30, 2024. Medical membership as of December 31, 2024 of 27.1 million increased 1.4 million members compared with December 31, 2023, reflecting increases in the Medicare and individual exchange product lines.
• Prior years' health care costs payable estimates developed favorably by $885 million during the year ended December 31, 2024. 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 2024 operating results.
• Days claims payable were 44.0 days as of December 31, 2024, a decrease of 0.6 days compared to September 30, 2024, primarily reflective of seasonality.

See the supplemental information on page 17 for additional information regarding the performance of the Health Care Benefits segment.

Health Services segment

The Health Services segment provides a full range of pharmacy benefit management 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 and years ended December 31, 2024 and 2023 were as follows:

• Total revenues decreased 4.3% and 7.1% for the three months and year ended December 31, 2024, respectively, compared to the prior year primarily driven by the previously announced loss of a large client and continued pharmacy client price improvements. These decreases were partially offset by pharmacy drug mix, increased contributions from the Company's health care delivery assets and growth in specialty pharmacy.
• Adjusted operating income decreased 5.3% for the three months ended December 31, 2024 compared to the prior year primarily driven by continued pharmacy client price improvements, the previously announced loss of a large client and the impact of higher health care costs in the Company's health care delivery assets, largely offset by improved purchasing economics and increased volume at Signify Health.
• Adjusted operating income decreased 0.9% for the year ended December 31, 2024 compared to the prior year primarily driven by continued pharmacy client price improvements and the previously announced loss of a large client, largely offset by improved purchasing economics.
• Pharmacy claims processed decreased 16.9% and 18.2% on a 30-day equivalent basis for the three months and year ended December 31, 2024, respectively, compared to the prior year reflecting the previously announced loss of a large client.

See the supplemental information on page 18 for additional information regarding the performance of the Health Services segment.

Pharmacy & Consumer Wellness 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 and years ended December 31, 2024 and 2023 were as follows:

• Total revenues increased 7.5% and 6.6% for the three months and year ended December 31, 2024, respectively, compared to the prior year primarily driven by pharmacy drug mix and increased prescription volume. These increases were partially offset by continued pharmacy reimbursement pressure, the impact of recent generic introductions and decreased front store volume, including the impact of a decrease in store count. Total revenues for the year ended December 31, 2024 also reflect the impact of increased contributions from vaccinations and lower contributions from COVID-19 over-the-counter ("OTC") test kits since the expiration of the public health emergency in May 2023.
• Adjusted operating income decreased 13.3% for the three months ended December 31, 2024 compared to the prior year primarily driven by continued pharmacy reimbursement pressure and decreased front store volume, partially offset by improved drug purchasing.
• Adjusted operating income decreased 3.2% for year ended December 31, 2024 compared to the prior year primarily driven by continued pharmacy reimbursement pressure and decreased front store volume, including lower contributions from COVID-19 OTC test kits, largely offset by increased prescription volume, including increased contributions from vaccinations, as well as improved drug purchasing.
• Prescriptions filled increased 3.3% and 4.0% on a 30-day equivalent basis for the three months and year ended December 31, 2024, respectively, compared to the prior year primarily driven by increased utilization.
• Same store prescription volume^(6)(12) increased 5.9% and 6.8% on a 30-day equivalent basis for the three months and year ended December 31, 2024, respectively, compared to the prior year.

See the supplemental information on page 19 for additional information regarding the performance of the Pharmacy & Consumer Wellness segment.

2025 Full-year guidance

The Company issued its full-year 2025 GAAP diluted EPS guidance range of $4.58 to $4.83 and its 2025 Adjusted EPS guidance range of $5.75 to $6.00. The Company also issued its full-year 2025 cash flow from operations guidance of approximately $6.5 billion.

The adjustments between full-year 2025 GAAP diluted EPS and Adjusted EPS include amortization of intangible assets, acquisition-related integration costs, 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 fourth quarter and full-year 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 a leading health solutions company building a world of health around every consumer, wherever they are. As of December 31, 2024, the Company had more than 9,000 retail pharmacy locations, more than 1,000 walk-in and primary care medical clinics, a leading pharmacy benefits manager with approximately 90 million plan members, and a dedicated senior pharmacy care business serving more than 800,000 patients per year. The Company also serves an estimated more than 36 million people through traditional, voluntary and consumer-directed health insurance products and related services, including highly rated Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan. The Company's integrated model uses personalized, technology driven services to connect people to simply better health, increasing access to quality care, delivering better outcomes, and lowering overall costs.

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, the information under the headings "2025 Full-Year Guidance", "CEO Commentary" and "Financial Results Summary" 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 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 Reports on Form 10-Q for the quarterly periods ended March 31, 2024, June 30, 2024 and September 30, 2024 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 -

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 and expected future performance. These non-GAAP financial measures, which are included in this press release and which may be referred to on the conference call discussing the Company's fourth quarter and full-year 2024 financial results, are provided as supplemental information to the financial measures presented in this press release and discussed on the conference call 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, 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.

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 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 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 and year ended December 31, 2024, the acquisition-related integration costs relate to the acquisitions of Signify Health, Inc. ("Signify Health") and Oak Street Health, Inc. ("Oak Street Health"). During the three months and year ended December 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 operating expenses within the Corporate/Other segment.
• During the three months ended December 31, 2024, the restructuring charges are primarily comprised of a stock-based compensation charge. During the year ended December 31, 2024, the restructuring charges also include a store impairment charge, corporate workforce optimization costs, including severance and employee-related costs, other asset impairment and related charges associated with the discontinuation of certain non-core assets. During the third quarter of 2024, the Company finalized an enterprise-wide restructuring plan intended to streamline and simplify the organization, improve efficiency and reduce costs. In connection with this restructuring plan, the Company completed a strategic review of its retail business and determined that it plans to close additional retail stores in 2025, and, accordingly, it recorded a store impairment charge to write down the associated operating or financing lease right-of-use assets and property and equipment. In addition, during the third quarter of 2024, the Company also conducted a review of its various strategic assets and determined that it would discontinue the use of certain non-core assets, at which time impairment losses were recorded to write down the carrying value of these assets to the Company's best estimate of their fair value. During the year ended December 31, 2023, the restructuring charges include severance and employee-related costs, asset impairment charges and a stock-based compensation charge. The restructuring charges associated with the store impairments are reflected within the Pharmacy & Consumer Wellness segment, other asset impairments and related charges are reflected within the Corporate/Other and Pharmacy & Consumer Wellness segments and corporate workforce optimization costs, including severance and employee-related costs, as well as stock-based compensation charges, are reflected within the Corporate/Other segment.
• During the three months and years ended December 31, 2024 and 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 Company's evaluation of corporate office real estate space in response to its ongoing flexible work arrangement. The office real estate optimization charges are reflected in operating expenses within each segment.
• During the year ended December 31, 2024, the opioid litigation charge relates to a change in the Company's accrual related to ongoing opioid litigation matters.
• During the year ended December 31, 2023, the loss on assets held for sale relates to the long-term care ("LTC") business 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. 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 reflected its estimated fair value less costs to sell. As of the third quarter of 2023, the Company determined the LTC business no longer met the criteria for held-for-sale accounting and accordingly the net assets associated with the LTC business were reclassified to held and used at their respective fair values.
• During the three months and year ended December 31, 2024, the gain on early extinguishment of debt relates to the Company's repayment of approximately $2.6 billion of its outstanding senior notes in December 2024, pursuant to its tender offer for such senior notes.
• 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.

See endnotes (1) and (2) on page 23 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 13 through 15 and page 22.

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, 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 as further described in endnote (1). The CODM uses adjusted operating income as its principal measure of segment performance as it enhances the CODM's ability to compare past financial performance with current performance and analyze underlying business performance and trends.

The following are reconciliations of financial measures of the Company's segments to the consolidated totals: