CVS HEALTH CORPORATION REPORTS THIRD QUARTER 2024 RESULTS
CVS Health reported Q3 2024 results with total revenues increasing 6.3% to $95.4 billion. However, GAAP diluted EPS dropped to $0.07 from $1.75, and Adjusted EPS fell to $1.09 from $2.21 year-over-year. The decline was primarily due to challenges in the Health Care Benefits segment, including a $1.1 billion premium deficiency reserve charge. The company recorded restructuring charges of approximately $1.2 billion, including store closures and workforce optimization. The Health Services and Pharmacy & Consumer Wellness segments showed strong performance, with prescription volume up 6.0%. Year-to-date cash flow from operations was $7.2 billion.
CVS Health ha riportato i risultati del Q3 2024, con ricavi totali in aumento del 6,3% a 95,4 miliardi di dollari. Tuttavia, l'utile per azione diluito secondo i principi contabili GAAP è sceso a 0,07 dollari da 1,75 dollari, e l'utile per azione rettificato è diminuito a 1,09 dollari da 2,21 dollari su base annua. Il calo è stato principalmente dovuto a sfide nel segmento dei Benefici Sanitari, inclusa una riserva per carenze dei premi di 1,1 miliardi di dollari. L'azienda ha registrato oneri di ristrutturazione di circa 1,2 miliardi di dollari, comprendenti chiusure di negozi e ottimizzazione della forza lavoro. I segmenti dei Servizi Sanitari e della Farmacia & Benessere dei Consumatori hanno mostrato un forte rendimento, con un aumento del volume delle prescrizioni del 6,0%. Il flusso di cassa operativo da inizio anno è stato di 7,2 miliardi di dollari.
CVS Health informó sobre los resultados del tercer trimestre de 2024, con ingresos totales aumentando un 6.3% a $95.4 mil millones. Sin embargo, las ganancias por acción diluidas según GAAP cayeron a $0.07 desde $1.75, y las ganancias por acción ajustadas descendieron a $1.09 desde $2.21 en comparación con el año anterior. La disminución se debió principalmente a los desafíos en el segmento de Beneficios de Salud, incluyendo un cargo de reserva por deficiencia de primas de $1.1 mil millones. La compañía registró cargos por reestructuración de aproximadamente $1.2 mil millones, incluyendo el cierre de tiendas y la optimización de la fuerza laboral. Los segmentos de Servicios de Salud y Farmacia & Bienestar del Consumidor mostraron un fuerte desempeño, con un aumento del volumen de recetas del 6.0%. El flujo de efectivo operativo acumulado hasta la fecha fue de $7.2 mil millones.
CVS Health는 2024년 3분기 실적을 보고하며 총 수익이 954억 달러로 6.3% 증가했다고 발표했습니다. 그러나 GAAP에 따른 희석 주당순이익은 1.75달러에서 0.07달러로 떨어졌고, 조정 주당순이익은 전년 대비 2.21달러에서 1.09달러로 감소했습니다. 이 감소는 주로 건강 관리 혜택 부문에서의 어려움으로 인해 발생했으며, 여기에는 11억 달러의 보험료 부족 비축금이 포함되어 있습니다. 회사는 약 12억 달러의 구조조정 비용을 기록했으며, 여기에는 매장 폐쇄와 인력 최적화가 포함됩니다. 건강 서비스 및 약국과 소비자 웰니스 부문은 강력한 성과를 보였으며, 처방전 양이 6.0% 증가했습니다. 연초부터 운영에서 발생한 현금 흐름은 72억 달러에 달했습니다.
CVS Health a rapporté des résultats pour le troisième trimestre 2024, avec des revenus totaux en hausse de 6,3 % atteignant 95,4 milliards de dollars. Cependant, le bénéfice par action dilué selon les normes GAAP a chuté à 0,07 $ contre 1,75 $, et le bénéfice par action ajusté est tombé à 1,09 $ contre 2,21 $ d'une année sur l'autre. Cette baisse est principalement due à des défis dans le segment des Avantages de Santé, y compris une charge de réserve de déficit de primes de 1,1 milliard de dollars. L'entreprise a enregistré des charges de restructuration d'environ 1,2 milliard de dollars, incluant des fermetures de magasins et une optimisation de la main-d'œuvre. Les segments des Services de Santé et de Pharmacie & Bien-être du Consommateur ont affiché de bonnes performances, avec un volume d'ordonnances en hausse de 6,0 %. Le flux de trésorerie d'exploitation depuis le début de l'année s'élevait à 7,2 milliards de dollars.
CVS Health berichtete über die Ergebnisse des 3. Quartals 2024, wobei die Gesamterlöse um 6,3% auf 95,4 Milliarden Dollar stiegen. Allerdings sank der verwässerte Gewinn pro Aktie nach GAAP von 1,75 Dollar auf 0,07 Dollar, und der bereinigte Gewinn pro Aktie fiel von 2,21 Dollar auf 1,09 Dollar im Jahresvergleich. Der Rückgang war hauptsächlich auf Herausforderungen im Segment der Gesundheitsleistungen zurückzuführen, einschließlich einer Rückstellung für Prämienmängel in Höhe von 1,1 Milliarden Dollar. Das Unternehmen verzeichnete Umstrukturierungskosten von rund 1,2 Milliarden Dollar, einschließlich Filialschließungen und Optimierung der Arbeitskräfte. Die Segmente Gesundheitsdienstleistungen und Apotheke & Verbraucherwohlbefinden zeigten eine starke Leistung, wobei das Verschreibungsvolumen um 6,0% anstieg. Der Cashflow aus der Betriebstätigkeit seit Jahresbeginn betrug 7,2 Milliarden Dollar.
- Total revenues increased 6.3% to $95.4 billion
- Year-to-date cash flow from operations of $7.2 billion
- Prescription volume increased 6.0%
- 88% of Medicare Advantage members in plans with 2025 star ratings of at least 4.0 stars
- Health Services segment adjusted operating income increased 17.4%
- Pharmacy & Consumer Wellness segment adjusted operating income increased 14.9%
- GAAP diluted EPS decreased 96% to $0.07 from $1.75
- Adjusted EPS declined 50.7% to $1.09 from $2.21
- $1.1 billion premium deficiency reserves charge in Health Care Benefits segment
- $1.2 billion restructuring charges including store closures
- Medical benefit ratio increased to 95.2% from 85.7%
- Interest expense increased 8.5% due to higher debt
Insights
CVS Health's Q3 results reveal significant challenges, particularly in its Health Care Benefits segment. The
The most troubling development is the
While Health Services and Pharmacy segments showed resilience with improved operating income, the core insurance business's deterioration overshadows these gains. The stock likely faces near-term pressure until Medicare Advantage challenges are resolved.
Financial Highlights
- Third quarter total revenues increased to
$95.4 billion 6.3% compared to the prior year - Third quarter GAAP diluted EPS of
$0.07 $1.09 - Third quarter GAAP diluted EPS and Adjusted EPS include charges to record premium deficiency reserves of approximately
$1.1 billion $0.63 - Generated year-to-date cash flow from operations of
$7.2 billion
CEO Commentary
"Our integrated model accelerates our ability to uniquely do what is most important to today's health care consumers: deliver lower cost of care, a simpler experience and better outcomes. Our third quarter results reflect strong performance in the Health Services and Pharmacy & Consumer Wellness segments, and also highlight the continued need to work across our enterprise and address macro challenges to the Health Care Benefits segment. My commitment to our CVS Health colleagues and our customers is to drive focused execution of our integrated strategy to improve the health of the 185 million people we are privileged to serve."
— David Joyner, CVS Health President and CEO
Financial Results Summary
Three Months Ended September 30, | |||||
In millions, except per share amounts | 2024 | 2023 | Change | ||
Total revenues | $ 95,428 | $ 89,764 | $ 5,664 | ||
Operating income | 832 | 3,690 | (2,858) | ||
Adjusted operating income (1) | 2,547 | 4,456 | (1,909) | ||
Diluted earnings per share | $ 0.07 | $ 1.75 | $ (1.68) | ||
Adjusted EPS (2) | $ 1.09 | $ 2.21 | $ (1.12) | ||
Third quarter GAAP diluted EPS of
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 22 for explanations of non-GAAP financial measures presented in this press release. See pages 13 through 15 for reconciliations of each non-GAAP financial measure used in this release to the most directly comparable GAAP financial measure.
Consolidated third quarter results
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
In millions, except per share amounts | 2024 | 2023 | Change | 2024 | 2023 | Change | |||||
Total revenues | $ 95,428 | $ 89,764 | $ 5,664 | $ 11,136 | |||||||
Operating income | 832 | 3,690 | (2,858) | 6,148 | 10,370 | (4,222) | |||||
Adjusted operating income (1) | 2,547 | 4,456 | (1,909) | 9,248 | 13,307 | (4,059) | |||||
Net income | 71 | 2,265 | (2,194) | 2,963 | 6,321 | (3,358) | |||||
Diluted earnings per share | $ 0.07 | $ 1.75 | $ (1.68) | $ 2.35 | $ 4.88 | $ (2.53) | |||||
Adjusted EPS (2) | $ 1.09 | $ 2.21 | $ (1.12) | $ 4.23 | $ 6.62 | $ (2.39) | |||||
For the three months ended September 30, 2024 compared to the prior year:
- Total revenues increased
6.3% primarily 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
77.5% primarily due to the decrease in adjusted operating income described below and restructuring charges of approximately$1.2 billion - Adjusted operating income decreased
42.8% driven by a decline in the Health Care Benefits segment, primarily due to increased utilization and premium deficiency reserves recorded in the third quarter of 2024 related to anticipated losses in the fourth quarter of 2024, partially offset by increases in the Health Services and Pharmacy & Consumer Wellness segments. See pages 3 through 5 for additional discussion of the adjusted operating income performance of the Company's segments. - Interest expense increased
$59 million 8.5% , due to higher debt in the three months ended September 30, 2024, primarily driven by long-term debt issued in May 2024. - The effective income tax rate increased to
32.4% compared to25.0% primarily due to lower pre-tax income in the three months ended September 30, 2024 compared to the prior year.
Restructuring program
- 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, during the three months ended September 30, 2024, the Company recorded restructuring charges of approximately
$1.2 billion $607 million $293 million $269 million
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 and nine months ended September 30, 2024 and 2023 were as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
In millions, except percentages | 2024 | 2023 | Change | 2024 | 2023 | Change | |||||
Total revenues | $ 32,996 | $ 26,296 | $ 6,700 | $ 97,707 | $ 78,920 | $ 18,787 | |||||
Adjusted operating income (loss) (1) | (924) | 1,536 | (2,460) | 746 | 4,901 | (4,155) | |||||
Medical benefit ratio ("MBR") (3) | 95.2 % | 85.7 % | 9.5 % | 91.7 % | 85.5 % | 6.2 % | |||||
Medical membership (4) | 27.1 | 25.7 | 1.4 | ||||||||
- Total revenues increased
25.5% for the three months ended September 30, 2024 compared to the prior year driven by growth in the Medicare and Commercial product lines. - During the third quarter of 2024, the Company recorded premium deficiency reserves of approximately
$1.1 billion $1.1 billion $394 million $670 million - During the three months ended September 30, 2024, the Health Care Benefits segment had an adjusted operating loss of
$924 million $1.5 billion $1.1 billion - The MBR increased to
95.2% in the three months ended September 30, 2024 compared to85.7% in the prior year driven by increased utilization, the$670 million - Medical membership as of September 30, 2024 of 27.1 million increased 178,000 members compared with June 30, 2024, reflecting increases in the Commercial and Medicare product lines.
- Prior years' health care costs payable estimates developed favorably by
$788 million - Days claims payable were 44.6 days as of September 30, 2024, a increase of 1.5 days compared to June 30, 2024. The increase was primarily driven by the impact of the premium deficiency reserves recorded as health care costs in the third quarter of 2024 described above.
- The
U.S. Centers for Medicare & Medicaid Services ("CMS") released the Company's 2025 star ratings in October 2024. The Company's 2025 star ratings will be used to determine which of the Company's Medicare Advantage plans have ratings of four stars or higher and qualify for bonus payments in 2026. Based on the Company's membership as of September 2024,88% of the Company's Medicare Advantage members were in plans with 2025 star ratings of at least 4.0 stars, compared to87% of the Company's Medicare Advantage members being in plans with 2024 star ratings of at least 4.0 stars based on the Company's membership as of September 2023.
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 and nine months ended September 30, 2024 and 2023 were as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
In millions | 2024 | 2023 | Change | 2024 | 2023 | Change | |||||
Total revenues | $ 44,129 | $ 46,891 | $ (2,762) | ||||||||
Adjusted operating income (1) | 2,204 | 1,878 | 326 | 5,482 | 5,452 | 30 | |||||
Pharmacy claims processed (5) (6) | 484.1 | 579.6 | (95.5) | 1,418.2 | 1,743.5 | (325.3) | |||||
- Total revenues decreased
5.9% for the three months ended September 30, 2024 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 increased
17.4% for the three months ended September 30, 2024 compared to the prior year primarily driven by improved purchasing economics, partially offset by continued pharmacy client price improvements and the previously announced loss of a large client. - Pharmacy claims processed decreased
16.5% on a 30-day equivalent basis for the three months ended September 30, 2024 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 and nine months ended September 30, 2024 and 2023 were as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
In millions | 2024 | 2023 | Change | 2024 | 2023 | Change | |||||
Total revenues | $ 32,423 | $ 28,872 | $ 3,551 | $ 90,986 | $ 85,578 | $ 5,408 | |||||
Adjusted operating income (1) | 1,596 | 1,389 | 207 | 4,016 | 3,936 | 80 | |||||
Prescriptions filled (5) (6) | 431.6 | 407.1 | 24.5 | 1,269.6 | 1,217.6 | 52.0 | |||||
- Total revenues increased
12.3% for the three months ended September 30, 2024 compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccinations, and pharmacy drug mix. 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. - Adjusted operating income increased
14.9% for the three months ended September 30, 2024 compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccinations, as well as improved drug purchasing. These increases were partially offset by continued pharmacy reimbursement pressure and decreased front store volume in the three months ended September 30, 2024. - Prescriptions filled increased
6.0% on a 30-day equivalent basis for the three months ended September 30, 2024 compared to the prior year primarily driven by increased utilization. - Same store prescription volume(6)(12) increased
9.1% on a 30-day equivalent basis for the three months ended September 30, 2024 compared to the prior year.
See the supplemental information on page 19 for additional information regarding the performance of the Pharmacy & Consumer Wellness segment.
Teleconference and webcast
The Company will be holding a conference call today for investors at 8:00 a.m. (Eastern Time) to discuss its third 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, the information under the headings "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 -
CVS HEALTH CORPORATION | |||||||
Condensed Consolidated Statements of Operations | |||||||
(Unaudited) | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
In millions, except per share amounts | 2024 | 2023 | 2024 | 2023 | |||
Revenues: | |||||||
Products | $ 59,674 | $ 61,298 | $ 169,610 | $ 179,984 | |||
Premiums | 30,925 | 24,657 | 91,983 | 74,117 | |||
Services | 4,279 | 3,532 | 12,108 | 8,977 | |||
Net investment income | 550 | 277 | 1,398 | 885 | |||
Total revenues | 95,428 | 89,764 | 275,099 | 263,963 | |||
Operating costs: | |||||||
Cost of products sold | 52,948 | 54,688 | 151,019 | 159,679 | |||
Health care costs | 29,922 | 21,499 | 85,578 | 63,729 | |||
Operating expenses | 10,557 | 9,876 | 31,185 | 29,329 | |||
Restructuring charges | 1,169 | 11 | 1,169 | 507 | |||
Loss on assets held for sale | — | — | — | 349 | |||
Total operating costs | 94,596 | 86,074 | 268,951 | 253,593 | |||
Operating income | 832 | 3,690 | 6,148 | 10,370 | |||
Interest expense | 752 | 693 | 2,200 | 1,968 | |||
Other income | (25) | (22) | (74) | (66) | |||
Income before income tax provision | 105 | 3,019 | 4,022 | 8,468 | |||
Income tax provision | 34 | 754 | 1,059 | 2,147 | |||
Net income | 71 | 2,265 | 2,963 | 6,321 | |||
Net (income) loss attributable to noncontrolling interests | 16 | (4) | 7 | (23) | |||
Net income attributable to CVS Health | $ 87 | $ 2,261 | $ 2,970 | $ 6,298 | |||
Net income per share attributable to CVS Health: | |||||||
Basic | $ 0.07 | $ 1.76 | $ 2.36 | $ 4.90 | |||
Diluted | $ 0.07 | $ 1.75 | $ 2.35 | $ 4.88 | |||
Weighted average shares outstanding: | |||||||
Basic | 1,259 | 1,287 | 1,258 | 1,284 | |||
Diluted | 1,259 | 1,290 | 1,262 | 1,289 | |||
Dividends declared per share | $ 0.665 | $ 0.605 | $ 1.995 | $ 1.815 | |||
CVS HEALTH CORPORATION | |||
Condensed Consolidated Balance Sheets | |||
(Unaudited) | |||
In millions | September 30, | December 31, | |
Assets: | |||
Cash and cash equivalents | $ 6,875 | $ 8,196 | |
Investments | 2,805 | 3,259 | |
Accounts receivable, net | 36,179 | 35,227 | |
Inventories | 17,649 | 18,025 | |
Other current assets | 3,835 | 3,151 | |
Total current assets | 67,343 | 67,858 | |
Long-term investments | 28,939 | 23,019 | |
Property and equipment, net | 12,728 | 13,183 | |
Operating lease right-of-use assets | 16,231 | 17,252 | |
Goodwill | 91,272 | 91,272 | |
Intangible assets, net | 27,817 | 29,234 | |
Separate accounts assets | 3,334 | 3,250 | |
Other assets | 4,763 | 4,660 | |
Total assets | $ 252,427 | $ 249,728 | |
Liabilities: | |||
Accounts payable | $ 15,713 | $ 14,897 | |
Pharmacy claims and discounts payable | 23,917 | 22,874 | |
Health care costs payable | 15,237 | 12,049 | |
Policyholders' funds | 913 | 1,326 | |
Accrued expenses | 20,174 | 22,189 | |
Other insurance liabilities | 1,051 | 1,141 | |
Current portion of operating lease liabilities | 1,912 | 1,741 | |
Short-term debt | 800 | 200 | |
Current portion of long-term debt | 4,910 | 2,772 | |
Total current liabilities | 84,627 | 79,189 | |
Long-term operating lease liabilities | 15,258 | 16,034 | |
Long-term debt | 59,824 | 58,638 | |
Deferred income taxes | 3,632 | 4,311 | |
Separate accounts liabilities | 3,334 | 3,250 | |
Other long-term insurance liabilities | 5,162 | 5,459 | |
Other long-term liabilities | 5,484 | 6,211 | |
Total liabilities | 177,321 | 173,092 | |
Shareholders' equity: | |||
Preferred stock | — | — | |
Common stock and capital surplus | 49,510 | 48,992 | |
Treasury stock | (36,813) | (33,838) | |
Retained earnings | 62,038 | 61,604 | |
Accumulated other comprehensive income (loss) | 209 | (297) | |
Total CVS Health shareholders' equity | 74,944 | 76,461 | |
Noncontrolling interests | 162 | 175 | |
Total shareholders' equity | 75,106 | 76,636 | |
Total liabilities and shareholders' equity | $ 252,427 | $ 249,728 | |
CVS HEALTH CORPORATION | |||
Condensed Consolidated Statements of Cash Flows | |||
(Unaudited) | |||
Nine Months Ended September 30, | |||
In millions | 2024 | 2023 | |
Cash flows from operating activities: | |||
Cash receipts from customers | $ 264,538 | $ 260,300 | |
Cash paid for inventory, prescriptions dispensed and health services rendered | (145,469) | (153,051) | |
Insurance benefits paid | (80,357) | (61,658) | |
Cash paid to other suppliers and employees | (28,933) | (26,038) | |
Interest and investment income received | 1,288 | 1,174 | |
Interest paid | (2,391) | (2,049) | |
Income taxes paid | (1,429) | (2,616) | |
Net cash provided by operating activities | 7,247 | 16,062 | |
Cash flows from investing activities: | |||
Proceeds from sales and maturities of investments | 7,634 | 5,547 | |
Purchases of investments | (12,677) | (6,625) | |
Purchases of property and equipment | (2,013) | (2,120) | |
Acquisitions (net of cash and restricted cash acquired) | (85) | (16,492) | |
Other | 75 | 43 | |
Net cash used in investing activities | (7,066) | (19,647) | |
Cash flows from financing activities: | |||
Commercial paper borrowings (repayments), net | 600 | — | |
Proceeds from issuance of short-term loan | — | 5,000 | |
Repayment of short-term loan | — | (5,000) | |
Proceeds from issuance of long-term debt | 4,959 | 10,898 | |
Repayments of long-term debt | (1,706) | (2,734) | |
Repurchase of common stock | (3,023) | (2,013) | |
Dividends paid | (2,535) | (2,353) | |
Proceeds from exercise of stock options | 342 | 242 | |
Payments for taxes related to net share settlement of equity awards | (181) | (175) | |
Other | (22) | (210) | |
Net cash provided by (used in) financing activities | (1,566) | 3,655 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | (1,385) | 70 | |
Cash, cash equivalents and restricted cash at the beginning of the period | 8,525 | 13,305 | |
Cash, cash equivalents and restricted cash at the end of the period | $ 7,140 | $ 13,375 | |
CVS HEALTH CORPORATION | |||
Condensed Consolidated Statements of Cash Flows | |||
(Unaudited) | |||
Nine Months Ended September 30, | |||
In millions | 2024 | 2023 | |
Reconciliation of net income to net cash provided by operating activities: | |||
Net income | $ 2,963 | $ 6,321 | |
Adjustments required to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 3,450 | 3,232 | |
Stock-based compensation | 403 | 461 | |
Restructuring charges (impairment of long-lived assets) | 840 | 152 | |
Deferred income taxes and other items | (912) | (163) | |
Change in operating assets and liabilities, net of effects from acquisitions: | |||
Accounts receivable, net | (986) | (3,920) | |
Inventories | 355 | 1,305 | |
Other assets | (850) | (518) | |
Accounts payable and pharmacy claims and discounts payable | 2,169 | 2,466 | |
Health care costs payable and other insurance liabilities | 2,878 | 4,679 | |
Other liabilities | (3,063) | 2,047 | |
Net cash provided by operating activities | $ 7,247 | $ 16,062 | |
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 third quarter 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 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 and nine months ended September 30, 2024, the acquisition-related integration costs relate to the acquisitions of Signify Health and Oak Street Health. During the three and nine months ended September 30, 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 statements of operations in operating expenses within the Corporate/Other segment.
- During the three and nine months ended September 30, 2024, the restructuring charges are primarily comprised of a store impairment charge, corporate workforce optimization costs, including severance and employee-related costs, and 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 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 three months ended September 30, 2023, the restructuring charges are primarily comprised of a stock-based compensation charge. During the nine months ended September 30, 2023, the restructuring charges also include severance and employee-related costs and asset impairment charges. 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 are reflected within the Corporate/Other segment.
- During the three and nine months ended September 30, 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 continuous evaluation of corporate office real estate space in response to its ongoing flexible work arrangement. The office real estate optimization charges are reflected in the Company's unaudited condensed consolidated statements of operations in operating expenses within each segment.
- During the nine months ended September 30, 2024, the opioid litigation charge relates to a change in the Company's accrual related to ongoing opioid litigation matters.
- During the nine months ended September 30, 2023, the loss on assets held for sale relates to the 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. 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.
- 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 22 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.
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 (loss) to segment adjusted operating income (loss): | |||||||||
Three Months Ended September 30, 2024 | |||||||||
In millions | Health Care Benefits | Health Services | Pharmacy & Consumer Wellness | Corporate/ Other | Consolidated Totals | ||||
Operating income (loss) (GAAP measure) | $ (1,229) | $ 2,055 | $ 784 | $ (778) | $ 832 | ||||
Amortization of intangible assets | 294 | 149 | 64 | — | 507 | ||||
Net realized capital (gains) losses | 1 | — | — | (20) | (19) | ||||
Acquisition-related integration costs | — | — | — | 41 | 41 | ||||
Restructuring charges | — | — | 747 | 422 | 1,169 | ||||
Office real estate optimization charges | 10 | — | 1 | 6 | 17 | ||||
Adjusted operating income (loss) (1) | $ (924) | $ 2,204 | $ 1,596 | $ (329) | $ 2,547 | ||||
Three Months Ended September 30, 2023 | |||||||||
In millions | Health Care Benefits | Health Services | Pharmacy & Consumer Wellness | Corporate/ Other | Consolidated Totals | ||||
Operating income (loss) (GAAP measure) | $ 1,115 | $ 1,727 | $ 1,322 | $ (474) | $ 3,690 | ||||
Amortization of intangible assets | 294 | 150 | 65 | — | 509 | ||||
Net realized capital losses | 119 | — | 2 | 21 | 142 | ||||
Acquisition-related transaction and integration costs | — | — | — | 94 | 94 | ||||
Restructuring charges | — | — | — | 11 | 11 | ||||
Office real estate optimization charges | 8 | 1 | — | 1 | 10 | ||||
Adjusted operating income (loss) (1) | $ 1,536 | $ 1,878 | $ 1,389 | $ (347) | $ 4,456 | ||||
Nine Months Ended September 30, 2024 | |||||||||
In millions | Health Care Benefits | Health Services | Pharmacy & Consumer Wellness | Corporate/ Other | Consolidated Totals | ||||
Operating income (loss) (GAAP measure) | $ (227) | $ 5,034 | $ 3,076 | $ (1,735) | $ 6,148 | ||||
Amortization of intangible assets | 881 | 448 | 192 | 1 | 1,522 | ||||
Net realized capital losses | 82 | — | — | 7 | 89 | ||||
Acquisition-related integration costs | — | — | — | 203 | 203 | ||||
Restructuring charges | — | — | 747 | 422 | 1,169 | ||||
Office real estate optimization charges | 10 | — | 1 | 6 | 17 | ||||
Opioid litigation charge | — | — | — | 100 | 100 | ||||
Adjusted operating income (loss) (1) | $ 746 | $ 5,482 | $ 4,016 | $ (996) | $ 9,248 | ||||
Nine Months Ended September 30, 2023 | |||||||||
In millions | Health Care Benefits | Health Services | Pharmacy & Consumer Wellness | Corporate/ Other | Consolidated Totals | ||||
Operating income (loss) (GAAP measure) | $ 3,683 | $ 5,132 | $ 3,388 | $ (1,833) | $ 10,370 | ||||
Amortization of intangible assets | 883 | 316 | 195 | 2 | 1,396 | ||||
Net realized capital losses | 296 | — | 4 | 45 | 345 | ||||
Acquisition-related transaction and integration costs | — | — | — | 294 | 294 | ||||
Restructuring charges | — | — | — | 507 | 507 | ||||
Office real estate optimization charges | 39 | 4 | — | 3 | 46 | ||||
Loss on assets held for sale | — | — | 349 | — | 349 | ||||
Adjusted operating income (loss) (1) | $ 4,901 | $ 5,452 | $ 3,936 | $ (982) | $ 13,307 | ||||
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 September 30, 2024 | Three Months Ended September 30, 2023 | ||||||
In millions, except per share amounts | Total | Per | Total | Per | |||
Net income attributable to CVS Health (GAAP measure) | $ 87 | $ 0.07 | $ 2,261 | $ 1.75 | |||
Amortization of intangible assets | 507 | 0.40 | 509 | 0.39 | |||
Net realized capital (gains) losses | (19) | (0.02) | 142 | 0.11 | |||
Acquisition-related transaction and integration costs | 41 | 0.03 | 94 | 0.07 | |||
Restructuring charges | 1,169 | 0.93 | 11 | 0.01 | |||
Office real estate optimization charges | 17 | 0.01 | 10 | 0.01 | |||
Tax impact of non-GAAP adjustments | (433) | (0.33) | (177) | (0.13) | |||
Adjusted income attributable to CVS Health (2) | $ 1,369 | $ 1.09 | $ 2,850 | $ 2.21 | |||
Weighted average diluted shares outstanding | 1,259 | 1,290 | |||||
Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | ||||||
In millions, except per share amounts | Total | Per | Total | Per | |||
Net income attributable to CVS Health (GAAP measure) | $ 2,970 | $ 2.35 | $ 6,298 | $ 4.88 | |||
Amortization of intangible assets | 1,522 | 1.21 | 1,396 | 1.08 | |||
Net realized capital losses | 89 | 0.07 | 345 | 0.27 | |||
Acquisition-related transaction and integration costs | 203 | 0.16 | 294 | 0.23 | |||
Restructuring charges | 1,169 | 0.93 | 507 | 0.39 | |||
Office real estate optimization charges | 17 | 0.01 | 46 | 0.04 | |||
Opioid litigation charge | 100 | 0.08 | — | — | |||
Loss on assets held for sale | — | — | 349 | 0.27 | |||
Tax impact of non-GAAP adjustments | (738) | (0.58) | (701) | (0.54) | |||
Adjusted income attributable to CVS Health (2) | $ 5,332 | $ 4.23 | $ 8,534 | $ 6.62 | |||
Weighted average diluted shares outstanding | 1,262 | 1,289 | |||||
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:
In millions | Health Care Benefits | Health Services (a) | Pharmacy & Consumer Wellness | Corporate/ Other | Intersegment Eliminations (b) | Consolidated Totals | |||||
Three Months Ended | |||||||||||
September 30, 2024 | |||||||||||
Total revenues | $ 32,996 | $ 44,129 | $ 32,423 | $ 142 | $ (14,262) | $ 95,428 | |||||
Adjusted operating income (loss) (1) | (924) | 2,204 | 1,596 | (329) | — | 2,547 | |||||
September 30, 2023 | |||||||||||
Total revenues | $ 26,296 | $ 46,891 | $ 28,872 | $ 105 | $ (12,400) | $ 89,764 | |||||
Adjusted operating income (loss) (1) | 1,536 | 1,878 | 1,389 | (347) | — | 4,456 | |||||
Nine Months Ended | |||||||||||
September 30, 2024 | |||||||||||
Total revenues | $ 97,707 | $ 90,986 | $ 368 | $ (40,547) | $ 275,099 | ||||||
Adjusted operating income (loss) (1) | 746 | 5,482 | 4,016 | (996) | — | 9,248 | |||||
September 30, 2023 | |||||||||||
Total revenues | $ 78,920 | $ 85,578 | $ 376 | $ (38,608) | $ 263,963 | ||||||
Adjusted operating income (loss) (1) | 4,901 | 5,452 | 3,936 | (982) | — | 13,307 |
_____________________________________________
(a) | Total revenues of the Health Services segment include approximately |
(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. |
Supplemental Information | |||||||||||||||
(Unaudited) | |||||||||||||||
Health Care Benefits segment | |||||||||||||||
The following table summarizes the Health Care Benefits segment's performance for the respective periods: | |||||||||||||||
Change | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, 2024 vs 2023 | Nine Months Ended September 30, 2024 vs 2023 | ||||||||||||
In millions, except percentages and basis points ("bps") | 2024 | 2023 | 2024 | 2023 | $ | % | $ | % | |||||||
Revenues: | |||||||||||||||
Premiums | $ 91,947 | $ 74,079 | $ 6,269 | 25.4 % | 24.1 % | ||||||||||
Services | 1,659 | 1,464 | 4,684 | 4,285 | 195 | 13.3 % | 399 | 9.3 % | |||||||
Net investment income | 423 | 187 | 1,076 | 556 | 236 | 126.2 % | 520 | 93.5 % | |||||||
Total revenues | 32,996 | 26,296 | 97,707 | 78,920 | 6,700 | 25.5 % | 18,787 | 23.8 % | |||||||
Health care costs | 29,443 | 21,114 | 84,359 | 63,329 | 8,329 | 39.4 % | 21,030 | 33.2 % | |||||||
MBR (Health care costs as a % of premium revenues) (3) | 95.2 % | 85.7 % | 91.7 % | 85.5 % | 950 | bps | 620 | bps | |||||||
Operating expenses | $ 4,782 | $ 4,067 | $ 13,575 | $ 11,908 | $ 715 | 17.6 % | $ 1,667 | 14.0 % | |||||||
Operating expenses as a % of total revenues | 14.5 % | 15.5 % | 13.9 % | 15.1 % | |||||||||||
Operating income (loss) | $ (1,229) | $ 1,115 | $ (227) | $ 3,683 | $ (2,344) | (210.2) % | (106.2) % | ||||||||
Operating income (loss) as a % of total revenues | (3.7) % | 4.2 % | (0.2) % | 4.7 % | |||||||||||
Adjusted operating income (loss) (1) | $ (924) | $ 1,536 | $ 746 | $ 4,901 | $ (2,460) | (160.2) % | (84.8) % | ||||||||
Adjusted operating income (loss) as a % of total revenues | (2.8) % | 5.8 % | 0.8 % | 6.2 % | |||||||||||
Premium revenues (by business): | |||||||||||||||
Government | $ 66,269 | $ 52,680 | $ 5,123 | 29.8 % | $ 13,589 | 25.8 % | |||||||||
Commercial | 8,583 | 7,437 | 25,678 | 21,399 | 1,146 | 15.4 % | 4,279 | 20.0 % | |||||||
The following table summarizes the Health Care Benefits segment's medical membership for the respective periods: | |||||||||||||||||||||||
September 30, 2024 | June 30, 2024 | December 31, 2023 | September 30, 2023 | ||||||||||||||||||||
In thousands | Insured | ASC | Total | Insured | ASC | Total | Insured | ASC | Total | Insured | ASC | Total | |||||||||||
Medical membership: (4) | |||||||||||||||||||||||
Commercial | 4,751 | 14,155 | 18,906 | 4,702 | 14,099 | 18,801 | 4,252 | 14,087 | 18,339 | 4,198 | 14,075 | 18,273 | |||||||||||
Medicare Advantage | 4,438 | — | 4,438 | 4,342 | — | 4,342 | 3,460 | — | 3,460 | 3,438 | — | 3,438 | |||||||||||
Medicare Supplement | 1,291 | — | 1,291 | 1,294 | — | 1,294 | 1,343 | — | 1,343 | 1,352 | — | 1,352 | |||||||||||
Medicaid | 2,077 | 436 | 2,513 | 2,090 | 443 | 2,533 | 2,073 | 444 | 2,517 | 2,173 | 452 | 2,625 | |||||||||||
Total medical membership | 12,557 | 14,591 | 27,148 | 12,428 | 14,542 | 26,970 | 11,128 | 14,531 | 25,659 | 11,161 | 14,527 | 25,688 | |||||||||||
Supplemental membership information: | |||||||||||||||||||||||
Medicare Prescription Drug Plan (stand-alone) | 4,898 | 4,903 | 6,081 | 6,092 | |||||||||||||||||||
The following table summarizes the Health Care Benefits segment's days claims payable for the respective periods: | |||||||||
September 30, 2024 | June 30, 2024 | March 31, 2024 | December 31, 2023 | September 30, 2023 | |||||
Days Claims Payable (7) | 44.6 | 43.1 | 44.5 | 45.9 | 50.3 | ||||
Supplemental Information | |||||||||||||||
(Unaudited) | |||||||||||||||
Health Services segment | |||||||||||||||
The following table summarizes the Health Services segment's performance for the respective periods: | |||||||||||||||
Change | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, 2024 vs 2023 | Nine Months Ended September 30, 2024 vs 2023 | ||||||||||||
In millions, except percentages | 2024 | 2023 | 2024 | 2023 | $ | % | $ | % | |||||||
Revenues: | |||||||||||||||
Products | $ 118,417 | $ 133,371 | $ (3,811) | (8.5) % | $ (14,954) | (11.2) % | |||||||||
Services | 2,922 | 1,872 | 8,171 | 4,326 | 1,050 | 56.1 % | 3,845 | 88.9 % | |||||||
Net investment income (loss) | (1) | — | (3) | — | (1) | (100.0) % | (3) | (100.0) % | |||||||
Total revenues | 44,129 | 46,891 | 126,585 | 137,697 | (2,762) | (5.9) % | (11,112) | (8.1) % | |||||||
Cost of products sold | 40,381 | 43,738 | 116,678 | 129,425 | (3,357) | (7.7) % | (12,747) | (9.8) % | |||||||
Health care costs | 936 | 612 | 2,428 | 995 | 324 | 52.9 % | 1,433 | 144.0 % | |||||||
Gross profit (8) | 2,812 | 2,541 | 7,479 | 7,277 | 271 | 10.7 % | 202 | 2.8 % | |||||||
Gross margin (Gross profit as a % of total revenues) (8) | 6.4 % | 5.4 % | 5.9 % | 5.3 % | |||||||||||
Operating expenses | $ 757 | $ 814 | $ 2,445 | $ 2,145 | $ (57) | (7.0) % | $ 300 | 14.0 % | |||||||
Operating expenses as a % of total revenues | 1.7 % | 1.7 % | 1.9 % | 1.6 % | |||||||||||
Operating income | $ 2,055 | $ 1,727 | $ 5,034 | $ 5,132 | $ 328 | 19.0 % | $ (98) | (1.9) % | |||||||
Operating income as a % of total revenues | 4.7 % | 3.7 % | 4.0 % | 3.7 % | |||||||||||
Adjusted operating income (1) | $ 2,204 | $ 1,878 | $ 5,482 | $ 5,452 | $ 326 | 17.4 % | $ 30 | 0.6 % | |||||||
Adjusted operating income as a % of total revenues | 5.0 % | 4.0 % | 4.3 % | 4.0 % | |||||||||||
Revenues (by distribution channel): | |||||||||||||||
Pharmacy network (9) | $ (3,845) | (13.7) % | (20.0) % | ||||||||||||
Mail & specialty (10) | 17,214 | 17,004 | 52,127 | 50,378 | 210 | 1.2 % | 1,749 | 3.5 % | |||||||
Other | 2,780 | 1,906 | 8,013 | 4,269 | 874 | 45.9 % | 3,744 | 87.7 % | |||||||
Net investment income (loss) | (1) | — | (3) | — | (1) | (100.0) % | (3) | (100.0) % | |||||||
Pharmacy claims processed (5) (6) | 484.1 | 579.6 | 1,418.2 | 1,743.5 | (95.5) | (16.5) % | (325.3) | (18.7) % | |||||||
Generic dispensing rate (6) (11) | 86.8 % | 87.5 % | 87.8 % | 88.1 % | |||||||||||
Supplemental Information | |||||||||||||||
(Unaudited) | |||||||||||||||
Pharmacy & Consumer Wellness segment | |||||||||||||||
The following table summarizes the Pharmacy & Consumer Wellness segment's performance for the respective periods: | |||||||||||||||
Change | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, 2024 vs 2023 | Nine Months Ended September 30, 2024 vs 2023 | ||||||||||||
In millions, except percentages | 2024 | 2023 | 2024 | 2023 | $ | % | $ | % | |||||||
Revenues: | |||||||||||||||
Products | $ 31,823 | $ 3,780 | 13.5 % | $ 5,753 | 6.9 % | ||||||||||
Services | 600 | 831 | 1,791 | 2,140 | (231) | (27.8) % | (349) | (16.3) % | |||||||
Net investment income (loss) | — | (2) | — | (4) | 2 | 100.0 % | 4 | 100.0 % | |||||||
Total revenues | 32,423 | 28,872 | 90,986 | 85,578 | 3,551 | 12.3 % | 5,408 | 6.3 % | |||||||
Cost of products sold | 26,032 | 22,797 | 72,627 | 67,301 | 3,235 | 14.2 % | 5,326 | 7.9 % | |||||||
Gross profit (8) | 6,391 | 6,075 | 18,359 | 18,277 | 316 | 5.2 % | 82 | 0.4 % | |||||||
Gross margin (Gross profit as a % of total revenues) (8) | 19.7 % | 21.0 % | 20.2 % | 21.4 % | |||||||||||
Operating expenses | $ 4,860 | $ 4,753 | $ 107 | 2.3 % | $ (4) | — % | |||||||||
Operating expenses as a % of total revenues | 15.0 % | 16.5 % | 16.0 % | 17.0 % | |||||||||||
Restructuring charge | $ 747 | $ — | $ 747 | $ — | $ 747 | 100.0 % | $ 747 | 100.0 % | |||||||
Loss on assets held for sale | — | — | — | 349 | — | — % | (349) | (100.0) % | |||||||
Operating income | 784 | 1,322 | 3,076 | 3,388 | (538) | (40.7) % | (312) | (9.2) % | |||||||
Operating income as a % of total revenues | 2.4 % | 4.6 % | 3.4 % | 4.0 % | |||||||||||
Adjusted operating income (1) | $ 1,596 | $ 1,389 | $ 4,016 | $ 3,936 | $ 207 | 14.9 % | $ 80 | 2.0 % | |||||||
Adjusted operating income as a % of total revenues | 4.9 % | 4.8 % | 4.4 % | 4.6 % | |||||||||||
Revenues (by major goods/service lines): | |||||||||||||||
Pharmacy | $ 26,666 | $ 3,689 | 16.1 % | $ 6,092 | 9.0 % | ||||||||||
Front Store | 5,196 | 5,371 | 15,847 | 16,597 | (175) | (3.3) % | (750) | (4.5) % | |||||||
Other | 561 | 526 | 1,676 | 1,614 | 35 | 6.7 % | 62 | 3.8 % | |||||||
Net investment income (loss) | — | (2) | — | (4) | 2 | 100.0 % | 4 | 100.0 % | |||||||
Prescriptions filled (5) (6) | 431.6 | 407.1 | 1,269.6 | 1,217.6 | 24.5 | 6.0 % | 52.0 | 4.3 % | |||||||
Same store sales increase (decrease): (12) | |||||||||||||||
Total | 15.5 % | 8.8 % | 9.1 % | 10.4 % | |||||||||||
Pharmacy | 19.5 % | 11.9 % | 12.1 % | 13.0 % | |||||||||||
Front Store | (1.1) % | (2.2) % | (2.5) % | 1.6 % | |||||||||||
Prescription volume (6) | 9.1 % | 2.7 % | 7.1 % | 3.7 % | |||||||||||
Generic dispensing rate (6) (11) | 88.2 % | 88.3 % | 89.5 % | 89.1 % | |||||||||||
Supplemental Information | |||||||||||||||
(Unaudited) | |||||||||||||||
Corporate/Other segment | |||||||||||||||
The following table summarizes the Corporate/Other segment's performance for the respective periods: | |||||||||||||||
Change | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, 2024 vs 2023 | Nine Months Ended September 30, 2024 vs 2023 | ||||||||||||
In millions, except percentages | 2024 | 2023 | 2024 | 2023 | $ | % | $ | % | |||||||
Revenues: | |||||||||||||||
Premiums | $ 11 | $ 12 | $ 36 | $ 38 | $ (1) | (8.3) % | $ (2) | (5.3) % | |||||||
Services | 3 | 1 | 7 | 5 | 2 | 200.0 % | 2 | 40.0 % | |||||||
Net investment income | 128 | 92 | 325 | 333 | 36 | 39.1 % | (8) | (2.4) % | |||||||
Total revenues | 142 | 105 | 368 | 376 | 37 | 35.2 % | (8) | (2.1) % | |||||||
Cost of products sold | — | — | — | 1 | — | — % | (1) | (100.0) % | |||||||
Health care costs | 49 | 61 | 142 | 163 | (12) | (19.7) % | (21) | (12.9) % | |||||||
Operating expenses | 449 | 507 | 1,539 | 1,538 | (58) | (11.4) % | 1 | 0.1 % | |||||||
Restructuring charges | 422 | 11 | 422 | 507 | 411 | 3,736.4 % | (85) | (16.8) % | |||||||
Operating loss | (778) | (474) | (1,735) | (1,833) | (304) | (64.1) % | 98 | 5.3 % | |||||||
Adjusted operating loss (1) | (329) | (347) | (996) | (982) | 18 | 5.2 % | (14) | (1.4) % | |||||||
Supplemental Information | |||
(Unaudited) | |||
The following table shows the components of the change in the consolidated health care costs payable during the nine months ended September 30, 2024 and 2023: | |||
Nine Months Ended September 30, | |||
In millions | 2024 | 2023 | |
Health care costs payable, beginning of the period | $ 12,049 | $ 10,142 | |
Less: Reinsurance recoverables | 5 | 5 | |
Less: Impact of discount rate on long-duration insurance reserves (a) | (23) | 8 | |
Health care costs payable, beginning of the period, net | 12,067 | 10,129 | |
Acquisitions, net | — | 1,098 | |
Add: Components of incurred health care costs | |||
Current year | 85,541 | 64,183 | |
Prior years (b) | (845) | (679) | |
Total incurred health care costs (c) | 84,696 | 63,504 | |
Less: Claims paid | |||
Current year | 71,356 | 52,952 | |
Prior years | 10,886 | 9,207 | |
Total claims paid | 82,242 | 62,159 | |
Health care costs payable, end of the period, net | 14,521 | 12,572 | |
Add: Premium deficiency reserve | 670 | — | |
Add: Reinsurance recoverables | 65 | 4 | |
Add: Impact of discount rate on long-duration insurance reserves (a) | (19) | (26) | |
Health care costs payable, end of the period | $ 15,237 | $ 12,550 | |
_____________________________________________
(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 income (loss) on the unaudited condensed consolidated balance sheets. |
(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 nine months ended September 30, 2024 and 2023 in the table above exclude |
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 acquisition-related transaction and integration costs, restructuring charges, office real estate optimization charges, opioid litigation charges and losses on assets held for sale. 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 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) GAAP diluted earnings per share and Adjusted EPS, respectively, are calculated by dividing net income attributable to CVS Health and 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 acquisition-related transaction and integration costs, restructuring charges, office real estate optimization charges, opioid litigation charges, losses on assets held for sale, as well as the corresponding income tax benefit or expense related to the items excluded from adjusted income attributable to CVS Health. 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) Medical benefit ratio is calculated by dividing the Health Care Benefits segment's health care costs by premium revenues and represents the percentage of premium revenues spent on medical benefits for the segment'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 Health Care Benefits segment's insured products.
(4) Medical membership represents the number of members covered by the Health Care Benefits segment'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 the Health Care Benefits segment's total revenues and operating results.
(5) 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.
(6) 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.
(7) Days claims payable is calculated by dividing the Health Care Benefits segment's health care costs payable at the end of each quarter by its average health care costs per day during such quarter. Management and investors use this metric as an indicator of the adequacy of the Health Care Benefits segment's health care costs payable liability at the end of each quarter and as an indicator of changes in such adequacy over time.
(8) Gross profit is calculated as the segment's total revenues less its cost of products sold, and, for the Health Services segment, health care costs. 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.
(9) Health Services pharmacy network revenues relate to claims filled at retail and specialty retail pharmacies, including the Company's retail pharmacies and LTC pharmacies, as well as 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.
(10) Health Services mail and 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.
(11) 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.
(12) 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 and digital sales initiated online or through mobile applications and fulfilled through the Company's distribution centers, 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. 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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SOURCE CVS Health Corporation
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