CVS Health Reports Strong Second Quarter Results

CVS Health Corporation (NYSE: CVS) today announced operating results for the three months ended June 30, 2022.

SECOND QUARTER HIGHLIGHTS

  • Total revenues increased to $80.6 billion, up 11.0% compared to prior year
  • GAAP diluted EPS of $2.23 and Adjusted EPS of  $2.40

KEY FINANCIAL DATA

Three Months Ended

June 30,

In millions, except per share amounts

2022

2021

Change

Total revenues 

$   80,636

$   72,616

$     8,020

Operating income

4,569

4,326

243

Adjusted operating income (1)

4,810

4,887

(77)

Diluted earnings per share

$       2.23

$       2.10

$       0.13

Adjusted EPS (2)

$       2.40

$       2.42

$      (0.02)

YEAR-TO-DATE HIGHLIGHTS

  • Total revenues increased to $157.5 billion, up 11.1% compared to prior year
  • GAAP diluted EPS of $3.97 and Adjusted EPS of $4.62
  • Generated cash flow from operations of $9.0 billion
  • Repaid $1.5 billion of long-term debt

2022 FULL-YEAR GUIDANCE

  • Raised GAAP diluted EPS guidance range to $7.23 to $7.43 from $6.93 to $7.13
  • Raised Adjusted EPS guidance range to $8.40 to $8.60 from $8.20 to $8.40
  • Raised cash flow from operations guidance range to $12.5 billion to $13.5 billion from $12.0 billion to $13.0 billion

CEO Commentary

“Despite a challenging economic environment, our differentiated business model helped drive strong results this quarter, with significant revenue growth across all of our business segments. The continued success of our foundational businesses accelerated our strategy to expand access to health services and help consumers navigate to the best site of care. We remain a trusted community health destination for millions of individuals with health products and services that engage customers in all aspects of their health wherever and whenever they need it.”
Karen S. Lynch, CVS Health President and CEO

Q2 IN THE SPOTLIGHT

Paid down $1.5 billion of long-term debt, while returning $740 million to shareholders through dividends during the three months ended June 30, 2022. Since the close of the acquisition of Aetna Inc. in November 2018, the Company has repaid a net $22.5 billion of long-term debt.

Enrolled six million active users on the Company’s individualized Health Dashboard since its launch earlier this year.

In June, CVS Health became the first health care provider to directly integrate with Carequality, the largest medical records exchange in the U.S., enabling the Company to improve care coordination and reduce the administrative burden on physicians.

Expanded free health screenings in underserved communities and support of community health partners as part of the Company’s commitment to advancing health equity.

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 23 for explanations of non-GAAP financial measures presented in this press release. See pages 14 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 Second Quarter Results

Three Months Ended

June 30,

Six Months Ended

June 30,

In millions, except per share amounts

2022

2021

Change

2022

2021

Change

Total revenues 

$  80,636

$  72,616

$    8,020

$ 157,462

$ 141,713

$  15,749

Operating income

4,569

4,326

243

8,059

7,903

156

Adjusted operating income (1)

4,810

4,887

(77)

9,293

9,092

201

Net income

2,961

2,791

170

5,274

5,015

259

Diluted earnings per share

$      2.23

$      2.10

$      0.13

$      3.97

$      3.78

$      0.19

Adjusted EPS (2)

$      2.40

$      2.42

$     (0.02)

$      4.62

$      4.46

$      0.16

For the three months ended June 30, 2022 compared to the prior year:

  • Total revenues increased 11.0% driven by growth across all segments.
  • Operating income increased 5.6% primarily due to a $225 million pre-tax gain on the sale of PayFlex Holdings, Inc. (“PayFlex”), which was consummated on June 1, 2022, and a decrease in amortization of intangible assets compared to prior year, partially offset by a slight decrease in adjusted operating income.
  • Adjusted operating income decreased $77 million in the three months ended June 30, 2022 compared to the prior year. The decrease in adjusted operating income was primarily driven by declines in the Retail/LTC and Corporate/Other segments, largely offset by increases in the Health Care Benefits and Pharmacy Services segments. See pages 3 through 5 and page 21 for additional discussion of adjusted operating income performance of the Company’s segments.
  • Interest expense decreased $53 million, or 8.3%, due to lower debt in the three months ended June 30, 2022.
  • The effective income tax rate increased to 26.5% compared to 25.3% in the prior year primarily due to basis differences on the sale of PayFlex in the three months ended June 30, 2022.

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 six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended

June 30,

Six Months Ended

June 30,

In millions, except percentages

2022

2021

Change

2022

2021

Change

Total revenues

$  22,756

$  20,525

$    2,231

$  45,865

$  41,008

$    4,857

Adjusted operating income (1)

1,831

1,614

217

3,582

3,396

186

Medical benefit ratio (“MBR”) (3)

82.9 %

84.1 %

(1.2) %

83.2 %

83.6 %

(0.4) %

Medical membership (4)

24.4

23.5

0.9

  • Total revenues increased 10.9% for the three months ended June 30, 2022 compared to the prior year driven by growth across all product lines.
  • Adjusted operating income increased 13.4% for the three months ended June 30, 2022 compared to the prior year primarily driven by strong underlying performance, including higher favorable development of prior-periods’ health care cost estimates in the three months ended June 30, 2022 compared to the prior year, and membership growth across all product lines. These increases were partially offset by incremental investments to support growth in the business and net realized capital losses.
  • The MBR decreased to 82.9% in the three months ended June 30, 2022 compared to 84.1% in the prior year reflective of strong underlying performance, including higher favorable development of prior-periods’ health care cost estimates in the three months ended June 30, 2022 compared to the prior year.
  • Medical membership as of June 30, 2022 of 24.4 million increased 922,000 members compared with June 30, 2021, reflecting increases across all product lines.
  • Medical membership as of June 30, 2022 of 24.4 million decreased 90,000 members compared with March 31, 2022, primarily due to the decrease of approximately 266,000 members in connection with the divestiture of the Company’s international health care business domiciled in Thailand (“Thailand business”) during the second quarter of 2022. Excluding the impact of this divestiture, membership increased across all product lines compared with March 31, 2022.
  • The segment experienced favorable development of prior-periods’ health care cost estimates in its Government Services and Commercial businesses during the three months ended June 30, 2022, primarily attributable to first quarter 2022 performance.
  • Prior years’ health care costs payable estimates developed favorably by $666 million during the six months ended June 30, 2022. 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 2022 operating results.

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

Pharmacy Services Segment

The Pharmacy Services segment provides a full range of pharmacy benefit management solutions to employers, health plans, government employee groups and government sponsored programs. The segment results for the three and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended

June 30,

Six Months Ended

June 30,

In millions

2022

2021

Change

2022

2021

Change

Total revenues

$  42,812

$  38,314

$    4,498

$  82,273

$  74,635

$    7,638

Adjusted operating income (1)

1,855

1,755

100

3,491

3,262

229

Total pharmacy claims processed (5) (6)

584.3

562.2

22.1

1,151.3

1,098.1

53.2

Pharmacy network (7)

499.1

479.3

19.8

983.4

934.7

48.7

Mail choice (8)

85.2

82.9

2.3

167.9

163.4

4.5

  • Total revenues increased 11.7% for the three months ended June 30, 2022 compared to the prior year primarily driven by increased pharmacy claims volume, growth in specialty pharmacy and brand inflation, partially offset by continued client price improvements.
  • Adjusted operating income increased 5.7% for the three months ended June 30, 2022 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. These increases were partially offset by continued client price improvements, decreased contributions from pharmacy and/or other administrative services for 340B covered entities and increased restructuring and business integration costs in the three months ended June 30, 2022 compared to the prior year.
  • Total pharmacy claims processed increased 3.9% on a 30-day equivalent basis for the three months ended June 30, 2022 compared to the prior year. The increase was primarily driven by net new business, increased utilization and the impact of an extended cough, cold and flu season compared to the prior year, partially offset by decreased COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, total pharmacy claims processed increased 5.7% on a 30-day equivalent basis for the three months ended June 30, 2022 compared to the prior year.

See the supplemental information on page 19 for additional information regarding the performance of the Pharmacy Services segment.

Retail/LTC Segment

The Retail/LTC segment fulfills prescriptions for medications, provides patient care programs, sells a wide assortment of health and wellness products and general merchandise, provides health care services through walk-in medical clinics, provides medical diagnostic testing, administers vaccinations and provides pharmacy services to long-term care facilities. The segment results for the three and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended

June 30,

Six Months Ended

June 30,

In millions

2022

2021

Change

2022

2021

Change

Total revenues

$  26,286

$  24,728

$    1,558

$  51,704

$  48,002

$    3,702

Adjusted operating income (1)

1,862

2,049

(187)

3,467

3,443

24

Prescriptions filled (5) (6)

400.8

394.4

6.4

795.4

769.8

25.6

  • Total revenues increased 6.3% for the three months ended June 30, 2022 compared to the prior year primarily driven by increased prescription and front store volume, including the sale of COVID-19 over-the-counter test kits and the impact of an extended cough, cold and flu season compared to the prior year, as well as pharmacy brand inflation. These increases were partially offset by decreased COVID-19 vaccinations and diagnostic testing, the impact of recent generic introductions and continued pharmacy reimbursement pressure.
  • Adjusted operating income decreased 9.1% for the three months ended June 30, 2022 compared to the prior year primarily driven by continued pharmacy reimbursement pressure, decreased COVID-19 vaccinations, increased investments in the segment’s operations and capabilities and the absence of a $125 million gain from an anti-trust legal settlement recorded in the three months ended June 30, 2021. These decreases were partially offset by the increased prescription and front store volume described above, improved generic drug purchasing and the favorable impact of business initiatives in the three months ended June 30, 2022.
  • Prescriptions filled increased 1.6% on a 30-day equivalent basis for the three months ended June 30, 2022 compared to the prior year primarily driven by increased utilization and the impact of an extended cough, cold and flu season compared to the prior year, partially offset by decreased COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, prescriptions filled increased 4.6% on a 30-day equivalent basis for the three months ended June 30, 2022 compared to the prior year.

See the supplemental information on page 20 for additional information regarding the performance of the Retail/LTC segment.

2022 Full-Year Guidance

The Company raised its full-year 2022 GAAP diluted EPS guidance range to $7.23 to $7.43 from $6.93 to $7.13 and raised its full-year 2022 Adjusted EPS guidance range to $8.40 to $8.60 from $8.20 to $8.40. The Company also raised its full-year 2022 cash flow from operations guidance range to $12.5 billion to $13.5 billion from $12.0 billion to $13.0 billion.

The adjustments between full-year 2022 GAAP diluted EPS and Adjusted EPS include amortization of intangible assets, the gain on the divestiture of PayFlex, a legal settlement, a loss on assets held for sale, the corresponding income tax benefit or expense related to the items excluded from adjusted income attributable to CVS Health and the impact of certain discrete tax items concluded in the first quarter of 2022.

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.