First Quarter Highlights Total revenues increased to $88.4 billion, up 3.7% compared to prior year GAAP diluted EPS of $0.88 and Adjusted EPS of $1.31 Generated cash flow from operations of $4.9 billion 2024 Full-Year Guidance Revised GAAP diluted EPS guidance to at least $5.64 from at least $7.06 Revised Adjusted EPS guidance to at least $7.00 from at least $8.30 Revised cash flow from operations guidance to at least $10.5 billion from at least $12.0 billion CEO Commentary"The current environment does not diminish our opportunities, enthusiasm, or the long-term earnings power of our company. We are confident we have a pathway to address our near-term Medicare Advantage challenges. We remain committed to our strategy and believe that we have the right assets in place to deliver value to our customers, members, patients, and shareholders." -Karen S. Lynch, CVS Health President and CEO WOONSOCKET, R.I., May 1, 2024 /PRNewswire/ -- CVS Health Corporation (NYSE:CVS) today announced operating results for the three months ended March 31, 2024. Financial Results Summary Three Months Ended March 31, In millions, except per share amounts 2024 2023 Change Total revenues  $         88,437 $         85,278 $           3,159 Operating income 2,271 3,446 (1,175) Adjusted operating income (1) 2,957 4,370 (1,413) Diluted earnings per share $             0.88 $             1.65 $           (0.77) Adjusted EPS (2) $             1.31 $             2.20 $           (0.89) First quarter revenues of $88.4 billion increased by 3.7% compared to the prior year, reflecting strong growth in the Health Care Benefits and Pharmacy & Consumer Wellness segments, partially offset by a decline in our Health Services segment. First quarter GAAP diluted EPS of $0.88 decreased from $1.65 in the prior year and Adjusted EPS of $1.31 decreased from $2.20 in the prior year, primarily due to a decline in the Health Care Benefits segment's operating results, reflecting utilization pressure in the Company's Medicare business. Recognizing the potential for continued elevated medical cost trends in the remainder of 2024, the Company revised its full-year 2024 GAAP diluted EPS, Adjusted EPS and cash flow from operations guidance to reflect the assumption that the majority of this pressure will persist throughout 2024. 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 14 and page 21 for reconciliations of each non-GAAP financial measure used in this release to the most directly comparable GAAP financial measure. Consolidated first quarter results Three Months Ended March 31, In millions, except per share amounts 2024 2023 Change Total revenues  $  88,437 $  85,278 $    3,159 Operating income 2,271 3,446 (1,175) Adjusted operating income (1) 2,957 4,370 (1,413) Net income 1,124 2,142 (1,018) Diluted earnings per share $      0.88 $      1.65 $     (0.77) Adjusted EPS (2) $      1.31 $      2.20 $     (0.89) For the three months ended March 31, 2024 compared to the prior year: Total revenues increased 3.7% 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 34.1% primarily due to the decrease in adjusted operating income described below, partially offset by 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 ("LTC business") recorded in the prior year. Adjusted operating income decreased 32.3% primarily driven by declines in the Health Care Benefits and Health Services segments, partially offset by an increase in the Pharmacy & Consumer Wellness segment. See pages 3 through 5 for additional discussion of the adjusted operating income performance of the Company's segments. Interest expense increased $127 million, or 21.6%, due to higher debt in the three months ended March 31, 2024, primarily driven by long-term debt issued in February and June of 2023 to fund the Company's acquisitions of Signify Health, Inc. ("Signify Health") and Oak Street Health, Inc. ("Oak Street Health"). The effective income tax rate increased to 28.9% compared to 25.6% primarily due to the impact of certain discrete tax items and their proportion to lower pre-tax income recorded during the three months ended March 31, 2024. Health Care Benefits segment The Health Care Benefits segment offers a full range of insured and self-insured ("ASC") medical, pharmacy, dental and behavioral health products and services. The segment results for the three months ended March 31, 2024 and 2023 were as follows: Three Months Ended March 31, In millions, except percentages 2024 2023 Change Total revenues $  32,236 $  25,877 $    6,359 Adjusted operating income (1) 732 1,824 (1,092) Medical benefit ratio ("MBR") (3) 90.4 % 84.6 % 5.8 % Medical membership (4) 26.8 25.5 1.3                                                Total revenues increased 24.6% for the three months ended March 31, 2024 compared to the prior year driven by growth in the Medicare and Commercial product lines. Adjusted operating income decreased 59.9% for the three months ended March 31, 2024 compared to the prior year primarily driven by increased Medicare utilization, the unfavorable impact of the previously disclosed decline in the Company's 2024 Medicare Advantage star ratings, as well as an unfavorable year-over-year impact of prior-year development. These decreases were partially offset by increased volume due to growth in the Medicare and Commercial product lines, an increase in net investment income and improved fixed cost leverage across the business due to membership growth. The MBR increased to 90.4% in the three months ended March 31, 2024 compared to 84.6% in the prior year driven by increased Medicare utilization, the unfavorable impact of the Company's 2024 Medicare Advantage star ratings, the unfavorable year-over-year impact of prior-year development, as well as the impact of an additional day in 2024 due to the leap year. Medical membership as of March 31, 2024 of 26.8 million increased 1.1 million members compared with December 31, 2023, reflecting increases in the Medicare and Commercial product lines, including an increase of 493,000 members related to the individual exchange business within the Commercial product line. These increases were partially offset by a decline in the Medicaid product line. Prior years' health care costs payable estimates developed favorably by $473 million during the three months ended March 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 44.5 days as of March 31, 2024, a decrease of 1.4 days compared to December 31, 2023. The decrease was primarily driven by the impact of membership growth, higher pharmacy trends, as well as the number of days in each quarter. See the supplemental information on page 16 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 ("PBM") solutions, delivers health care services in its medical clinics, virtually, and in the home, and offers provider enablement solutions. The segment results for the three months ended March 31, 2024 and 2023 were as follows: Three Months Ended March 31, In millions 2024 2023 Change Total revenues $  40,285 $  44,591 $   (4,306) Adjusted operating income (1) 1,363 1,680 (317) Pharmacy claims processed (5) (6) 462.9 587.3 (124.4) Total revenues decreased 9.7% for the three months ended March 31, 2024 compared to the prior year primarily driven by the previously announced loss of a large client during the three months ended March 31, 2024 and continued pharmacy client price improvements. These decreases were partially offset by pharmacy drug mix, growth in specialty pharmacy and the acquisitions of Oak Street Health and Signify Health. Adjusted operating income decreased 18.9% for the three months ended March 31, 2024 compared to the prior year primarily driven by continued pharmacy client price improvements, lower contributions from 340B, the previously announced loss of a large client during the three months ended March 31, 2024 and the inclusion of the Oak Street Health operating results in the three months ended March 31, 2024. These decreases were partially offset by improved purchasing economics, including increased contributions from the products and services of the Company's group purchasing organization, as well as contributions from Signify Health in the three months ended March 31, 2024. Pharmacy claims processed decreased 21.2% on a 30-day equivalent basis for the three months ended March 31, 2024 compared to the prior year, reflecting the previously announced loss of a large client during the three months ended March 31, 2024. See the supplemental information on page 17 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 ended March 31, 2024 and 2023 were as follows: Three Months Ended March 31, In millions 2024 2023 Change Total revenues $  28,725 $  27,922 $       803 Adjusted operating income (1) 1,177 1,134 43 Prescriptions filled (5) (6) 417.6 404.8 12.8 Total revenues increased 2.9% for the three months ended March 31, 2024 compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccinations, as well as pharmacy drug mix. These increases were partially offset by the impact of recent generic introductions, continued pharmacy reimbursement pressure and decreased front store volume, reflecting the impact of a decrease in store count and lower contributions from coronavirus disease 2019 ("COVID-19") over-the-counter test kits. Adjusted operating income increased 3.8% for the three months ended March 31, 2024, compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccinations, improved drug purchasing and decreased operating expenses, including the favorable impact of the decrease in store count, during the three months ended March 31, 2024. These increases were partially offset by continued pharmacy reimbursement pressure. Prescriptions filled increased 3.2% on a 30-day equivalent basis for the three months ended March 31, 2024 compared to the prior year primarily driven by increased utilization. See the supplemental information on page 18 for additional information regarding the performance of the Pharmacy & Consumer Wellness segment. 2024 Full-year guidance The Company revised its full-year 2024 GAAP diluted EPS guidance to at least $5.64 from at least $7.06 and its full-year 2024 Adjusted EPS guidance to at least $7.00 from at least $8.30. The Company also revised its full-year 2024 cash flow from operations guidance to at least $10.5 billion from at least $12.0 billion. The Company's guidance revision reflects the assumption that the majority of utilization pressure observed in the Health Care Benefits segment during the first quarter will persist throughout 2024. Additional details of the guidance revision can be found in the Q1 2024 Earnings Presentation that can be found on the Investor Relations section of the CVS Health website at http://investors.cvshealth.com.  The adjustments between full-year 2024 GAAP diluted EPS and Adjusted EPS include amortization of intangible assets, net realized capital losses, acquisition-related integration costs, opioid litigation charges and the corresponding income tax benefit or expense related to the items excluded from adjusted income attributable to CVS Health. Teleconference and webcast The Company will be holding a conference call today for investors at 8:00 a.m. (Eastern Time) to discuss its first quarter results. An audio webcast of the call will be broadcast simultaneously for all interested parties through the Investor Relations section of the CVS Health website at http://investors.cvshealth.com. This webcast will be archived and available on the website for a one-year period following the conference call. About CVS Health CVS Health is the leading health solutions company, delivering care like no one else can. We reach more people and improve the health of communities across America through our local presence, digital channels and over 300,000 dedicated colleagues – including more than 40,000 physicians, pharmacists, nurses and nurse practitioners. Wherever and whenever people need us, we help them with their health – whether that's managing chronic diseases, staying compliant with their medications or accessing affordable health and wellness services in the most convenient ways. We help people navigate the health care system – and their personal health care – by improving access, lowering costs and being a trusted partner for every meaningful moment of health. And we do it all with heart, each and every day. Follow @CVSHealth on social media. Cautionary statement concerning forward-looking statements The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of CVS Health Corporation. Statements in this press release that are forward-looking include, but are not limited to, the information under the headings "2024 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 Report on Form 10-Q for the quarterly period ended March 31, 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 CORPORATIONCondensed Consolidated Statements of Operations(Unaudited) Three Months Ended March 31, In millions, except per share amounts 2024 2023 Revenues: Products $      53,724 $      58,147 Premiums 30,391 24,352 Services 3,868 2,445 Net investment income 454 334 Total revenues 88,437 85,278 Operating costs: Cost of products sold 48,073 51,455 Health care costs 27,803 20,448 Loss on assets held for sale — 349 Operating expenses 10,290 9,580 Total operating costs 86,166 81,832 Operating income 2,271 3,446 Interest expense 716 589 Other income (25) (22) Income before income tax provision 1,580 2,879 Income tax provision 456 737 Net income 1,124 2,142 Net income attributable to noncontrolling interests (11) (6) Net income attributable to CVS Health $        1,113 $        2,136 Net income per share attributable to CVS Health: Basic $         0.88 $         1.66 Diluted $         0.88 $         1.65 Weighted average shares outstanding: Basic 1,260 1,283 Diluted 1,267 1,291 Dividends declared per share $        0.665 $        0.605   CVS HEALTH CORPORATIONCondensed Consolidated Balance Sheets(Unaudited)  In millions March 31,2024 December 31,2023 Assets: Cash and cash equivalents $             9,801 $             8,196 Investments 3,288 3,259 Accounts receivable, net 32,217 35,227 Inventories 16,346 18,025 Other current assets 5,821 3,151 Total current assets 67,473 67,858 Long-term investments 24,074 23,019 Property and equipment, net 13,037 13,183 Operating lease right-of-use assets 17,045 17,252 Goodwill 91,272 91,272 Intangible assets, net 28,770 29,234 Separate accounts assets 3,271 3,250 Other assets 4,801 4,660 Total assets $         249,743 $         249,728 Liabilities: Accounts payable $           13,717 $           14,897 Pharmacy claims and discounts payable 22,289 22,874 Health care costs payable 14,368 12,049 Policyholders' funds 1,081 1,326 Accrued expenses 22,350 22,189 Other insurance liabilities 1,158 1,141 Current portion of operating lease liabilities 1,906 1,741 Short-term debt 2,719 200 Current portion of long-term debt 3,731 2,772 Total current liabilities 83,319 79,189 Long-term operating lease liabilities 15,742 16,034 Long-term debt 57,694 58,638 Deferred income taxes 4,184 4,311 Separate accounts liabilities 3,271 3,250 Other long-term insurance liabilities 5,178 5,459 Other long-term liabilities 6,205 6,211 Total liabilities 175,593 173,092 Shareholders' equity: Preferred stock — — Common stock and capital surplus 49,209 48,992 Treasury stock (36,773) (33,838) Retained earnings 61,873 61,604 Accumulated other comprehensive loss (341) (297) Total CVS Health shareholders' equity 73,968 76,461 Noncontrolling interests 182 175 Total shareholders' equity 74,150 76,636 Total liabilities and shareholders' equity $         249,743 $         249,728   CVS HEALTH CORPORATIONCondensed Consolidated Statements of Cash Flows(Unaudited) Three Months Ended March 31, In millions 2024