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Apex Trader Funding - Cvs Health Corporation Reports Second Quarter 2024 Results And Revises Full Year 2024 Guidance
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CVS HEALTH CORPORATION REPORTS SECOND QUARTER 2024 RESULTS AND REVISES FULL-YEAR 2024 GUIDANCE

Financial Highlights Second quarter total revenues increased to $91.2 billion, up 2.6% compared to the prior year Second quarter GAAP diluted EPS of $1.41 and Adjusted EPS of $1.83 Generated year-to-date cash flow from operations of $8.0 billion 2024 Full-Year Guidance Revised GAAP diluted EPS guidance to a range of $4.95 to $5.20 from at least $5.64 Revised Adjusted EPS guidance to a range of $6.40 to $6.65 from at least $7.00 Revised cash flow from operations guidance to approximately $9.0 billion from at least $10.5 billion CEO Commentary"We have many points of differentiation that position us to win now and into the future. Our innovation is accelerating more transparent pharmacy reimbursement models, increasing the use of biosimilars, and providing better patient outcomes through our connected health care delivery assets. Our integrated model and our strategy are enabling us to execute in a challenging environment and we are delivering the value our customers demand. We are taking action today to ensure we make the most of our many opportunities, including leadership changes in the Health Care Benefits segment." -Karen S. Lynch, CVS Health President and CEO WOONSOCKET, R.I., Aug. 7, 2024 /PRNewswire/ -- CVS Health Corporation (NYSE:CVS) today announced operating results for the three months ended June 30, 2024. Financial Results Summary Three Months Ended June 30, In millions, except per share amounts 2024 2023 Change Total revenues  $         91,234 $         88,921 $           2,313 Operating income 3,045 3,234 (189) Adjusted operating income (1) 3,744 4,481 (737) Diluted earnings per share $             1.41 $             1.48 $           (0.07) Adjusted EPS (2) $             1.83 $             2.21 $           (0.38) Second quarter GAAP diluted EPS of $1.41 decreased from $1.48 in the prior year and Adjusted EPS of $1.83 decreased from $2.21 in the prior year, primarily due to a decline in the Health Care Benefits segment's operating results, which reflect continued utilization pressure and the unfavorable impact of the Company's Medicare Advantage star ratings for the 2024 payment year within the Medicare product line. The Company revised its full-year 2024 GAAP diluted EPS, Adjusted EPS and cash flow from operations guidance to reflect continued pressure in the Health Care Benefits segment, partially offset by strong performance in the Health Services and Pharmacy & Consumer Wellness segments. The Company presents both GAAP and non-GAAP financial measures in this press release to assist in the comparison of the Company's past financial performance with its current financial performance. See "Non-GAAP Financial Information" beginning on page 11 and endnotes beginning on page 23 for explanations of non-GAAP financial measures presented in this press release. See pages 13 through 15 and page 22 for reconciliations of each non-GAAP financial measure used in this release to the most directly comparable GAAP financial measure. Consolidated second quarter results Three Months Ended June 30, Six Months Ended June 30, In millions, except per share amounts 2024 2023 Change 2024 2023 Change Total revenues  $  91,234 $  88,921 $    2,313 $ 179,671 $ 174,199 $    5,472 Operating income 3,045 3,234 (189) 5,316 6,680 (1,364) Adjusted operating income (1) 3,744 4,481 (737) 6,701 8,851 (2,150) Net income 1,768 1,914 (146) 2,892 4,056 (1,164) Diluted earnings per share $      1.41 $      1.48 $     (0.07) $      2.28 $      3.13 $     (0.85) Adjusted EPS (2) $      1.83 $      2.21 $     (0.38) $      3.14 $      4.41 $     (1.27) For the three months ended June 30, 2024 compared to the prior year: Total revenues increased 2.6% 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 5.8% primarily due to the decrease in adjusted operating income described below, partially offset by the absence of a $496 million restructuring charge recorded in the prior year as well as a decrease in acquisition-related transaction and integration costs compared to the prior year. Adjusted operating income decreased 16.4% primarily driven by declines in the Health Care Benefits and Pharmacy & Consumer Wellness segments, partially offset by an increase in the Health Services segment. See pages 3 through 5 for additional discussion of the adjusted operating income performance of the Company's segments. Interest expense increased $46 million, or 6.7%, due to higher debt in the three months ended June 30, 2024, primarily driven by long-term debt issued in June of 2023 to fund the Company's acquisition of Oak Street Health, Inc. ("Oak Street Health"), as well as long-term debt issued in May of 2024. The effective income tax rate decreased to 24.3% compared to 25.5% primarily due to a state tax settlement during the three months ended June 30, 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 and six months ended June 30, 2024 and 2023 were as follows: Three Months Ended June 30, Six Months Ended June 30, In millions, except percentages 2024 2023 Change 2024 2023 Change Total revenues $  32,475 $  26,747 $    5,728 $  64,711 $  52,624 $  12,087 Adjusted operating income (1) 938 1,541 (603) 1,670 3,365 (1,695) Medical benefit ratio ("MBR") (3) 89.6 % 86.2 % 3.4 % 90.0 % 85.4 % 4.6 % Medical membership (4) 27.0 25.6 1.4 Total revenues increased 21.4% for the three months ended June 30, 2024 compared to the prior year driven by growth in the Medicare and Commercial product lines. Adjusted operating income decreased 39.1% for the three months ended June 30, 2024 compared to the prior year primarily driven by increased utilization and the unfavorable impact of the previously disclosed decline in the Company's Medicare Advantage star ratings for the 2024 payment year within the Medicare product line, higher acuity in Medicaid primarily attributable to the resumption of redeterminations, as well as a change in estimate related to the individual exchange business risk adjustment accrual for the 2023 plan year recorded in the second quarter of 2024. These decreases were partially offset by a favorable year-over-year impact of prior period development and an increase in net investment income. The MBR increased to 89.6% in the three months ended June 30, 2024 compared to 86.2% in the prior year driven by increased utilization and the unfavorable impact of the Company's Medicare Advantage star ratings for the 2024 payment year within the Medicare product line, as well as the higher acuity in Medicaid and the change in estimate related to the individual exchange business risk adjustment accrual described above. These increases were partially offset by the favorable year-over-year impact of prior period development. Medical membership as of June 30, 2024 of 27.0 million increased 200,000 members compared with March 31, 2024, reflecting increases in the Medicare and Medicaid product lines, including the commencement of the Medicaid Oklahoma contract on April 1, 2024. Prior years' health care costs payable estimates developed favorably by $623 million during the six months ended June 30, 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 43.1 days as of June 30, 2024, a decrease of 1.4 days compared to March 31, 2024. The decrease was primarily driven by elevated reserves held in the first quarter of 2024, including the impact of the Change Healthcare cyberattack. Based on the current performance and outlook for the Health Care Benefits segment, the Company has decided to make leadership changes effective immediately. Brian Kane is leaving the Company. Karen Lynch will assume direct leadership of the Health Care Benefits segment. Both Karen and Tom Cowhey, CFO of CVS Health will be overseeing the day-to-day management of this business. In addition, Katerina Guerraz, Executive Vice President and Chief Strategy Officer, will be the Chief Operating Officer of the Health Care Benefits segment. Katerina is a 20-year Aetna veteran with extensive Commercial and Medicare experience and has a track record of operational excellence. 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 six months ended June 30, 2024 and 2023 were as follows: Three Months Ended June 30, Six Months Ended June 30, In millions 2024 2023 Change 2024 2023 Change Total revenues $  42,171 $  46,215 $   (4,044) $  82,456 $  90,806 $   (8,350) Adjusted operating income (1) 1,915 1,894 21 3,278 3,574 (296) Pharmacy claims processed (5) (6) 471.2 576.6 (105.4) 934.1 1,163.9 (229.8) Total revenues decreased 8.8% for the three months ended June 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 1.1% for the three months ended June 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 18.3% on a 30-day equivalent basis for the three months ended June 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 six months ended June 30, 2024 and 2023 were as follows: Three Months Ended June 30, Six Months Ended June 30, In millions 2024 2023 Change 2024 2023 Change Total revenues $  29,838 $  28,784 $    1,054 $  58,563 $  56,706 $    1,857 Adjusted operating income (1) 1,243 1,413 (170) 2,420 2,547 (127) Prescriptions filled (5) (6) 420.4 405.7 14.7 838.0 810.5 27.5 Total revenues increased 3.7% for the three months ended June 30, 2024 compared to the prior year primarily driven by increased prescription volume 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 and lower contributions from COVID-19 over-the-counter ("OTC") test kits since the expiration of the public health emergency in May 2023. Adjusted operating income decreased 12.0% for the three months ended June 30, 2024, compared to the prior year primarily driven by continued pharmacy reimbursement pressure and decreased front store volume, including lower contributions from COVID-19 OTC test kits. These decreases were partially offset by increased prescription volume, improved drug purchasing and pharmacy drug mix. Prescriptions filled increased 3.6% on a 30-day equivalent basis for the three months ended June 30, 2024 compared to the prior year primarily driven by increased utilization. See the supplemental information on page 19 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 a range of $4.95 to $5.20 from at least $5.64 and revised its full-year 2024 Adjusted EPS guidance to a range of $6.40 to $6.65 from at least $7.00. The Company also revised its full-year 2024 cash flow from operations guidance to approximately $9.0 billion from at least $10.5 billion. The Company's guidance revision reflects continued pressure in the Health Care Benefits segment, partially offset by strong performance in the Health Services and Pharmacy & Consumer Wellness segments. Additional details of the guidance revision can be found in the Q2 2024 Earnings Presentation 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 second 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 Reports on Form 10-Q for the quarterly periods ended March 31, 2024 and June 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 June 30, Six Months Ended June 30, In millions, except per share amounts 2024 2023 2024 2023 Revenues: Products $      56,212 $      60,539 $    109,936 $    118,686 Premiums 30,667 25,108 61,058 49,460 Services 3,961 3,000 7,829 5,445 Net investment income 394 274 848 608 Total revenues 91,234 88,921 179,671 174,199 Operating costs: Cost of products sold 49,998 53,536 98,071 104,991 Health care costs 27,853 21,782 55,656 42,230 Operating expenses 10,338 9,873 20,628 19,453 Restructuring charge — 496 — 496 Loss on assets held for sale — — — 349 Total operating costs 88,189 85,687 174,355 167,519 Operating income 3,045 3,234 5,316 6,680 Interest expense 732 686 1,448 1,275 Other income (24) (22) (49) (44) Income before income tax provision 2,337 2,570 3,917 5,449 Income tax provision 569 656 1,025 1,393 Net income 1,768 1,914 2,892 4,056 Net (income) loss attributable to noncontrolling interests 2 (13) (9) (19) Net income attributable to CVS Health $        1,770 $        1,901 $        2,883 $        4,037 Net income per share attributable to CVS Health: Basic $         1.41 $         1.48 $         2.29 $         3.15 Diluted $         1.41 $         1.48 $         2.28 $         3.13 Weighted average shares outstanding: Basic 1,256 1,283 1,258 1,283 Diluted 1,259 1,287 1,263 1,289 Dividends declared per share $        0.665 $        0.605 $         1.33 $         1.21   CVS HEALTH CORPORATION Condensed Consolidated Balance Sheets (Unaudited) In millions June 30,2024 December 31,2023 Assets: Cash and cash equivalents $           12,507 $             8,196 Investments 3,755 3,259 Accounts receivable, net 32,385 35,227 Inventories 16,068 18,025 Other current assets 5,237 3,151   Total current assets 69,952 67,858 Long-term investments 25,028 23,019 Property and equipment, net 13,032 13,183 Operating lease right-of-use assets 16,901 17,252 Goodwill 91,272 91,272 Intangible assets, net 28,311 29,234 Separate accounts assets 3,187 3,250 Other assets 4,798 4,660 Total assets $         252,481 $         249,728 Liabilities: Accounts payable $           14,416 $           14,897 Pharmacy claims and discounts payable 24,188 22,874 Health care costs payable 13,885 12,049 Policyholders' funds 1,051 1,326 Accrued expenses 21,163 22,189 Other insurance liabilities 1,041 1,141 Current portion of operating lease liabilities 1,911 1,741 Short-term debt — 200 Current portion of long-term debt 3,731 2,772   Total current liabilities 81,386 79,189 Long-term operating lease liabilities 15,537 16,034 Long-term debt 62,643 58,638 Deferred income taxes 4,052 4,311 Separate accounts liabilities 3,187 3,250 Other long-term insurance liabilities 5,039 5,459 Other long-term liabilities 5,526 6,211 Total liabilities 177,370 173,092 Shareholders' equity: Preferred stock — — Common stock and capital surplus 49,371 48,992 Treasury stock (36,919) (33,838) Retained earnings 62,797 61,604 Accumulated other comprehensive loss (319) (297)   Total CVS Health shareholders' equity 74,930 76,461 Noncontrolling interests 181 175 Total shareholders' equity 75,111 76,636 Total liabilities and shareholders' equity $         252,481 $         249,728   CVS HEALTH CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, In millions 2024 2023 Cash flows from operating activities: Cash receipts from customers $      173,728 $      175,567 Cash paid for inventory, prescriptions dispensed and health services rendered (90,845) (101,318) Insurance benefits paid (52,485) (41,108) Cash paid to other suppliers and employees (21,124) (17,686) Interest and investment income received 839 801 Interest paid (1,392) (1,131) Income taxes paid (729) (1,779) Net cash provided by operating activities 7,992 13,346 Cash flows from investing activities: Proceeds from sales and maturities of investments 4,418 3,640 Purchases of investments (6,781) (4,499) Purchases of property and equipment (1,343) (1,575) Acquisitions (net of cash and restricted cash acquired) (73) (16,474) Other 60 32 Net cash used in investing activities (3,719) (18,876) Cash flows from financing activities: Commercial paper borrowings (repayments), net (200) 1,000 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 (37) (1,787) Repurchase of common stock (3,024) (2,016) Dividends paid (1,698) (1,574) Proceeds from exercise of stock options 228 120 Payments for taxes related to net share settlement of equity awards (176) (168) Other (30) (121) Net cash provided by financing activities 22 6,352 Net increase in cash, cash equivalents and restricted cash 4,295 822 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 $       12,820 $       14,127   CVS HEALTH CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, In millions 2024 2023 Reconciliation of net income to net cash provided by operating activities: Net income $         2,892 $         4,056 Adjustments required to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,289 2,105 Stock-based compensation 270 307 Deferred income taxes and other items (341) 87 Change in operating assets ...