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 Six Months Ended
June 30,
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 Six Months Ended
June 30,
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 Six Months Ended
June 30, 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 Six Months Ended
June 30, 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 Six Months Ended
June 30, 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, December 31,
2024 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 and liabilities, net of effects from acquisitions:
Accounts receivable, net 2,798 (804)
Inventories 1,937 1,800
Other assets (2,241) (913)
Accounts payable and pharmacy claims and discounts payable 1,191 (118)
Health care costs payable and other insurance liabilities 1,581 4,334
Other liabilities (2,384) 2,492
Net cash provided by operating activities $7,992 $13,346
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 performance. These non-GAAP financial measures are provided as supplemental information to the financial measures presented in this press release 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 six months ended June 30, 2024, the
acquisition-related integration costs relate to the acquisitions of
Signify Health and Oak Street Health. During the three and six months
ended June 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 six months ended June 30, 2024, the opioid litigation charge
relates to a change in the Company's accrual related to ongoing opioid
litigation matters.
-- During the three and six months ended June 30, 2023, the restructuring
charge is primarily comprised of severance and employee-related costs
and asset impairment charges. During the second quarter of 2023, the
Company developed an enterprise-wide restructuring plan intended to
streamline and simplify the organization, improve efficiency and reduce
costs. In connection with the development of this plan and the recently
completed acquisitions of Signify Health and Oak Street Health, the
Company also conducted a strategic review of its various transformation
initiatives and determined that it would terminate certain initiatives.
The restructuring charge is reflected within the Corporate/Other
segment.
-- During the three and six months ended June 30, 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 planned reduction of corporate office
real estate space in response to the Company's new 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 the Health Care Benefits, Health
Services and Corporate/Other segments.
-- During the six months ended June 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 23 for definitions of non-GAAP financial measures. Reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure are presented on pages 13 through 15 and page 22.
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 June 30, 2024
In millions Health Care Health Pharmacy & Corporate/ Consolidated
Benefits Services Consumer Other Totals
Wellness
---
Operating income (loss) (GAAP measure) $574 $1,766 $1,179 $(474) $3,045
Amortization of intangible assets 293 149 64 1 507
Net realized capital losses 71 19 90
Acquisition-related integration costs - 102 102
Adjusted operating income (loss) (1) $938 $1,915 $1,243 $(352) $3,744
Three Months Ended June 30, 2023
In millions Health Care Health Pharmacy & Corporate/ Consolidated
Benefits Services Consumer Other Totals
Wellness
---
Operating income (loss) (GAAP measure) $1,160 $1,767 $1,349 $(1,042) $3,234
Amortization of intangible assets 294 125 65 1 485
Net realized capital (gains) losses 78 (1) 21 98
Acquisition-related transaction and - 157 157
integration costs
Restructuring charge - 496 496
Office real estate optimization charges 9 2 11
Adjusted operating income (loss) (1) $1,541 $1,894 $1,413 $(367) $4,481
Six Months Ended June 30, 2024
In millions Health Care Health Pharmacy & Corporate/ Consolidated
Benefits Services Consumer Other Totals
Wellness
---
Operating income (loss) (GAAP measure) $1,002 $2,979 $2,292 $(957) $5,316
Amortization of intangible assets 587 299 128 1 1,015
Net realized capital losses 81 27 108
Acquisition-related integration costs - 162 162
Opioid litigation charge - 100 100
Adjusted operating income (loss) (1) $1,670 $3,278 $2,420 $(667) $6,701
Six Months Ended June 30, 2023
In millions Health Care Health Pharmacy & Corporate/ Consolidated
Benefits Services Consumer Other Totals
Wellness
---
Operating income (loss) (GAAP measure) $2,568 $3,405 $2,066 $(1,359) $6,680
Amortization of intangible assets 589 166 130 2 887
Net realized capital losses 177 2 24 203
Acquisition-related transaction and integration
costs - 200 200
Restructuring charge - 496 496
Office real estate optimization charges 31 3 2 36
Loss on assets held for sale - 349 349
Adjusted operating income (loss) (1) $3,365 $3,574 $2,547 $(635) $8,851
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 Three Months Ended
June 30, 2024 June 30, 2023
In millions, except per share amounts Total Per Total Per
Company Common Company Common
Share Share
---
Net income attributable to CVS Health (GAAP measure) $1,770 $1.41 $1,901 $1.48
Amortization of intangible assets 507 0.40 485 0.38
Net realized capital losses 90 0.07 98 0.08
Acquisition-related transaction and integration costs 102 0.08 157 0.12
Restructuring charge - 496 0.38
Office real estate optimization charges - 11 0.01
Tax impact of non-GAAP adjustments (163) (0.13) (303) (0.24)
Adjusted income attributable to CVS Health (2) $2,306 $1.83 $2,845 $2.21
Weighted average diluted shares outstanding 1,259 1,287
Six Months Ended Six Months Ended
June 30, 2024 June 30, 2023
In millions, except per share amounts Total Per Total Per
Company Common Company Common
Share Share
---
Net income attributable to CVS Health (GAAP measure) $2,883 $2.28 $4,037 $3.13
Amortization of intangible assets 1,015 0.80 887 0.69
Net realized capital losses 108 0.09 203 0.16
Acquisition-related transaction and integration costs 162 0.13 200 0.16
Opioid litigation charge 100 0.08
Restructuring charge - 496 0.38
Office real estate optimization charges - 36 0.03
Loss on assets held for sale - 349 0.27
Tax impact of non-GAAP adjustments (305) (0.24) (524) (0.41)
Adjusted income attributable to CVS Health (2) $3,963 $3.14 $5,684 $4.41
Weighted average diluted shares outstanding 1,263 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 Health Pharmacy & Corporate/ Intersegment Consolidated
Benefits Services Consumer Other Eliminations
(a) (b) Totals
Wellness
---
Three Months Ended
June 30, 2024
Total revenues $32,475 $42,171 $29,838 $111 $(13,361) $91,234
Adjusted operating income (loss) (1) 938 1,915 1,243 (352) 3,744
June 30, 2023
Total revenues $26,747 $46,215 $28,784 $83 $(12,908) $88,921
Adjusted operating 1,541 1,894 1,413 (367) 4,481
income (loss) (1)
Six Months Ended
June 30, 2024
Total revenues $64,711 $82,456 $58,563 $226 $(26,285) $179,671
Adjusted operating income (loss) (1) 1,670 3,278 2,420 (667) 6,701
June 30, 2023
Total revenues $52,624 $90,806 $56,706 $271 $(26,208) $174,199
Adjusted operating income (loss) (1) 3,365 3,574 2,547 (635) 8,851
_____________________________________________
(a) Total revenues of the Health Services segment include approximately $2.8 billion and $3.4 billion of
retail co-payments for the three months ended June 30, 2024 and 2023, respectively, and $6.2
billion and $7.5 billion of retail co-payments for the six months ended June 30, 2024 and 2023,
respectively.
(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 Six Months Ended Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2024 vs 2023 2024 vs 2023
In millions, except percentages and basis points ("bps") 2024 2023 2024 2023
$ %
$ %
---
Revenues:
Premiums $30,654 $25,095 $61,033 $49,434 $5,559 22.2 % $11,599 23.5 %
Services 1,521 1,447 3,025 2,821 74 5.1 % 204 7.2 %
Net investment income 300 205 653 369 95 46.3 % 284 77.0 %
Total revenues 32,475 26,747 64,711 52,624 5,728 21.4 % 12,087 23.0 %
Health care costs 27,458 21,620 54,916 42,215 5,838 27.0 % 12,701 30.1 %
MBR (Health care costs as a % of premium revenues) (3) 89.6 % 86.2 % 90.0 % 85.4 % 340 bps 460 bps
Operating expenses $4,443 $3,967 $8,793 $7,841 $476 12.0 % $952 12.1 %
Operating expenses as a % of total revenues 13.7 % 14.8 % 13.6 % 14.9 %
Operating income $574 $1,160 $1,002 $2,568 $(586) (50.5) % $(1,566) (61.0) %
Operating income as a % of total revenues 1.8 % 4.3 % 1.5 % 4.9 %
Adjusted operating income (1) $938 $1,541 $1,670 $3,365 $(603) (39.1) % $(1,695) (50.4) %
Adjusted operating income as a % of total revenues 2.9 % 5.8 % 2.6 % 6.4 %
Premium revenues (by business):
Government $22,222 $17,944 $43,938 $35,472 $4,278 23.8 % $8,466 23.9 %
Commercial 8,432 7,151 17,095 13,962 1,281 17.9 % 3,133 22.4 %
The following table summarizes the Health Care Benefits segment's medical membership for the respective periods:
June 30, 2024 March 31, 2024 December 31, 2023 June 30, 2023
In thousands Insured ASC Total Insured ASC Total Insured ASC Total Insured ASC Total
---
Medical membership: (4)
Commercial 4,702 14,099 18,801 4,735 14,111 18,846 4,252 14,087 18,339 4,033 14,114 18,147
Medicare
Advantage 4,342 4,342 4,205 4,205 3,460 3,460 3,408 3,408
Medicare
Supplement 1,294 1,294 1,300 1,300 1,343 1,343 1,351 1,351
Medicaid 2,090 443 2,533 1,972 447 2,419 2,073 444 2,517 2,261 467 2,728
Total medical
membership 12,428 14,542 26,970 12,212 14,558 26,770 11,128 14,531 25,659 11,053 14,581 25,634
Supplemental membership information:
Medicare Prescription Drug Plan (stand-alone) 4,903 4,947 6,081 6,094
The following table summarizes the Health Care Benefits segment's days claims payable for the respective periods:
June 30, 2024 March 31, 2024 December 31, 2023 June 30, 2023
Days Claims Payable (7) 43.1 44.5 45.9 46.9
Supplemental Information
(Unaudited)
Health Services segment
The following table summarizes the Health Services segment's performance for the respective periods:
Change
Three Months Ended Six Months Ended Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2024 vs 2023 2024 vs 2023
In millions, except percentages 2024 2023 2024 2023
$ %
$ %
---
Revenues:
Products $39,492 $44,681 $77,209 $88,352 $(5,189) (11.6) % $(11,143) (12.6) %
Services 2,681 1,534 5,249 2,454 1,147 74.8 % 2,795 113.9 %
Net investment income (loss) (2) (2) (2) (100.0) % (2) (100.0) %
Total revenues 42,171 46,215 82,456 90,806 (4,044) (8.8) % (8,350) (9.2) %
Cost of products sold 38,765 43,271 76,297 85,687 (4,506) (10.4) % (9,390) (11.0) %
Health care costs 791 383 1,492 383 408 106.5 % 1,109 289.6 %
Gross profit (8) 2,615 2,561 4,667 4,736 54 2.1 % (69) (1.5) %
Gross margin (Gross profit as a % of total revenues) (8) 6.2 % 5.5 % 5.7 % 5.2 %
Operating expenses $849 $794 $1,688 $1,331 $55 6.9 % $357 26.8 %
Operating expenses as a % of total revenues 2.0 % 1.7 % 2.0 % 1.5 %
Operating income $1,766 $1,767 $2,979 $3,405 $(1) (0.1) % $(426) (12.5) %
Operating income as a % of total revenues 4.2 % 3.8 % 3.6 % 3.7 %
Adjusted operating income (1) $1,915 $1,894 $3,278 $3,574 $21 1.1 % $(296) (8.3) %
Adjusted operating income as a % of total revenues 4.5 % 4.1 % 4.0 % 3.9 %
Revenues (by distribution channel):
Pharmacy network (9) $21,848 $27,477 $42,312 $55,069 $(5,629) (20.5) % $(12,757) (23.2) %
Mail & specialty (10) 17,651 17,229 34,913 33,374 422 2.4 % 1,539 4.6 %
Other 2,674 1,509 5,233 2,363 1,165 77.2 % 2,870 121.5 %
Net investment income (loss) (2) (2) (2) (100.0) % (2) (100.0) %
Pharmacy claims processed (5) (6) 471.2 576.6 934.1 1,163.9 (105.4) (18.3) % (229.8) (19.7) %
Generic dispensing rate (6) (11) 88.2 % 88.3 % 88.3 % 88.4 %
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 Six Months Ended Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2024 vs 2023 2024 vs 2023
In millions, except percentages 2024 2023 2024 2023
$ %
$ %
---
Revenues:
Products $29,252 $28,141 $57,372 $55,399 $1,111 3.9 % $1,973 3.6 %
Services 586 642 1,191 1,309 (56) (8.7) % (118) (9.0) %
Net investment income (loss) - 1 (2) (1) (100.0) % 2 100.0 %
Total revenues 29,838 28,784 58,563 56,706 1,054 3.7 % 1,857 3.3 %
Cost of products sold 23,835 22,628 46,595 44,504 1,207 5.3 % 2,091 4.7 %
Gross profit (8) 6,003 6,156 11,968 12,202 (153) (2.5) % (234) (1.9) %
Gross margin (Gross profit as a % of total revenues) (8) 20.1 % 21.4 % 20.4 % 21.5 %
Operating expenses $4,824 $4,807 $9,676 $9,787 $17 0.4 % $(111) (1.1) %
Operating expenses as a % of total revenues 16.2 % 16.7 % 16.5 % 17.3 %
Loss on assets held for sale
$ -
$ -
$ - $349
$ - - % $(349) (100.0) %
Operating income 1,179 1,349 2,292 2,066 (170) (12.6) % 226 10.9 %
Operating income as a % of total revenues 4.0 % 4.7 % 3.9 % 3.6 %
Adjusted operating income (1) $1,243 $1,413 $2,420 $2,547 $(170) (12.0) % $(127) (5.0) %
Adjusted operating income as a % of total revenues 4.2 % 4.9 % 4.1 % 4.5 %
Revenues (by major goods/service lines):
Pharmacy $24,013 $22,614 $46,797 $44,394 $1,399 6.2 % $2,403 5.4 %
Front Store 5,281 5,629 10,651 11,226 (348) (6.2) % (575) (5.1) %
Other 544 540 1,115 1,088 4 0.7 % 27 2.5 %
Net investment income (loss) - 1 (2) (1) (100.0) % 2 100.0 %
Prescriptions filled (5) (6) 420.4 405.7 838.0 810.5 14.7 3.6 % 27.5 3.4 %
Same store sales increase (decrease): (12)
Total 6.4 % 10.9 % 5.9 % 11.3 %
Pharmacy 9.1 % 14.3 % 8.2 % 13.5 %
Front Store (4.0) % (0.3) % (3.1) % 3.5 %
Prescription volume (6) 6.5 % 3.6 % 6.1 % 4.3 %
Generic dispensing rate (6) (11) 90.1 % 89.5 % 90.1 % 89.5 %
Supplemental Information
(Unaudited)
Corporate/Other segment
The following table summarizes the Corporate/Other segment's performance for the respective periods:
Change
Three Months Ended Six Months Ended Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2024 vs 2023 2024 vs 2023
In millions,
except
percentages 2024 2023 2024 2023
$ %
$ %
---
Revenues:
Premiums $13 $13 $25 $26
$ - - % $(1) (3.8) %
Services 2 2 4 4 - % - %
Net investment
income 96 68 197 241 28 41.2 % (44) (18.3) %
Total revenues 111 83 226 271 28 33.7 % (45) (16.6) %
Cost of
products sold - 1 - % (1) (100.0) %
Health care
costs 46 50 93 102 (4) (8.0) % (9) (8.8) %
Operating
expenses 539 579 1,090 1,031 (40) (6.9) % 59 5.7 %
Restructuring
charge - 496 496 (496) (100.0) % (496) (100.0) %
Operating loss (474) (1,042) (957) (1,359) 568 54.5 % 402 29.6 %
Adjusted
operating
loss (1) (352) (367) (667) (635) 15 4.1 % (32) (5.0) %
Supplemental Information
(Unaudited)
The following table shows the components of the change in the consolidated health care costs payable during the six months ended June 30, 2024 and 2023:
Six Months Ended
June 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 - 1,102
Add: Components of incurred health care costs
Current year 56,177 42,705
Prior years (b) (662) (619)
Total incurred health care costs (c) 55,515 42,086
Less: Claims paid
Current year 43,218 32,502
Prior years 10,514 8,800
Total claims paid 53,732 41,302
Health care costs payable, end of the period, net 13,850 12,015
Add: Reinsurance recoverables 59 5
Add: Impact of discount rate on long-duration insurance reserves (a) (24) (22)
Health care costs payable, end of the period $13,885 $11,998
_____________________________________________
(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 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 six months ended June 30, 2024 and 2023 in the table above
exclude $48 million and $42 million, respectively, of health care costs recorded in the Health Care
Benefits segment that are included in other insurance liabilities on the unaudited condensed
consolidated balance sheets and $93 million and $102 million, respectively, of health care costs
recorded in the Corporate/Other segment that are included in other insurance liabilities on the
unaudited condensed consolidated balance sheets.
Adjusted Earnings Per Share Guidance
(Unaudited)
The following reconciliation of projected net income attributable to CVS Health to projected adjusted income attributable to CVS Health and calculations of projected GAAP diluted EPS and projected Adjusted EPS contain forward-looking information. All forward-looking information involves risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking information for a number of reasons as described in our 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 and our Quarterly Report on Form 10-Q for the period ended June 30, 2024. See "Non-GAAP Financial Information" earlier in this press release and endnote (2) later in this press release for more information on how we calculate Adjusted EPS.
Year Ending
December 31, 2024
Low High
In millions, except per share amounts Total Per Total Per
Company Common Company Common
Share Share
---
Net income attributable to CVS Health (GAAP measure) $6,247 $4.95 $6,564 $5.20
Non-GAAP adjustments:
Amortization of intangible assets 2,020 1.60 2,020 1.60
Net realized capital losses 108 0.09 108 0.09
Acquisition-related integration costs 240 0.19 230 0.18
Opioid litigation charge 100 0.08 100 0.08
Tax impact of non-GAAP adjustments (635) (0.51) (632) (0.50)
Adjusted income attributable to CVS Health (2) $8,080 $6.40 $8,390 $6.65
Weighted average diluted shares outstanding 1,262 1,262
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, opioid litigation charges, restructuring charges, office real estate optimization 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, opioid litigation charges, restructuring charges, office real estate optimization 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 segment's insured Health Care Benefits 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
