CVS Health Reports Record First-Quarter Results
May 1, 2015
<span style="font-size:14px;"><span style="color:#000000;"><strong style="box-sizing: border-box; line-height: 1.4; margin: 0px;">First Quarter Year-over-year Highlights:</strong></span></span>
- Net revenues increased 11.1% to $36.3 billion
- Operating profit increased 5.3% to $2.1 billion
- Adjusted EPS of $1.14, an increase of 12.2%; GAAP diluted EPS from continuing operations of $1.07
- Generated free cash flow of approximately $1.6 billion; cash flow from operations of approximately $2.0 billion
- Full year Adjusted EPS narrowed to $5.08 to $5.19; GAAP diluted EPS from continuing operations narrowed to $4.80 to $4.91
- Provided second quarter Adjusted EPS guidance of $1.17 to $1.20 and GAAP diluted EPS from continuing operations guidance of $1.10 to $1.13
- Confirmed full year free cash flow of $5.9 to $6.2 billion; cash flow from operations of $7.6 to $7.9 billion
<span style="font-size:14px;"><span style="color:#000000;">CVS Health Corporation (NYSE: </span><a href="http://studio-5.financialcontent.com/prnews?Page=Quote&Ticker=CVS" rel="nofollow" style="color: rgb(61, 152, 198); box-sizing: border-box; line-height: 1.4; margin: 0px; text-decoration: none;" target="_blank" title="CVS"><span style="color:#000000;">CVS</span></a><span style="color:#000000;">) today announced operating results for the three months ended March 31, 2015.</span></span>
Net revenues for the three months ended March 31, 2015, increased 11.1%, or
compared to the three months ended March 31, 2014.
Revenues in the Pharmacy Services Segment increased 18.2%, or
in the three months ended March 31, 2015. The increase was primarily driven by growth in specialty pharmacy and pharmacy network claims. Pharmacy network claims processed during the three months ended March 31, 2015, increased 11.0% to 230.8 million compared to 208.0 million in the prior year. The increase in the pharmacy network claim volume was primarily due to net new business as well as growth in Managed Medicaid and public exchanges. Mail choice claims processed during the three months ended March 31, 2015, increased 2.7% to 20.3 million, compared to 19.8 million in the prior year. The increase in mail choice claims was driven by specialty claim volume and increased claims associated with the continued adoption of our Maintenance Choice
Revenues in the Retail Pharmacy Segment increased 2.9%, or
in the three months ended
March 31, 2015
. Same store sales increased 1.2% over the first quarter of last year, with pharmacy same store sales up 4.2% and front store same store sales down 6.1%. On a comparable basis, front store same store sales would have been approximately 800 basis points higher if tobacco and the estimated associated basket sales were excluded from the three months ended
March 31, 2014
. Front stores same store sales were impacted by softer customer traffic, partially offset by an increase in basket size. Pharmacy same store prescription volumes rose 5.1% on a 30-day equivalent basis, partially driven by strong seasonal volume. Pharmacy same store sales were negatively impacted by approximately 280 basis points from recent generic drug introductions and by approximately 190 basis points from the implementation of Specialty Connect
. The implementation of Specialty Connect had a greater effect on revenues than prescription volumes due to the higher dollar value of specialty products.
For the three months ended March 31, 2015, the generic dispensing rate increased approximately 150 basis points from the prior year in both segments, rising to 83.5% in the Pharmacy Services Segment and 84.4% in the Retail Pharmacy Segment.
Net income for the three months ended March 31, 2015, increased 8.1%, or
, compared with approximately
during the three months ended March 31, 2014. The Pharmacy Services and Retail Pharmacy segments both benefited from the impact of increased generic drugs dispensed. The Pharmacy Services Segment was positively impacted by growth in specialty pharmacy as well as favorable purchasing and rebate economics, partially offset by price compression. The Retail Pharmacy Segment was positively impacted by increased sales, an improved front store margin rate largely driven by the removal of tobacco products and favorable purchasing economics, partially offset by reimbursement pressure. Adjusted earnings per share (Adjusted EPS) for the three months ended March 31, 2015 and 2014, was
, respectively, an increase of 12.2%. Adjusted EPS in the three months ended
in 2015 and 2014, respectively, of intangible asset amortization related to acquisition activity. GAAP earnings per diluted share for the three months ended March 31, 2015 and 2014, was
, respectively, an increase of 12.7%.
President and Chief Executive Officer
stated, "We delivered better-than-expected results this quarter, primarily driven by stronger-than-expected prescription volumes as well as favorable purchasing and rebate economics in the PBM. Adjusted EPS increased 12.2%, to
above the high end of our guidance range, with operating profit in the retail business in line with our expectations and operating profit in the PBM exceeding our expectations. We also generated approximately
in free cash flow, and we continued to return significant value to our shareholders through our disciplined capital allocation practices."
Mr. Merlo continued, "We are already off to a solid start in the 2016 PBM selling season. Our integrated model allows us to provide differentiated products and services that generate savings for our clients while providing better health outcomes and convenience for patients. We remain very well positioned with our distinctive, channel-agnostic solutions, which are resonating strongly in the marketplace."
The Company raised the low end of its EPS guidance range for the full year 2015. The Company now expects to deliver Adjusted EPS of
$5.08 to $5.19
, up from
$5.05 to $5.19
, and GAAP diluted EPS from continuing operations of
$4.80 to $4.91
, up from
$4.77 to $4.91
in 2015. The Company also continues to expect to deliver 2015 free cash flow of
$5.9 billion to $6.2 billion
, and 2015 cash flow from operations of
$7.6 billion to $7.9 billion
. The Company expects to deliver Adjusted EPS of
$1.17 to $1.20
and GAAP diluted EPS from continuing operations of
$1.10 to $1.13
in the second quarter of 2015.
Real Estate Program
During the three months ended March 31, 2015, the Company opened 38 new retail drugstores and closed 10 retail drugstores. In addition, the Company relocated 12 retail drugstores. As of March 31, 2015, the Company operated 8,006 locations in 47 states, the
District of Columbia
. These locations included 7,850 retail drugstores, 17 onsite pharmacies, 24 retail specialty pharmacy stores, 11 specialty mail order pharmacies, four mail service dispensing pharmacies, and 86 branches for infusion and enteral services, including approximately 70 ambulatory infusion suites and six centers of excellence.
Teleconference and Webcast
The Company will be holding a conference call today for the investment community at
8:30 am (EDT)
to discuss its quarterly 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
. This webcast will be archived and available on the website for a one-year period following the conference call.
About the Company
CVS Health is a pharmacy innovation company helping people on their path to better health. Through its more than 7,800 retail drugstores, nearly 1,000 walk-in medical clinics, a leading pharmacy benefits manager with more than 70 million plan members, and expanding specialty pharmacy services, the Company enables people, businesses and communities to manage health in more affordable, effective ways. This unique integrated model increases access to quality care, delivers better health outcomes and lowers overall health care costs. Find more information about how CVS Health is shaping the future of health at
This press release contains forward-looking statements within the meaning of the federal securities laws. By their nature, all forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements for a number of reasons as described in our Securities and Exchange Commission filings, including those set forth in the Risk Factors section and under the section entitled "Cautionary Statement Concerning Forward-Looking Statements" in our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q.