01—Abstract
Summary
Summary of the 10-K filed February 7, 2024. Cited figures are marked; the original filing is the authoritative source.
CVS Health Corporation (CVS) reported strong top-line growth in its 2023 10-K filing, with total revenues increasing by 10.9% year-over-year to $357.8 billiona.
This growth was driven by broad-based strength across all segments, notably the Health Services segment which saw a 10.2% revenue increase, bolstered by acquisitions like Oak Street Health and Signify Health. The company also highlighted continued investment in technology and strategic initiatives aimed at enhancing consumer experience and operational efficiency. Despite revenue growth, adjusted operating income saw a slight decrease of 2.7% to $17.5 billionb, impacted by increased utilization in Medicare Advantage programs and ongoing competitive pressures within the PBM industry.
Key strategic moves included the integration of Oak Street Health and Signify Health, positioning CVS Health to expand its primary care and value-based care capabilities. The company also saw a significant improvement in its Medicare Advantage star ratings for 2024, expected to positively impact future revenues.
However, increased interest expenses due to debt financing for acquisitions and higher health care costs in the Health Care Benefits segment presented headwinds. Management remains focused on enterprise-wide cost savings and efficiency improvements to navigate these challenges and drive sustainable long-term growth.
02—Key points
Key Highlights
- Total revenues increased by 10.9% to $357.8 billion in 2023, driven by growth across all segments.
- The Health Services segment revenue grew by 10.2%, significantly benefiting from the acquisitions of Oak Street Health and Signify Health.
- Adjusted operating income decreased by 2.7% to $17.5 billion, impacted by increased Medicare Advantage utilization and PBM industry pressures.
- The company's Medicare Advantage star ratings improved significantly for 2024, expecting to recover revenue losses from 2024 in 2025.
- Interest expense increased by 16.2% due to higher debt levels to fund the recent acquisitions.
- Net income attributable to CVS Health increased substantially by 93.6% to $8.3 billion, largely due to the absence of significant litigation charges recorded in the prior year.
- CVS Health announced a 10% increase in its quarterly cash dividend, demonstrating a commitment to returning capital to shareholders.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, CVS Health Corp kept $0.02.
- Revenue$357.78B100.0%
- Cost of revenue−$217.10B60.7%
- Gross profit$140.68B39.3%
- Operating costs−$126.94B35.5%
- Operating income$13.74B3.8%
- Interest, other & tax−$5.38B1.5%
- Net income$8.37B2.3%
Where FY2023 revenue went
$357.78B- Cost of revenue: $217.10B, 61% of revenue
- Operating costs: $126.94B, 35% of revenue
- Net income: $8.37B, 2.3% of revenue
- Interest, other & tax: $5.38B, 1.5% of revenue
Kept 2.3% as net incomeNet income $8.37B · 2.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 7, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $357.78B$322.47B | +10.9% |
| Cost of Revenue | $217.10B$196.89B | +10.3% |
| Gross Profit | $140.68B$125.58B | +12.0% |
| Operating Expenses | $344.03B$314.51B | +9.4% |
| Operating Income | $13.74B$7.95B | +72.8% |
| Interest Expense | $2.66B$2.29B | +16.2% |
| Net Income | $8.37B$4.33B | +93.4% |
| EPS (Basic) | $6.49$3.29 | +97.3% |
| EPS (Diluted) | $6.47$3.26 | +98.5% |
| Shares Outstanding (Basic) | 1.28B1.31B | −2.1% |
| Shares Outstanding (Diluted) | 1.29B1.32B | −2.5% |
05—Questions
Frequently Asked Questions
What were the main drivers of CVS Health's revenue growth in 2023?
CVS Health's total revenues increased by 10.9% to $357.8 billion in 2023. This growth was driven by increased membership in Medicare Advantage, growth in the Health Services segment (particularly from the acquisitions of Oak Street Health and Signify Health), increased prescription volume and brand inflation in the Pharmacy & Consumer Wellness segment, and improved purchasing economics in the Health Services segment.
How did the acquisitions of Oak Street Health and Signify Health impact the company's financial performance?
The acquisitions of Oak Street Health and Signify Health significantly contributed to the 10.2% revenue growth in the Health Services segment. These acquisitions are part of CVS Health's strategy to expand its primary care and value-based care capabilities. While they contributed positively to revenue, they also increased operating expenses due to amortization of intangible assets and integration costs, leading to a decrease in adjusted operating income for the Health Services segment.
What is the outlook for the company's Medicare Advantage business, particularly regarding star ratings?
CVS Health saw a significant improvement in its Medicare Advantage star ratings for 2024, with 87% of members in plans rated 4.0 stars or higher, compared to 21% in the prior year. This improvement, driven by a half-star increase in the Aetna National PPO plan, is expected to lead to eligibility for bonus payments in 2025, recovering the majority of the revenue decrease experienced in 2024. The company plans to reinvest a portion of this improvement back into the business.
What are the key challenges or headwinds faced by CVS Health in the reported period?
Key challenges include increased health care costs and utilization in the Health Care Benefits segment, particularly within Medicare Advantage programs, which outpaced pricing adjustments. Competitive pressures in the PBM industry continue to impact margins as the company shares more rebates with clients. Additionally, increased interest expenses due to higher debt levels from acquisitions and ongoing retail pharmacy reimbursement pressures were notable headwinds.
06—Continue