10-QPeriod: Q2 FY2021

CVS HEALTH Corp Quarterly Report for Q2 Ended Jun 30, 2021

Filed August 4, 2021For Securities:CVS

Summary

CVS Health Corporation reported solid revenue growth for the second quarter and first half of 2021, driven by increases across all its major segments, particularly Pharmacy Services and Retail/LTC. Total revenues rose 11.1% for the quarter and 7.3% year-to-date compared to the prior year. While overall revenues were strong, operating income saw a slight decline of 7.6% for the quarter and 2.9% year-to-date, primarily due to the normalization of healthcare utilization in the Health Care Benefits segment as the impact of the COVID-19 pandemic shifted from the prior year's lows. The company demonstrated resilience with strong performance in its Pharmacy Services segment, benefiting from improved purchasing economics and increased claims volume. The Retail/LTC segment also showed significant revenue growth, bolstered by prescription volume and COVID-19 related services like vaccinations and testing. Despite these positive operational trends, investors should note the decrease in operating income driven by the comparison to a pandemic-influenced prior year and the ongoing investments in growth and operational enhancements.

Financial Highlights

55 data points
Beta

Revenue

$72.62B

40.1% Gross Margin

Net Income

$2.79B

3.8% Net Margin

EPS (Diluted)

$2.10

Total Assets

$231.16B

Cash & Equivalents

$7.12B

Free Cash Flow

$5.36B

Financial Statements
Beta
Revenue$72.62B
Cost of Revenue$43.52B
Gross Profit$29.10B
Operating Expenses$68.29B
Operating Income$4.33B
Interest Expense$636.00M
Net Income$2.79B
EPS (Basic)$2.11
EPS (Diluted)$2.10
Shares Outstanding (Basic)1.32B
Shares Outstanding (Diluted)1.33B

Key Highlights

  • 1Total revenues increased 11.1% to $72.6 billion for the three months ended June 30, 2021, and 7.3% to $141.7 billion for the six months ended June 30, 2021, compared to the prior year.
  • 2Operating income decreased by 7.6% to $4.3 billion for the three months ended June 30, 2021, and by 2.9% to $7.9 billion for the six months ended June 30, 2021, compared to the prior year.
  • 3The Health Care Benefits segment experienced a significant decrease in operating income, primarily due to the return of normalized healthcare utilization and the repeal of the Health Insurer Fee (HIF) in 2021, impacting year-over-year comparisons.
  • 4The Pharmacy Services segment showed strong growth, with total revenues up 9.8% for the quarter and 6.8% year-to-date, driven by increased claims volume and improved purchasing economics.
  • 5The Retail/LTC segment reported robust revenue growth of 14.2% for the quarter and 8.1% year-to-date, significantly boosted by prescription volume, COVID-19 vaccinations, and diagnostic testing.
  • 6Net income attributable to CVS Health was $2.8 billion for the three months ended June 30, 2021, a decrease of 6.5% from the prior year, and $5.0 billion for the six months ended June 30, 2021, a slight increase of 0.5%.

Frequently Asked Questions

Revenue growth was broad-based across all segments. The Pharmacy Services segment benefited from increased pharmacy claims volume and improved purchasing economics, while the Retail/LTC segment saw strong performance driven by prescription volume, COVID-19 vaccinations, and diagnostic testing. The Health Care Benefits segment also contributed with increased premiums, particularly in government programs.

The decrease in operating income compared to the prior year was primarily due to the Health Care Benefits segment. The prior year's second quarter saw significantly lower healthcare utilization due to the COVID-19 pandemic, which boosted operating income. As utilization normalized in 2021, this comparison created a year-over-year decline, despite overall revenue increases.

CVS Health did not repurchase any shares during the first six months of 2021 and has a remaining authorization of approximately $13.9 billion under its 2016 repurchase program. The company continued its practice of paying regular quarterly cash dividends of $0.50 per share.

CVS Health acknowledges that the COVID-19 pandemic continues to evolve and its impact on the business is uncertain, but could be adverse and material. While COVID-19 related services like testing and vaccinations provided a revenue boost in the Retail/LTC segment, the company anticipates a moderation in these contributions later in the year. The company also expects continued elevated expenses related to investments in growth and operational enhancements across its segments.