10-QPeriod: Q3 FY2021

CVS HEALTH Corp Quarterly Report for Q3 Ended Sep 30, 2021

Filed November 3, 2021For Securities:CVS

Summary

CVS Health Corporation reported solid revenue growth for the nine months ended September 30, 2021, with total revenues increasing by 8.2% to $215.5 billion, driven by strong performance across all segments. Net income attributable to CVS Health saw a comparable increase of 6.4% to $6.6 billion. The company experienced a notable goodwill impairment of $431 million in the Retail/LTC segment, impacting operating income. Despite the goodwill impairment, the company demonstrated resilience with increased net cash provided by operating activities, reaching $14.3 billion for the nine-month period, an increase of 16.0% year-over-year. This robust operational cash flow supports the company's financial flexibility and ability to manage its debt obligations, which were reduced during the period. Investors can take comfort in the continued revenue growth and strong operating cash flow generation, though the goodwill impairment warrants attention regarding the long-term care business outlook.

Financial Highlights

55 data points
Beta

Revenue

$73.79B

39.0% Gross Margin

Net Income

$1.59B

2.2% Net Margin

EPS (Diluted)

$1.20

Total Assets

$234.89B

Cash & Equivalents

$9.83B

Free Cash Flow

$4.91B

Financial Statements
Beta
Revenue$73.79B
Cost of Revenue$45.01B
Gross Profit$28.78B
Operating Expenses$70.73B
Operating Income$3.06B
Interest Expense$602.00M
Net Income$1.59B
EPS (Basic)$1.21
EPS (Diluted)$1.20
Shares Outstanding (Basic)1.32B
Shares Outstanding (Diluted)1.33B

Key Highlights

  • 1Total revenues for the nine months ended September 30, 2021, increased by 8.2% to $215.5 billion, compared to $199.2 billion in the prior year.
  • 2Net income attributable to CVS Health increased by 6.4% to $6.6 billion for the nine months ended September 30, 2021.
  • 3Net cash provided by operating activities increased significantly by 16.0% to $14.3 billion for the nine months ended September 30, 2021.
  • 4The company recorded a goodwill impairment charge of $431 million in the third quarter of 2021 related to the LTC reporting unit.
  • 5Interest expense decreased by 17.6% for the three months ended September 30, 2021, and 15.0% for the nine months ended September 30, 2021, reflecting reduced debt levels.
  • 6Medical membership increased by 427,000 members year-over-year as of September 30, 2021, primarily driven by Medicare and Medicaid product lines.
  • 7Pharmacy claims processed increased by 6.9% for the three months and 5.6% for the nine months ended September 30, 2021, reflecting growth in pharmacy services.

Frequently Asked Questions

The total revenues increased by 10.0% in the three months ended September 30, 2021, compared to the prior year, driven by growth across all segments, including increases in products, premiums, services, and net investment income.

The company recorded a $431 million goodwill impairment charge in the third quarter of 2021 related to the LTC (Long-Term Care) reporting unit. This was due to continued challenges impacting the ability to grow the LTC business, including lower net facility admissions, customer losses, and the prolonged adverse impact of the COVID-19 pandemic. While this impacted operating income, the company's overall financial performance remained strong.

CVS Health has actively managed its debt. Long-term debt decreased from $59.2 billion at December 31, 2020, to $56.8 billion at September 30, 2021. The company made significant repayments on its senior notes during the period, which, while resulting in losses on early extinguishment of debt, reduced overall interest expense and improved the company's debt profile.

The Pharmacy Services segment is expected to continue benefiting from improvements in purchasing economics and growth in specialty pharmacy. However, this is partially offset by ongoing price compression and competitive pressures within the PBM industry, which may affect rebate sharing with clients and the ability to offer certain pricing structures.