CVS - Earnings call transcript Q1 2022

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Operator

Ladies and gentlemen, good morning and welcome to the CVS Health First Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, today’s conference is being recorded. I would now like to turn the call over to Tom Cowhey, Senior Vice President of Capital Markets for CVS Health. Please go ahead.

Tom Cowhey

Good morning and welcome to the CVS Health first quarter 2022 earnings call and webcast. Senior of Cowhey, CVS Markets Tom Health. am Vice Capital President for I this Lynch, and by Executive am morning I joined Karen Shawn Executive Officer. Officer Guertin, President Vice Financial President Chief and Chief and

Officer, Chief our Shah, Finke, include Roberts, Co-Presidents Officer; President, and will both Dr. Healthcare remarks, session Chief President, Chief Lotvin, Peluso, President Jon will a Benefits; Executive host Following Retail question-and-answer Customer prepared the Pharmacy Prem that segment. Alan and Pharmacy Vice Officer; and Operating we of Services; Michelle Dan

archived Our posted Today’s press filed with XX-Q have it being release for this and slide be our was we call to our X presentation been on year. that SEC. along our where broadcast website, the also morning with website, Form will

certain expected reflecting market will our benefits views future During current to financial the we and products events, services our our industry this as consumer call, forward-looking well statements financial future projections. performance, and of and as make conditions related

forward-looking these results. XX-K, X-K Our to currently earnings we recent to from our with uncertainties, and report on uncertainties and our on annual release press Form and regarding including and SEC you our the materially reports risks differ current morning’s actual recent risks projected could file significant cause most strongly Form this review that the results XX-Q. encourage Form to reports are We statements subject

website. call the turn I’d of to talking non-GAAP reconciliation measures and that, the use can will when to During company’s morning’s reconciliation non-GAAP we over and like the of Relations the portion to this posted press Karen. measures financial these this you Karen? our Investor performance call, about With find document a in release and conditions

Karen Lynch

our quarter, increased operating We you, XXXX across $X.X significant by Tom. income nearly billion first growth X.X% Adjusted and quarter. by to with the and entered of generated today. joining we operating and the billion. call adjusted quarter Good $X.XX, delivered X% results We as over over of for XX% business. grew In $XX.X cash strong Thank to momentum representing thanks prior compared our up EPS revenue everyone morning, to was billion approximately $X.X year prior over the XX% over year. flows,

Pharmacy foundational in quarter. revenue increased projected XX.X% baseline Health Overall Our of deep Care nearly grew contribution billion. product adjusted In a our of We reflect X% excellence. consumers’ businesses revenue increased consistent line. We health remain well and medical service grew operating sequentially performed Adjusted understanding our by year-over-year. the operating In These product achieved our strong membership XXXB Benefits, flat $X.X by year-over-year. results Services, portfolio, costs income from year-over-year needs income year-over-year. and trends. with despite X.X%

our position same-store over and demonstrate prior the Americans. increased grew than more retail, scripts tests as their CVS million our as to XXXX. prior visits customers. strengthened a COVID-XX to the Health we the destination earnings we revenues results year vaccines X X administered marketplace. than We nationwide COVID-XX central X%, quarter and by needs. twice Americans in approaching the more more growth approximately of in million Store see leading health consistent X% first deliver year. as retail approximately that Our over the operating approximately millions growth XX% community of We with adjusted by health We savings grew value In for

guidance year $X.XX. per raising adjusted XXXX $X.XX Given share to earnings we these our full results, are to

billion for flow the the Our $XX of range billion. in to cash strong remains guidance year $XX

term near-term and achieve to longer well-positioned are growth We goals.

strategic this doing across are We imperatives, which Day. outlined we value-creating at five Investor our

in strong we progress Let each. making me share examples few the a just of are

care primary advancing our capabilities. are all-payer we First, delivery

XX% visits in from destinations in-person the virtual approximately up nearly and million more visits X.X first health in Our XXXX, year. are with X.X prior million community quarter, engaging consumers the

virtual one of high many Our channels quality lower sites delivery care cost of care. solution care represents of and

next we people million Last in we broadening mental services virtual power our XX,XXX XX days. virtual care health increase back for More demonstrates in to health. scale. XXXX, supported our XX are year, be digitally-enabled virtual the drive visits supported accessing will visits. mental This at ability We the just solutions. healthcare Pre-pandemic of dramatic using innovation

will locations, are retail optimizing we three and health Pharmacy clinics, hub our our models: advanced of traditional Second, that enhanced portfolio be care primary CVS comprised locations.

out have and XXX XXX the we for stores today, approximately As planned planned the this of of the XXXX. of year closed by XXX end

volume are suggests within prescription nearly our retaining of our strong early value the demonstrating of Our network, we evidence XX% experience consumers. to

XX% than to colleagues redeployed more CVS retained we and other them Additionally, of locations.

services. diversifying Third, health portfolio growth are our new with we

our expanding on their our are Partnering critical launch customers prepare Aetna as allow home-based care path for of membership for transitions XXXX geographies. improve for health care capabilities post-acute juncture a the this reduce readmissions we select in in and to and will to at We pilot our home recovery. technology us in

our broaden of create continually capabilities assets. portfolio non-strategic evaluate value, we As we new to for sources our

selected of million international on digital-first sale customers the the on XX Xx million technology-forward transactions Fourth, approach. our Our businesses in with our we nearly ease CVS by average as unique traditional are of Health offering. and than to Investor visit and testament Digital end value with over line X first customers since our invest are up Payflex two We often in our our serve a customers recent our digital more quarter, These omni-channel the of digital of Day, and assets are actions. commitment our areas recently aligned strategy. from are of are that focused announced to examples customers.

does dashboard place, more into by seamless, managing next to our This and and so convenient personalized. health critical dashboard digital first your offering. We health It makes family’s health also medications information best putting pharmacy expand health actions. records, continue one

year. services active million up quarter to dashboard this continue X XX% connectivity over the later past will and have users, enhance in We health we to more

they fulfillment free option part consumers approximately new with a option as we are consumers experience. will an Consumers pickup our progress first X,XXX be in CVS health that health and health same-day omnichannel destinations serving online wellness for we purchase receive whenever products for year. quarter, making later this In of Finally, available launched wherever community can the and our healthcare.

We deliver consumers. ways real Microsoft benefits are in partnering Google that to with and

For the prescriptions. still using faster example, to based, XX% MinuteClinic that into the driving and is now our making integrated robotics convenient scheduling text Google more it or pharmacy, In Search, are easier bookings. analytics prescriptions patient’s for to fill facts automate appointment of are paper us and we and new specialty Microsoft

to business increasingly are our using improve cost. We technology and process reduce

two just are Here examples.

learning require ways at-risk them patients achievable. approach of the monitoring drug overall range medication our Consumer adherence place their likelihood Ultimately, previously taken claims, becoming most patients. fostering wide progress. which reduces predicting help with which our can a coach and together cost and them imperatives value of a of using committed hard steady of This at attention At of Health, the experience. and our their real uses time we patients of five colleagues values. center dedicated consumer machine These the our makes to and are pharmacists, Also our is to machine Our health. to help strategic learning maintain approach work resolve CVS spend engine and do. we prompts freeing patient up in that advanced non-adherent culture intelligent then medications. by specialty prescription commitment now of robotics, the it’s This and can integration the the behind making results we and and everything we to the businesses are strategy improves we individual overall

made access the inclusion priority. increasing to and have representation, We and and belonging development workforce promoting growth our equitable

report month, sustainable Social highlighted practices health sharpened we shareholders, to XXXX and last focus business commitment In customers our our released remains and Our equity to in steadfast. on communities America. priority our advance Environmental Governance

website. our You can find our report on

in is to fundamentally well work reshape our healthcare the country underway. of delivery Our

contributions I him Before to Chaguturu. end everyday, thank a and to Also, Officer, at like Americans pleased to I am and Chief for retiring customer’s have be health. moment Roberts, every our millions Medical heart his June I at to to company. colleagues our Health dedicated who career over XX-year helping Dr. am new of grateful over bringing I’d their Jon announce of who acknowledge it Sree to of named deliver the to CVS turn many we his will our continue Shawn,

turn me the Shawn for Let it now for look of remainder into over a and results deeper to our year. outlook the operational

Shawn Guertin

Thank everyone. and Karen morning you, good

segments Our $X.XX all positioning share. core with continued strong performance our and cash to increase revenue business momentum EPS share range growth, guidance per adjusted earnings to in flow results adjusted our XXXX a per us generation growth, first to quarter of $X.XX reflects from

execution operational we focused our financial total As communities highlights few making and serve. the performance. remain growth, towards A we targets, of on supporting we company progress continue

revenues We delivered of XX.X% income $X.XX, adjusted billion segments. year-over-year, increased adjusted reflecting of $XX.X of and prior business robust X.X% increase $X.X representing operating by and EPS of billion across approximately an versus X.X% year quarter respectively. First all growth

interest our both due in operating performance to prior quarter reflects versus adjusted XXXX. a EPS adjusted and contribution first higher expense Our income lower campaign proactive year deleveraging

capital impacted Importantly, per of related noted, million net write-downs in approximately the $X.XX. sovereign by $X.XX by lowered EPS adjusted adjusted and bonds $XX $XX quarter losses, share our Of XXXX performance million realized EPS to or was of first losses Ukraine Belarus. which

XX.X% by lines. quarter driven all over Care segment, year-over-year reflecting membership product Benefits all across growth delivered growth Health lines. billion XXX,XXX increased by membership $XX.X We revenue Turning to sequential across growth of first of product

the Advantage performance members grew been franchise, X.X%. We the be over up continue pleased about has engine to which Medicare of Medicare years. with XXX,XXX a growth sequentially, key our

impacted trends. billion the contributed medical in growth, operating XX% continued reentry our commercial membership strong to $X.X net realized normalized into group growth commercial account as the into continued growing losses In dual-eligible national enrollment exchange mentioned the in the prior with compared slightly selling with a marketplace. Adjusted income risk plans membership, progression business, of capital momentum by previously driven individual season commercial growth quarter, our also Our year along cost and towards along sequentially. to down first the as was

service. days commercial lower benefit Consolidated approximately XX.X, payable with with medical medical points ratio baselines. XX.X% pre-pandemic of X.X normalized in claims confident government strong on trend trended remain line quarter. on slightly at first growth. total up basis our new in Pharmacy costs. Services, end behalf and baselines, we achieve is drug a capabilities of our Our was brought in Overall, outcome the pre-pandemic our and total, management execution, customer XX to year-over-year, income progression specialty days the remain other delivering the revenue of of business membership the sequentially adjusted increased operating remaining leading continued providing we our towards in natural the This from reflective cost than continue government medical adequacy leading and we quarter In industry same as outstanding trends In reserves. clients, of

group X.X% members first continued $XX.X at pharmacy in from the offset and claims partially helped growth year-over-year $X.X X.X% are in renewals Currently, billion as year with specialty increased of XXXX client pharmacy retention. onboard and primarily During new was business processed offset over commercial reflecting billion by of carve-out by XXXX. pharmacy by organization end prior continued improvements. products California year. other the price the revenue the grew core Total selling membership increased growth, partially by client membership flat this from year-over-year new Medicaid XXX claims increased approximately at in economics, the by brand pharmacy million underlying significant our driven XX% increased services operating purchasing lives of contribution the above business inflation we offset Total and improvements that expenses to started specialty of Adjusted for and losses year, price quarter, X.X% through government roughly pharmacy improved income growth client from purchasing year. attributable XX% of driven season, to beginning in to

lines our segment, adjusted In year. mentioned, we versus Karen delivered product Retail/Long-Term As not and grow income strong revenue did quarter. growth our Care XXXB operating inside the prior

was front due front and and test OTC largely prior revenue versus treatment administration kits. grew investments declining consciously particularly in case store and we at of in were Omicron response sales, of impacts COVID-XX for high. quarter to COVID-XX labor improvements had of prescription were by incidence XX.X% meet the we beginning volume, of vaccines of $X.X driven of slow the consumer when quarter Omicron in grew categories, a to test billion needs. capacity key the but related and as $XX.X year-over-year operating including sale positive kits health partially billion investments drawdown factors in income sufficient increased These ongoing, including the to the minimum pharmacy and reimbursement stable year, staffing levels few wage pressure, by store Adjusted the to components: X.X% increase strength demand over-the-counter ensure offset store to business First store

capital March shares Our liquidity XX, and of capital and position maintaining to Thailand cash company common the first later stock $X.X its flow strong year. ratings, this $X in business strategically common Payflex remain provide the X stock We parent capability of committed XX.X to the our flexibility marking quarter repurchased XXXX. repurchased at International ending cash unrestricted and having the M&A. additional generating billion has The grade of the to capital deployable are Aetna remains of quarter, also since the shares from the first subsidiaries. announced while with time and the our XXXX, expected for during approximately end operations focused We ended of million sales with at months investment of deploy us billion

with years. claims Under related a We to the than opioid by also XXX announced quarterly million shareholders dividend resolve during period a ended Florida March settle an State to increased dating XX, million by dividends for months more over also March, into Florida which claims of XX% XX $XXX back entered decade X opioid return X, to medications. effective XXXX the distribution, dividend XXXX. paid the In to will and February we resulted the of the in with through had be we agreement, we all shareholder agreement of

As a pending of by the terms state, result, the settlement satisfaction upon released will in be the from CVS Florida. litigation

operating we which a after XXXX settlement, our approximately adjusted been have $XXX Associated metrics. from financials, of our excluded has million taken in first this charge with tax quarter

versus experienced per performance, guidance the year As net baseline. The X.X% reflects X% of of losses we per to earnings we favorable development, our our to benefits do quarter of our impact first adjusted forecast. healthcare full in earnings are a not adjusted prior increase share $X.XX our growth year’s capital both result of business, which realized represents raising to XXXX share which $X.XX

$XXX $X.XX Adjusted we $XX.X $X.XX as guidance to $XX.X billion. XX is such, full increases range year As at guidance to MBR are a XX.X XX.X% XX.X% Revenue updated to income first million a increases raising reflect a Membership guidance benefits range of to members. follows: to billion. operating to increases to by increases the healthcare of billion to range to billion our midpoint Similarly, to experience. quarter million

are other earnings We our all quarter maintain guidance call. during fourth shared

our year cost offsetting mentioned. a an guidance immunocompromised our first pressures Administration have net be XX outlook assumption the individuals quarter XXXX older maintain incremental helping full by to to aged per to CDC. for COVID-XX our reflects to booster Representing expense our the set benefits expected guidelines previously is forth as will neutral that fourth segment Retail enterprise. certain now health and a segment, adult updated but Our to the of booster administered by a impact and to fourth

back we As the progression project adjusted split half remainder evaluate investors which evenly modestly XXXX of we that to we the currently XXXX will our in year. quarters. remind EPS be higher of fourth the XX% the fairly the expect first of we occur to in third of that and earnings will project the would XX% prior the for half to Similar progression, XXXX, between of earnings statements earnings of we year, be

morning. updated will website our we to in posted this guidance additional details presentation You our and find slide regarding the

billion updated as are technology We into we incorporated continue between improved as cash to as $XX of divestiture recent quarter from digital $X.X first the experience our by from and strong XXXX the deployable to consumer expenditures and year improve in guidance stage our range earnings early to impact and capital conclude at Full results these strategy. particularly in billion our this $X $XX the To outlook, invest locations. well activity execute operations free in to divestitures billion we strong we sharpen year in XXXX ranges. billion are our focus will community and from our while our encouraged cash anticipate any continue enhancements as and benefit

communities. healthcare leader for As experience cost as healthcare access a superior we in and and our strive partner to to and delivery trusted building lowering and consumers the care, engagement improving to their consumers our convenience of

to now questions. Operator? We will your open call the

Operator

will We question first [Operator you. Gill Instructions] our is from JPMorgan. Thank take of Lisa

Lisa Gill

Hi, morning. thanks good and very much

all his years, congratulations you First let these give It’s all great. been Getting my retirement. Jon. know for Jon in me to to

So, retirement. the I area question, versus look I where wish one Shawn, benefits if in my was business. previous the at guidance the in guidance, raised your you health well On you

can drivers MLR a talk key You if how the MLR part the us of So some the to can about Karen a we digital. what what of are guidance. forward? about going just so more Is drivers to think better are in the you your talked playing about give key talked you virtual, color better of it? about that

Shawn Guertin

remarks I in realize that, about pulled losses. the that be the just being HCB. in easiest that experienced to so about the was here we we talked And of to clear of that million is $XX Yes, first million capital losses. what’s $XX think prior think the realized year capital less sort sort in quarter on of my About is of development through way largely

populations excellent specific right obviously, post of mentioned, January increase. for To as have So as you the as now incorporated really we’ve out saw, round especially around that’s Omicron booster it the of going performance a that’s two strong guidance sort is recommended fourth that story the the and though, we be those the on has cost for for, things and net $XXX But faded item, volume growth that side. had to kind been HCB. so million,

the the and cost year the able losses, have absorb ongoing the realized development capital thing to biggest the strength of should is So we be should prior booster. from volume fourth but that

Lisa Gill

I – now, just care headway I you my talk and questions Okay, to have your of more the acquisition? we are in asking maybe as be about would guess, announcement still great. from around the this any internal that’s offerings scale Thanks very Then an talk a thought year, for larger make follow-up by my primary on strategy. did helpful. care been looking around Or But primary last you making my marketplace. will I’ve had would that and some remarks prepared in that the can you about Just the growth? of you be much. really update

Karen Lynch

we on capabilities. Good morning, Lisa, It’s a just that let are interesting me look primary range an that. Yes, to for of broader care comment continuing market.

it We talk to do Shawn, come. strategically and our to prudent, are part trying is conversations that are but want and you about we of sure make capital? financially, strategy, we’ve both more to

Shawn Guertin

M&A Yes, because careful been this I’ll I Lisa, certainly I and large think we’ve clear. specifically talk question will I bit understand be to different define about your people and on want pretty the little ways, different

acquisition not jumbo a here. about We’re talking

necessarily some We’re talking but about At a size anything capability-based jumbo. acquisition. not

assets space. range care in and to very We’ve space, in aren’t will that evaluated for out have so We dialogues of sale around been start assets and this of I most delivery process. the you active remind this a

These primary will assets remain will as care areas our of home the health serve strategic MSO priority the capability platform, the and which foundation capability. pursue Our vision. and

So their and defining essential evaluate characteristics that we capabilities. fully it’s

present optimistic I’m to our to our on strategic execute own valuation cautiously And in so continues plan the ‘XX. sets ability to while challenges, with of begin it’s environment

Jon Roberts

about very and Jon. Obviously a good the career is leadership confident Thanks words. feel your team’s kind this and execute. now at strategy rewarding I CVS, I ability have here, Lisa, their for that’s the And team really in to

thanks. So

Lisa Gill

you. Thank

Operator

next our We of Goldwasser will Morgan take question Ricky from Stanley.

Ricky Goldwasser

morning. and you Thank Yes. good

December, with XXXX. XXXX also gave us and clearly, Shawn, your you back expectations. in progressing line targets sort So is of XXXX in for

December for of kind environment, XXXX of with those everything how – the we that’s still thinking macro with So and track is or in XXXX it stance on happening starts? your changed now in like is

Shawn Guertin

to doing and start and Yes, ‘XX to EPS so as committed a more ‘XX. certainly we for remain we off in ‘XX that immediately those to good maybe achieving targets it are pertains and

all there continue moving why into a there some about providing not loss are is specific redeterminations as ‘XX happening think businesses, that now think stage testing had at we that I there, expect we when of question is protocols about but headwinds, I too you I as to retention expect the treatment as factors good there, long to lot things the think progress uncertainty lot lot is about have early, specialty having the While this generics macro and When and we’re biosimilars, there is season. understand in. also I the and market. very the Medicaid of momentum the kick tailwinds early PSS, in but your some in parts, right a macro being as well time On still a and think in like very good season future a sort and of guidance we’ve as HCB, in it’s are is in factors a our economic do specialty, is work The point, a COVID have the tailwinds commercial. certainly answered as of But in obviously, we sales we sort but of future. there of there about the good of

‘XX question, for pointing for kind business have is that retail. macroeconomic exchange had of on would we’ve off really our in obviously, so pricing at But And in baseline margin. a jumbo I the a The conditions business that are the we up lot outlook set. here We up But is The get some still to good much of point we will also light today, about our is about with ongoing MA excellent we group yet strong have and start most maybe those renewal. actually and ends a of franchise. ‘XX always development individual expansion. be out of importantly MA have accounts, that

worth so minutes to model few we COVID And that’s from highly assumption. modeling think pandemic spending and going like a I unlikely outcome for think XXXX for to But a move zero a retail, endemic. convenient it’s I as there. very to Many

strong franchise and well. particular as treatment as strength We’ve the categories. COVID of had other testing, both testing there very a as in the front well store, have We OTC

Our continues, pharmacy is X year-over-year in members. it And pressure moderated CarePass membership up to reimbursement XX% stabilized million and has while XXXX. the a bit in

continue by further. to volume all growing to we this the faster at going that, happened. eighth in to a pharmacy. retail can market. probably This will We is also least we’re quarter But do that again than row took reduce to and We other continue In increase that’s costs. words, pressure we’re the trying share combat in reducing

We’re buy online, the help potentially which should in pick in increase implementing up store, both front volume and back. overall, the

couple years, of only our to going always customer. offset so that will importantly, Maybe the as potentially the guidance volume ways give will second new and customers’ feel we stores be fulfill enough can In you ‘XX expected And I the we fulfill efficient, for which ‘XX of aggressively in the most omni-channel us about next goods assumes XXXX, of so going on our those doing, at closures, also in having. are think but well help both and and year better to positive store positioned recall terms deploy we that that to to have push of in cost our pharmacy, capital we’re far of the retention significant and prescriptions, or We’re to way though, about sold. script than to very repurchased capacity dilution. are continue shares cost-efficient as

So, EPS strategy, as this also on only a is can to not deliver lever helps be well. advance targets used our a lever our that that but it’s

Ricky Goldwasser

thank you. one And there. quick Great, follow-up just

customer. you and compared As I visit in the the those profitability those more brick Can sort sense customers? Karen a that of digital fact how stores, future, than mortar think just Xx the we give efficiencies average us of the talked of investment the customers about think and also about the customers to maybe

Shawn Guertin

Yes.

things think probably a basket I when more think but it’s been size you frequency. set a it’s about like of and of comparable whatnot, sort

Ricky Goldwasser

Thank you.

Operator

question of America. comes Michael Bank next Cherny Our of from

Michael Cherny

thank you you ton there for biosimilars. at Good Shawn, that and one morning specialty around on and a in was the specialty mentioned details was point obviously, far. of dynamics ‘XX so it

obviously growth non-interchangeable and – this willing interchangeable you both nicely time driving which of overall how having with in to season As about it’s with as at profile. biosimilars going soon the appear greater potential to selling think preparing biosimilar point across next adoption, of and conversations side be How your this very that are they raft do seems blockbusters on your for the clear the you you you’re on like customers pipeline they work potential be during a to are enterprise to year. coming think additive do some as

Alan Lotvin

very A Alan. it’s Michael, question. timely

are designs, that’s very willing cost to to they going strategies, to cost. they net product. through say ‘XX programs, to deliver is them And to would that plan lowest say most whatever that awaiting of entertain. it drive approaches to of and willing to do customers the lower our but kind needed looking takes, are What to I of us very biosimilar continues really starting way anxiously the net in their decade. not So the this approaches to are they I’m entertain are

aren’t entirely be set you yes. will manufacturer as substitutable. that be strategies that an so products pricing so The interchangeable, pointed there out, will are And

specialty our many it. lowering – that contributor to we in us confident times, our happy very said the of we that’s our success sort one trend pay important quite we’ve to are not for say So clear it’s are continued that biosimilars very, how generally, customers. going will And overall would exactly for value, and when trend fruition, customers be but it’s to create as to come an

Michael Cherny

And if I question on can and just growth. add one more pharmacy services

your XXXB overall did plan, the or year’s is within it’s guidance the whether assumption what not of book growth mention You growing terms within multiyear for year-over-year, in this business? of XXXB

Alan Lotvin

Alan, it’s Michael. So

it think number I put guess So – the there deciding were pricing I I to as of continuing it year, is what to. about we about and apply a discussion, were I So when going manufacturers would as they volume phrase write obviously, last weren’t the their subsequent and think would XXXB a would XXXB, own right? out to way to regulations guidance

the reduced volume. so And that

have So when make program, access entire our down, of for is which XXXB don’t lower-cost existence covered entities by less the volume clients the well reason money, partner. goes the drugs the to

have don’t reprocess doesn’t to earn and our dispensing the the claims dispensing administrator fees. volume third-party Our pharmacies

So down. first entities. is seen into will for covered XXXX XXXB that’s manufacturers open pricing up conditions they quarter goes now pharmacy, when going by have we’ve volume What that which of articulated the contract the

that comes back. volume So

a the there covered Now make, decisions it. fast is need what the right, issue, are make on they to are restrictions entities to how timing that placed

there and manufacturers an So do. which volume, – ultimate then decide is to

So within those variability. all of

volume back, clients well has our covered the volume as entities to more comes So process. partner make money, save money

year-over-year, the basically the now. program sort which of our in of flat all within best is we’re right So estimating thinking totality,

Michael Cherny

you. very helpful. It’s Thank

Alan Lotvin

welcome. are You

Operator

Valiquette We take our Barclays. next of Steven question from

Steven Valiquette

morning, Good everybody. thanks. Hi,

some recovery wanted first SNF operations ‘XX. seen Omnicare the increases nobody ‘XX about or calendar – of the after occupancy months facility just gains So skilled to slower the in that former we’ve pretty LTC occupancy ever just in notable a the for asked nursing really X sub-segment, in industry X, ask,

just Rx better for Thanks. wondering LTC volume in if results early Omnicare translating ‘XX. So that’s I’m the into operations just

Shawn Guertin

been from wouldn’t part, up that an volume expectations its tracked It’s has that. a seen anything as inflection And expectations COVID year, or been characterize consistent for we’ve I has year. definitely like with most Steven, with and less but bit. or business our this little bottom Yes. recovering during that more point come certainly it the this

Steven Valiquette

Got it. me. That’s it Thanks. for

Operator

We next Sachs. Rich take will from our Nathan question of Goldman

Nathan Rich

year? over then Can talk Hi. Good guess And more you what the on business. the morning. in little how dynamics what’s came balance margin play we that it could year-over-year. for Shawn, little relative Can you I start a that expected about on SG&A questions. trended maybe Maybe the wage margin talk maybe to like expectations? a side, than the looks Thanks the just the just detail you down have just on more saw the you first cost gross about you kind on favorable. and driving out of give bit increases was your of retail quarter, expect

Shawn Guertin

– a obviously, had fine-tuned are do dynamics It’s strong year, the vaccine expense to year-over-year program we been quarter. quarter and business, some starting have last that’s in in very There the year the Yes. and we with obviously very levels vaccine last high had sort now. of that

too. I that little better a G&A which of fact changed volumes components of So year-over-year, down answer. we and overall, question sort the that’s has a from of of reimbursement of a actually the is think line time, growth over But of year-over-year. sort period gross probably of hundred million down, had did QX. We bit some in Testing, towards been of probably again, COVID couple contribution of were despite the wise kind margin the that vaccine bottom because

and The other light cold a season, dynamics, we are had think kind I – right. of flu we

So, of a the But the depressed broader good. quarter there of the The again, was growth that set surprising store. both fairness, particularly store categories there going was looked But of across In still store was in than the and front was back front good, on side. on. probably of going last was good script was on metrics just reimbursement first overall, the year’s ‘XX because OTC. somewhat sort what nothing

Nathan Rich

on ask just market all, Great. between M&A we you seller. kind out at valuations start still quick seen I given play is the of buyer that what conversation guess have year? could on have disconnect and it this comments Okay. guess to so seen and shift landscape I in like your just I a on there the sounds If follow-up a far

Shawn Guertin

Yes. them this journey, regressed some completely interesting been to either. revenue, they have that some maybe right? And right. right. Xx right, that companies it’s to on – of correct When an one at we be not two, valued of Xx these And may were set have But now or and wasn’t and probably now dynamic, out

decisions. So, greater right. this people make the persists, some is I reality this of longer upon mean the the becomes answer which The sort

it memories some remains And where of the of challenging directionally, given values would so yes. sort I were. these of sort still of say But

Nathan Rich

helpful. you. That’s Thank

Operator

Justin question of next take Lake will from Research. our We Wolfe

Justin Lake

morning. Good Thanks.

Shawn, First question, just COVID. appreciate your on comments

I negative an mind million in your weakness much Is just getting about And that was get to how then benefit year. of – reasonable by does impact contribution in to then million talked the retail. ballpark? year-over-year in business? completely benefits this estimate offset And COVID about $XXX the You a benefit total in lastly, $XXX the a is first the quarter?

Shawn Guertin

Yes.

little in with a answer of And neighborhood, let expectations probably – sort eventually what just we path with have be me will the fourth our different the bit little question a So, booster. the that’s bit are. your about to now there albeit gotten COVID talk the

where We a quarter terms lot do XX your in is not in that’s And to half-ish the XX% OTC number. and of going if excluding down in same is defined test But the like maybe XX% provision XXXX. the million more contribution test expect going be with you it the down to back decline end little vaccines COVID. things will are again, additional far booster off back that. you out will of XXXX, of some go for on this Testing, produce fourth and endemic boosters, first about plus populations. be extent, would for XX% than that in situation versus going contribution now probably loaded treat end for or be and including forward. the And about minus. to XX%, an is expected year-over-year. bit of to testing jury’s the to A higher. year OTC, we be the math, loaded the a overall, And That’s a maybe This neighborhood,

to more half So, this play the of but there of is out terms second next into year, year. out as that ripples how in in

are line. from the importantly, most our picture in COVID But we the For base sense expenses product is have nuanced years HCB, pricing. maybe in more removed we the now reflect X XXXX that now been to able

not came prematurely, encouraging as mentioned both victory as cost trended in my ‘XX very going And which, and to versus our so consistent well. remarks, for am declare result, or better a that’s I overall baseline, potentially trends in while ‘XX slightly I

I think how we and traditionally which this what think have with business, to looked this managing return margin we I cost and is trends operating revenue to at for means levels. have by though growth ‘XX, is matching price expected increases

Justin Lake

And ask Got a I just follow-up. it. if can

capital. You mentioned

Day ‘XX, X-year talked potential you about $XX kind two-thirds think am the flow potential be generation, running excess leveraging that of reasonable terms to about but about you I to ballpark getting and billion of So, X.Xx. about capital could of Investor period you third not of there, earmarked, above numbers number what some already a from ‘XX over what beyond capital have that’s coming from that guided? to cash that Is in a already your up free about

Shawn Guertin

ballpark probably in a I we strategy. some little the where than investment-grade of neighborhood. our think think today, higher assumes leverage that ratio that but rating But with consistent is that’s bit sort are still I

Justin Lake

Thanks.

Operator

question next take of A.J. We our from Credit will Rice Suisse.

Rice, A.J. mute your And line Please open. you is line check is open. switch. Your

A.J. Rice

hear you now? Can me Hi.

Shawn Guertin

Yes. with your Proceed question.

A.J. Rice

Yes.

Sorry about that.

care little primary commenting is a you there the still pricey. as are So,

value been is little wondered platform you I I of as platform capabilities flesh health. a aspects then would start not you that the on sort to the fee-for-service want? of get a to need of home doing sort be your for deliver areas little up since based. or done have people bit to being anxiety few mentioned and able that’s about of maybe Is something of think your announced. of can ability one little other your maybe Day, these pivot feel year a on there important and I that anxious set if fresh to marketplace about to give a to that long-term And maybe Investor are some looking in you but the can that a also that has us would and perspective you out have It’s that quite, comments your been peers idea on you just contribute do an something to objectives, that? nothing how whole is some what you more do You Can of an deal you there some in interest mean a health you you. a got ‘XX.

Karen Lynch

a year. But Day. but since feel a But Investor comment strategy uniquely our of it kick capabilities. then health I will existing since think thinking. kind we look it’s a company, as it any our are integrate bit only let might I Shawn and actually A.J., way, to positioned are all we a it’s Investor to little me been home like year months talk broadly Obviously, about what we on Day, to like X.X just been

extending opportunities As we we there of primary home, into us. about and – a think the care is for number

with are transitions. care our very We starting post-acute early

We Medicare and payer-agnostic. will a the look foremost support improvement membership at opportunities to expand in costs and into particularly support first to

with there care. home, you the coverage we where link our in we the primary Coram, already are expand a we can in clearly new in transitions. post-acute So, and – care then lot And home but is as with with know, our will it virtual

at of So as well. looking capabilities. options foremost as there continue our part ‘XX? you number priority acquisition about and valuation. to really our care our advance navigate talk first of to our And the way and to too, is strategy primary a that, is mentioned, Shawn we do But as want through Shawn, are we

Shawn Guertin

Yes.

that wouldn’t but to position, back the would capital away So was be with contribution, committed capital be sort there we to I get of say the that what a I that for am pieces from contribution. can was a pathway yet. not step pathway EPS and it point delivering is this use. I to M&A we won’t Day a the we we the target to certainly And get an on at described And want of that I of A.J., in pathway what remain might continues But hypothetically that sort the were certainly XXXX. And if inevitably, earnings go that to number abdicating lever different. we do Investor

sort just you we top did looked you at of all get the numbers. Day, just pure that deploy of at You if on can recall capital, these Investor capital, when

strategy. going are doing. am that that us make want important my So, do power to it’s important positioning because the about it’s also we we longer term And to for And commitments. is for to strategic again, deal we right we do in But do I it’s I satisfy future. sure right sure both everything that I deal – think and the make the this our for can that

A.J. Rice

Okay.

surprising of inflation, brief a that? this updated follow-up, Just on call, chain, thoughts been so supply any asked the Any way at on you haven’t labor.

Karen Lynch

looks Yes, seen as are a could Shawn the U.S. that each impact there some incredibly be And of mindful view inflationary pressures kind decades. and on bit inflation, know, about ask firmer in those go kinds a And this we will are you we of There businesses details is think aspects each of what little reaction inflation. to through as these give it topic. of to inflation hasn’t But I varying of obviously, you inflation, of by business positive A.J., of that very to those to us. – like.

Shawn Guertin

inflation, something we And I the of portfolio of losses wage don’t because of and last that is capital year, a see obviously to say that of mind be one related that. that but lot that in moves in actually did that’s going mainly, I think losses we the I would realized rates the kind the made some will pinch, in we one the cousin quarter, Yes. place a the to forward. felt took – we And interest it and of result keep think

element billion some plus the $XX moved unrealized $X year there approximately position, billion during portfolio about And position portfolio that turnover billion the gain position. from management unrealized $X end at of always is year. We and a loss income have of gain the to has fixed

something will to that that’s think So, I closely. monitor continue

we but of goods all across remind about that have I this – both seeing everyone standpoint, wouldn’t that cost sold historically and potential we I particular ‘XX we think in line, a think of HCB, aspect mean is From I are a in would as forward, are about G&A we lot. aspects, the certainly thought higher As yet, thought contracts PSS of businesses there the I the top for in our the show our locked inflation most has have all it’s I a labor you have a I COGS mentioned, down very it think HCB. I pharmacy say shape as in up higher also in driven are good as businesses.

Our contract about years is X average HCB in duration.

our retail, some attractive pricing. that obviously, dynamic one pricing inflation other and but obviously, so think for on products. we on leverage our brands well, have On is still forward will relative be ‘XX. that help also a can about store lot thinking be of coming with and to point programs But that And I membership as number of up those we earlier will make XXXX as will will watching certainly also of it actually my more we fully frankly our a comments, our reflect

certainly mitigate are and to can all do lot thinking think we looking the but thoroughly levers impact. are a of this, fingers pull at about this the of I there we of kind So,

Karen Lynch

market. tight on which really I locations. we been But labor very A.J. like mentioned else continue, labor everyone are able in prepared stores And retain been those when obviously, to question, helping your has experience a us remarks as we retail, those in have to closing we out

company successful in and some and we and our have strong tech like very the areas our analytics. of hiring had also business, We retention across been digital in key very

hires thing other would that, the is are the of more than serve. our we very and reflecting communities we and diverse just are are I that pleased – say half with So

A.J. Rice

much. Great. Alright. so Thanks

Operator

will next Nephron Research. Eric Percher of question from We our take

is Your line open.

Eric Percher

Shawn the quarterly services. and impacting profit you. drill HCB wanted the pharmacy. Thank I factors in on appreciate into color pharmacy I

any For fluctuation fluctuation COVID And through onboarding? benefit large or from the expect XXXB you given year, and there do year? the is sourcing

Shawn Guertin

and very when think staff we customers. you something to new a season. very our have season, successful results, did and first this anticipated, sort of at positive quarter did for On our I experience PSS, a is we growth to we your And but welcome looked successful point, create that

higher sort QX the the of movement, in expense run levels a generalized certainly little other before we rest are is the year. the the the rest of the are Alan There from of So, year, the year-over-year sort of largely each assuming same a mentioned rest rate quarters the standpoint, flat of year. in XXXB for contribution. some bit neighborhood as a but are than for

around kind of a sort coming So, of lot growth from increases core specialty the the elements things and like and the of that. of are business,

Eric Percher

ways correctly, gets comment, year? that’s the I your is and which that covered are to caught volumes, does if providing support it that And expand key data, is there for flat ultimately the volumes that to seeing your you that suggest increase, view Alan’s was

Alan Lotvin

from it’s right. So, that the The of manufacturers is the the depressed Alan. base Eric, took, kind actions off volume growth of

it’s growth. just volume the It’s of a a So, not volume. kind year-over-year of recovery

the that’s thing I first would so And say.

about or second The supply thing data to is, whether to not the ultimately, decision they is entities. manufacturers the up COVID

they or program conditions. work will they what with and so when to And back tell on the under are us ready and turn aren’t us

Eric Percher

Thank you.

Operator

Please will go ahead. We Tanquilut take of a Jefferies. from question Brian

Brian Tanquilut

of Hey. question your Good a the just business. side morning. on just – on follow-up Alan,

a about shift changes service because have think have of signed some pandemic. we – that we the seen of I we the saw As

specialty you the say or if both sides? even visits, on how mail of that’s in just infusion and maybe shift – things home as of volumes sticking So, durability of your of hospital seeing Coram, in terms are normalize physician terms visits side what is terms in that and

Alan Lotvin

Yes.

So, in variability I the Pharmacy activity. units probably think the business segment Services within terms core three least the the of I business had guess of company, underlying

way by a people and there not to were a specialty of itself, little business the many a more acute hospital oncology the there the large, Coram was service Obviously, extent the impacted. on. antibiotics, going pharmacy offset weren’t were some was That up So, shifts as we saw that hospitalizations. dip scripts, the traditional more there bit things lot of The infusion to outpatient a as was that picked you new prescriptions but and doctor, of site little the by non-material. along bit in

say I of probably would relative material size the just of not Pharmacy impacts Services change segment it’s given that the the rest net-net, company? Coram the a So, versus

Brian Tanquilut

And I have Shawn just I earlier expected. probably buybacks, a little a follow-up, as than would about think

quarter, So, because the your just cash acquisitions delays during as deployment is you planned? strong of the that potential is the a the And from expect this had flow with result? we really or capital some because it upside of buybacks should was

Shawn Guertin

year-to-year strength the it can it ways, ability we our less of are generate Yes. that the something sort out than emanates it’s the and that to the fully the that in in And over a I is from to of some do fluctuations to going that, people that mean just make to net ongoing be rush from time to we business. safety has certainly the of strength right lever remains capital, some capital. that. want understand deployable of understand given and potential sure fact It’s pull to that a ways, normal I

Karen Lynch

joining you our thank just and to all for you want few call today, comments. I leave a

As year and that XXXX forward execute. Thanks across see, on year. the of and – We you businesses. We powerful progress momentum into continue all the And very with the call. entered momentum our remain joining to can we our throughout for team our we for growth will updating we remainder strong look of to beyond. confident the you continues

Operator

CVS and today’s earnings quarter webcast. first Health XXXX call concludes This

have disconnect at may wonderful this day. your time a line You and

CVS Health (CVS) 4 May 222022 Q1 Earnings call transcript