CVS - Earnings call transcript Q2 2022

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Operator

Ladies and gentlemen, good morning, and welcome to the CVS Health Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow CVS Health's prepared remarks. At which point we will review instructions on how to ask a question.

As a reminder, today's conference is being recorded. to President call Investor of CVS like McGrath, to Relations now Health. Vice Senior Business would turn over the Larry for I Development and ahead. go Please

Larry McGrath

earnings CVS Good Executive Vice Senior Officer; and Executive morning Business Relations. Guertin, second morning, by to Investor of webcast. Vice the and and Chief joined and quarter Larry Shawn welcome President Financial XXXX President Chief I'm call Development McGrath, Karen and I'm President Officer. Health and this Lynch,

session question-and-answer President a will host Peluso, Vice we'll Pharmacy remarks, prepared Co-President Retail; Pharmacy Retail, Finke, our Alan Officer Dr. Dan Chief Co-President, of Senior President, President, Chief as Healthcare that Capital Lotvin, Prem and Following include Michelle Shah, well Markets. and and Cowhey, Customer as Services; Officer; Benefits; Tom

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

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

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

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

Karen Lynch

We Thank Health joining everyone, to team. CVS year results versus grew the $XX strong all increase morning, you, welcome raised income another adjusted prior of adjusted full of share with earnings billion Good thanks quarter. delivered year XX% and of generated morning, per earnings We billion adjusted This Larry, $X.X and business $X.XX. today. $X.XX. the segments. to our by range over to $X.XX guidance per operating for call an $X.XX, delivered we outstanding XXXX and our to across revenue share

our outlook goals. $XX.X all well from businesses. cash the increasing also billion continued reflect are our ability and near-term year to positive increases longer-term billion. growth These for our momentum guidance to in and full confident We flow We to across positioned achieve remain $XX.X operations our of

strong nearly Our segment Care a We billion. of of increasingly $X.X foundational exceptional year-over-year. results The Health had integrated with for growth adjusted Benefit achieved XX% revenue quarter. businesses the delivered quarter income operating

end-to-end customer benefit medical lines trends year. the value across versus assets, time basis together ratio of of year, favorable. Our growth at remained XX.X% at versus XXX We membership all by These results medical working cost the points product prior a increasingly national generated as the our scale. prior one reflect improved

we one products. and strongest Medicare Our segments, our year-over-year across business increased membership all of Medicare growth remains

market. continues and membership overall Our individual the a than Medicare Advantage to at double-digit pace faster grow

Dual X than we milestone members, This Medicare achieved quarter, million major Eligible. including individual a Advantage with more

of healthy also us with providing PDP its opportunities. maintains trends, conversion and ahead is upsell momentum growth Our well portfolio future that industry

XX% rate we're a XXXX, maintaining in national nearly to Looking client ahead accounts. retention

growth we show having and next Additionally, group to a Medicare membership are successful expect selling season Advantage positive year.

our to we're expand portfolio add individual exchange obtaining have on states individual are offerings build to coverage where continue exchange approvals we to and currently our revenue business, we final to states. total track four grew year $X.X As nearly XX% delivered Specialty pharmacy to income our compared pharmacy year-over-year. revenue to of up bringing adjusted billion. In operating prior XX and is nearly the XX% services, new

with provide differentiate that us value specialty substantive programs in drive customers We pair digital the and marketplace, to are a savings as with in programs leader pharmacy assets. we

we're ahead, XX% in evidence of the retention drove client rate with and offerings. season management, Looking for of a integrated business, more transparency We $X.X trend of renewals billion providing market-leading XXXX than XX% our maintaining growth selling complete. new

Turning to Retail/Long-Term Care segment. our

first the We quarter. continued our momentum from

at the interactions, us In contributed prior day deep X% revenue the agile resilient Our and $X.X income. community versus with we year model, quarter, operating locations, growth us the customers patient billion strong engage in adjusted to supply chain powerful performance. making a and X.X million customer high-quality all destination. delivered CVS quarterly every relationships, Nearly health operating over

Our front driven of and test sales more strong than store grew and strength sales, by consumer products. flu health X%, sales over-the-counter COVID in including cold cost

year. of prior COVID-XX the Our versus which pharmacy X.X% impact or the the declined vaccination, X.X%, grew prescriptions excluding

Our as first retail trend growth have the of share since market script year-over-year remarkable consistently we increased XXXX. is quarter

increase, will second and the nationwide who and nearly have have COVID-XX endemic additional medications Americans services. a to antiviral Health We us us million double for X for on for successfully to COVID-XX dispensing we The as Millions while approximately navigate share environment, administered vaccine phase, medications new in towards CVS in Health the for X of engaged antiviral XX% national more vaccinations customers depend As retail million treatment. move million critical wallet to continue positivity the CVS digits. quarter. services new continue the role administration and tests of play treat continues country. in to we bringing remains Services, to rate expanding to an demand than to increasing COVID-XX XX Health. communities for by COVID-XX continues COVID-XX chosen Of COVID-XX Overall, challenging across customers approximately a the testing,

attract and omnichannel retain customers. to driving Health health and experiences, Our approach consumer CVS satisfaction continuously levels connects high enabling

to over time. competitive enhancing this one are Our experience leadership is committed in on a omnichannel we investing advantage and

to strategic imperatives. Turning our

few you give me Let a updates.

We capabilities. are nationally, our and leading retail to health provider tier advance we a of services continue delivery

million Minute a XX% our more supported patient the have than year. representing X.X Our teams prior Clinics year-to-date, CVS in increase from visits Healthcare

enhancing We more relevant are further customers. making for our services our them and

working in treat to pharmacies consumers navigate to seamlessly more closely customers access of COVID-XX. our MinuteClinics administration with are and our with the site implementing best to to services furthers We care. even conditions test will program helps prescribing to and the certain the to be and strategy health offering expand pharmacists under serve This

portfolio, and evaluate growth take updating look we complementary stores to optimization, our store of As to strategy, overall health we this and a and part progress. track we we've to to enhance XXX on care on our our delivery to approach. capabilities Inorganic year. remain you forward close continue to stores XXX date is services Relative closed disciplined

hours are satisfaction, We and needs. of as our successfully pharmacy high disruption levels maintain minimizing to customers our to and we health meet store our consumer locations across maintaining

have XX% to We other are impacted retaining over our CVS XX% colleagues network locations. on redeployed prescription our over volume of and within

specialty, and our unique pharmacies. XX% by fill driven users X.X technology increase order is serves receive CVS our focused consumers prescriptions. million forward and approach newly simplifying This Health since quarter. complexity solutions mail of customers, creating up are XX of pharmacy digital digital-first than health and omnichannel Our are on Over reducing retail how now our new million digital is that for more customers digital last convenient. acquired strategy our customers

million users, for and expanding active services our through are already convenience this deepening health launched X the digital health to personalization up quarter. individualized and our have engagement year We We drive earlier customers. from prior XX% dashboard

in the in grows path As to carbon-free our results. the day XX% of finally, every energy sourcing health we as this latest for largest to communities agreement and successfully ongoing And execute our an one can XXXX. strategy, And part model sustainability, you we consumers, and commitment renewable This relevance we with energy see energy. step on customers our our the unified renewable purchase serve. of into to the nation's our by producers entered importance of is

will our team. two results executive of look I talented Tilak leadership Chief Technology Violetta has CVS as turn has Ostafin Health diverse possible Both first None joined to outlook. momentum now needs and as into Officer. Strategy financial leaders bring the colleagues our every be the positioned over are Data, added Chief joined proven Officer; day. health a Digital serve will operational Health our to and our team. deeper half without who and our and to our expertise for it recently unique deep Shawn Mandadi We second year. our of America's CVS continue this to We this through

Shawn Guertin

Karen, you, morning, and everyone. Thank good

modestly of a similar [Technical from rate Our reserves. grew In drive we as second we each what Services continuation in growth. for industry-leading the XXXX. of days the our continue to we experienced a sequentially specialty quarter reserves at trend as pattern results deliver customer levels adequacy our management our outstanding remain of displaying ability reflect of premium our Pharmacy segments than business core our business, capabilities, drug to second performance quarter in X our Difficulty] outstanding and clients, service Overall, exceeded the growth, confident to higher the

growth. results. contribution $X.X group product integration the from from processed exceeding year. claims drive as increased membership During economics, Total improvements. driven offset started of in the and as lives in business tempered flu XXXB than price year-over-year, by Pharmacy X.X% purchasing improvements, by cough, combined Retail/Long-Term our and were year-over-year, increased season. carve-out X.X% to versus million than and impact the by offset covered to conditions inflation, billion strong nearly XXXX, X.X% grew business These entities year more ongoing previously the XXX Total partially the claims brand price items estimated. by in of pharmacy improved restructuring $XX.X segment, Medicaid specialty of Adjusted year, new cold to and and client XX% well contributions manufacture income XX.X% services increased reflecting and members slower of quarter, purchasing growth, sales attributable our Revenue pharmacy the new in with inside partially when were excluding revenue COVID-related growth. sequentially, claims in we grew an higher-than-projected costs. and organization extended store and Care by as continued utilization quarter, declined of favorable million $XX pharmacy primarily pharmacy wins increased growth pharmacy of volume vaccinations, Specialty agree California strength prior that products lines above front In from client significant billion grew losses to second by helped membership operating membership as commercial COVID-XX Year-over-year our government prior driven pharmacy reflecting and had and impact growth this

income increased X.X% antitrust of including $X.X sales quarter, Specifically, COVID as kits during year-over-year, from reflecting grew products. XXXX, the due billion to flu operating legal second over-the-counter revenue $XX.X million quarter vaccine second test recognized prescription declined of year, and billion cold the volume, Adjusted partially settlement X.X% an a of front versus volumes. as in and COVID-XX lower well cough, gain of increased in $XXX prior store

investments, reimbursement include by ongoing but reflecting strength improved business Additional volume pressure increased during impact volume quarter. the flu sales, store drivers into prescription and increase utilization and the and front factors purchasing including the and the cough, grew generic spring. in minimum stable extending year-over-year, drug improvements. business initiatives later wage and cold in offset X.X% Pharmacy These favorable positive pharmacy of store were

X.X% year-over-year. Excluding the impact by pharmacy of increased COVID, volume prescription

to balance Turning the sheet.

remained excellent. capital liquidity the $X.X operations billion generated the $X at flow of quarter Our with parent of position ended we unrestricted cash subsidiaries. billion from Year-to-date, and cash and and

in resulted care XXXX is in Further, call EPS During deploy to also par impacted the significantly debt. reserve capital our be long-term adjusted for to adjusted call par the the year. the repaid total of billion excluded of for and while Adjusted Consistent for the this time outstanding in first also reserve combined company in a July, have investment-grade other business. billion a the $X.X few past will XXXX executing We quarter highlighting previously million in redemption operating quarter from in in $X.XX of announced practice, of on representing of in the notes we Yesterday, we represented our due our we announced maintaining completed worth Payflex, we adjusted November the for all having $XXX committed GAAP adjusted insurance Through ratings, returned legacy our A capability-focused strengthening a that on gain operating Other From we million notes. lowers $XXX our second amount this EPS $XXX $X announced quarterly for adjustment quarter, debt M&A. investors. items Corporate This strategically segment of in total with remain we maturities flexibility long-term sale by shareholders. of has we million acquisition financials. was our also our last the been billion of to calendar metrics. dividend, since Aetna this second which of $X.XX which our quarter. reporting by of pretax a perspective, income June, gain included December

our Turning outlook. XXXX to

We XXXX, remainder million of are per current by $XXX in segment, quarter as million by well an second net quarter $X.XX. of reflects to the to uncertainty raising range and our share strong of volatility adjusted increase and retail tempered the segment, to improved income underwriting a capital results $XXX the lower markets. as the performance for investment $X.XX the earnings over given outlook contributions HCB $X.XX LTC second guidance both This the of

are $XXX net XXXX, of generated benefits by As health to income reflects billion. $X.XX year of Benefits operating the billion such, the remainder in $XXX fundamental as to majority full in adjusted This Health contributions underlying investment $X.X our million Care we over is our our of guidance maintaining income net performance, segment. aforementioned offset million investment of the lower income strong vast care

contemplates emergency also updated the public the Our health XXXX. end outlook of through of extension the

of billion million the by half $XX.X retail first with to in that XX% operating $X.XX XX administer to raising range billion. million now We nearly COVID-XX increases approximately increases at administered as range vaccinations we forecast adjusted are revenue in million $XXX of to a follows: $X.XX XXXX, will LTC a midpoint We already of $XXX guidance full guidance year income the to billion, XXXX.

tail nearly prior over-the-counter volumes of more revenue $XX approximately $X exceeding of of units. diagnostic XX to We three endemic expect a but XX% test year, produce COVID our sales than of million these in on of approximately now kits double items indicative In full aggregate, to business. COVID-driven decline categories of and billion versus to retail year XXXX, expect million XXXX, the testing of compared we

our billion and down based from following continued capabilities, contribution costs outlook the billion prior reduced have Being be and for back higher includes updated restructuring prepare economics for the late the our million investment includes also Our XXXB integration as to levels XX on increase cases volumes $X.XX provision the factors. Services, of outlook and a The a of our COVID for the by we spending of midpoint potential half year, year that network will range previously purchasing scripts. in resulting in to expect strength we operating enhance experience. investments adjusted In our our $X.XX by range our low the full workforce in of to end I continued pressured income and a a and guidance year customer increased Pharmacy of strong including now core we be where at in business, compared mentioned year. to

to raised enterprise due Looking we in with $X.X to to cash at anticipate billion. a range momentum, of the as guidance capital range of a unchanged billion to sustained XXXX our at our strong $XX.X expenditures billion a and $XX.X operating operations from continued $X billion have whole,

of the during fairly quarter the share quarters. finally, remains we XX.X% fourth will evenly guidance our of adjusted year, the effective All shared discussed remainder earnings unchanged. result and XX.X%, a remind third split our other outlook. that primarily call project first investment are per that we We the as year to to investors earnings earnings full tax between from evaluate of continue be the rate And to our for income guidance raising the progression changes we

You in EPS raise second will year our details updated continued and website business our reflect regarding find additional to strength results guidance posted guidance. full our slide this all from adjusted pleased to our our morning. are the of segments, presentation conclude, XXXX we core we quarter To

growth as long-term including to on model, strategy. remain and continues, in EPS we on execution look implicit committed long-term we continue targets operational focus to to Our XXXX. progress our our and the We

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

Operator

[Operator take Goldwasser Ricky first Thank you. our question you. We'll Thank Instructions] Stanley. from Morgan with

now is line open. Your

Ricky Goldwasser

congrats Hey, quarter. on and a good morning great

So instead care in your thinking heels are you Karen, that news, sort my on inorganic how on Karen recent of the your of about remarks. really of balance primary question, prepared to the the you is Shawn M&A strategy referred the in settling and organic between comments

Karen Lynch

Ricky. Hi,

in all Relative say you entire the team me has remind it retail three - want having the nation. all, endeavors. congratulations, enhance we working First and we leadership are we on been a your me health that that to, you, expecting strategy best the our wish of CVS are categories. let your services it question, with that, and of And behalf to services pleasure said health we of let you a provider the first, to largest in have in future

in the you And the as home many strong tech As We as are before, evaluating talked there's we've to strong health - know, ability looking and are provider be health. can if we at we've And community pathway are look profitability. to our very as M&A see we our our criteria talked management us strategic as very many a we and if a stack. company there's of the options. given to to scale, that team, we're see ability Ricky, fluid. which And specific you Obviously, care, very the on about there Ricky, for mark we enablement look that a and goals. make pathways care about achieve multiple to to past, have primary our mentioned, size

and announced. You these don't gets what deals necessarily design exactly how

And step we'll year. the on and of very the by our committed We categories. end confident encouraged this take to we in next are journey health extending are services that this

As very the kind about a we talk primary without little would bit specific me we are as care about and M&A. you clear disciplined And can't We in be expect, of both to our market strategically that. Shawn more being the ask pursue very strategy. M&A been financially, We've let dynamics.

Shawn Guertin

Thanks, Ricky, Yeah. question. the for

and So we that It's what in capability-based space. that primary and health. home include drive follow provide play range And The priority models of care dynamics in around value as fully characteristics, I would remain a provider areas multiple business delivery these there the defining evaluate that consistently have reiterate vision. ability lasting financial would wide different the of in And pathways that we've which entities. been to mentioned, Karen our our they importance capabilities these growth and to value. our very with, deploy paramount to our their active real own and and is achieve of evaluating we and in to create existing enablement really care assets levers a assets optionality are including those stated us

something there. no Our vision as new is and done is thus, and And you there one know. differentiated asset

And asset certainly There so while differences. is no are perfect.

goal repurchase. core Day I generation is this still about targets a capital can Karen execute we earnings terms you opportunities the amongst remains at we value. 'XX. on our and criteria that the also still in to vision we future to of what execute for vision ability commit think to the M&A available financial to look powerful XXXX. - and of on supplement possible, particularly Investor to the our for of that And share and strategic performance, lever but begin can our continue I when that part strength growth 'XX via the our assets, highlighted, at As our talked And via makes provides it in believe to drive

Ricky Goldwasser

point [ph] thinking your about Let that of your footprint used sort to me and a and kind long-term assets really strategy. that asset Maybe existing with share of quick about… as kind access is will follow-up valuate additional of portfolio add ask how of us can you're sort base you Thinking to just enable here.

Karen Lynch

a Ricky, hard you. We're time hearing thank having you.

Ricky Goldwasser

you can me Sorry, hear now?

Karen Lynch

Yeah, a bit better. little Thank you.

Ricky Goldwasser

Great.

move existing like, technology provider your or thinking kind about sort of can like, think the acquiring you kind that it long-term in strategy? efforts really how enabling of that what it you connect your about if will or of points, the Is adding owning are kind access a So together? like all of care primary footprint versus

Karen Lynch

back us I the enablement the to overall strategy, looking just Obviously, think to of in in primary Yeah, care the capabilities. space, for in we're our number - think and there's at provider Ricky, of home about space a ways kind and I'll go space.

all a of it's those. to Shawn So one-and-done continue these evaluate of number it's kind a We'll a options. said, activity. of as combination And not

Shawn Guertin

I think and achieving I is We right? back do because a to need goes of And Yeah. both, both. vision. part of of new it sort Ricky, this think, sort is And it differentiated

a can you the that we why to from, platform on set businesses - You that platform really that need also then springboard with, it's what importance and begin better extent need it things. can use equal that fronts really. and of a to to do that's but think and the with So right? I and both And work new to you is technology do the move assets

Karen Lynch

think, retail had the XX% the visits health two make important very quarter. point evidenced is And a seeing here that's assets we're point operations. - foundation Yeah. Ricky, that we have. increase have this strength our We in MinuteClinic I the just in And we that had by with a we that strong to

So already a we foundation from opportunity lot strong have. the that of

Ricky Goldwasser

further you. Thank best And wishes as well.

Operator

you. Thank

from Gill Our with next Lisa come question JPMorgan. will

open. Your now line is

Lisa Gill

Karen, overall thank start and you. thinking And season. XXXX economic want I morning. Good you're selling current the how to with the Great. environment about

that Aetna looking for? the So different that X care primary know you virtual you since little marketplace. strong side. talked together. have the are maybe about have. commercial I almost a you You thinking are the you But a It's season PBM in about have offering you years mid-trends? How or CVS you employee new talked about, talk and assets been came that maybe if about Alan, bit what could employers a selling

plan XXXX talk just entity? you you as you're these a the going employers as together marketplace from assets of about in today, we can what about hearing where and different bringing maybe in think really design all see So whole

Karen Lynch

Yeah.

strong as what we're our through and remarks, know, in national Alan's And businesses and the So, you and our Lisa, I seeing to results service, prepared cost, I see really would we're flexibility having very portfolio. and strong all good through really service. in accounts very had entire and that's We've continue out low said of of the having in results offerings. strong with strong I well. selling at access, continue sites really We've hi, the sales retention What the that say to - is our low products cost. consistent benefited sure care, team lower on in focus of businesses integrated we look Obviously, very across market kind results. What are seeing continued is we're there's we've integrated think seeing still capabilities. employers an flexibility, interested that our cost, from and, we're making

businesses. Obviously, of kind market. we're in somewhat it's dampened across with pleased both seeing been we're So pipeline the what

you we've So more color me start business, and mentioned, market what – ask they're as I been let the they're little specifically Dan a retention. with Alan give and and seeing on But selling know, in Dan. you I'll to as having very

Dan Finke

Karen. Thanks, Yeah.

is all experience. of access the mean, and I house said we're look, controlling consumer in the good think I well. you cost top really it about having conversations

some in about cross-sell you shows those that opportunities. think it integrated how design up and value benefit As shows up in conversations,

the enterprise and and seeing benefit. in offering of the virtual You it's like in pharmacists our it then points also our care. low-cost can as virtual services, solving We're our and we're access good then we're for how like like points show total care. resources virtual with lastly, It's so care, not MinuteClinic across that program. Lisa, using no-cost, diabetes transform really about the new you oncology just And see about about products well. mentioned And some virtual care primary primary solutions MinuteClinic conversations local for up

Alan Lotvin

Yeah.

the of So add market. The bringing office certainly the on things. manager post-COVID. at into is seen I'll Lisa, people One, it's just benefit two back ends focusing we've larger the Alan.

we have and pushing we 'XX%. in thought might sometimes 'XX and out that so And out seen go to XX contracts

first the that's think I So one.

continued to thinking transparency see I think the be, we the part desire when they're for and really – about a prescription cost connectivity a of and digital kind control, their renewing a particularly in health. second they're would critical for moment ability specialty for

in very So resonating, still that areas active. are those the market although those particularly of things are

Lisa Gill

you the to on touched biggest year. Is guys the think how mean, specialty, about market how a a lose I as next you're Alan, Obviously, Is going biosimilars PBM? to sponsors? that? do Humira the driver, about XXXX, are with you And will that you and player. think we conversation come plan having or that be big say,

Alan Lotvin

Yeah.

billion X years to everyone's as with [ph] clients our started exclusivity. Humira, out, about there's So it's X, - XXXX two going that's the of X lose you day, on $XXX ago. things, more back We've you X years, just Lisa. talking basaglar One, next that about focused or product look in but if marketing so biosimilars look over out

We've we continuing our articulated So the both and are cost work clients. prepared lowest for. net market strategies to with the around

that what think that's pay happy us we are competition more do they - our customers as value for comes into to our the been I always create it. before, very create I've for market, generally when historically, and for generally as times customers, good So said we when very, many -

So in X over impact to I a do industry PBM be think the years. this the next X, is substantial going

Lisa Gill

Thank you.

Shawn Guertin

would context, you would the we componentry some to sense XXXX, I broader expect lower I'd Day And just I to given EPS that adjusted operating again, our I'd expect then say about. delivering December we'd that and that stage, just that specific guidance of talking and overall, Alan retail. given income remain nearly see we interest of earnings But here. about specifically expense things did Lisa. high-level share guidance 'XX. think, as we'd the initial at think given add, a double of implied outlook the expect HCB for committed XXXX some one year-over-year that, by But the and and 'XX Investor And I XXXX PSS sort offer lower Yeah, consensus on expectations, are adjusted thing ask a our it not count. that's and estimates. the of on reiterate be that operating makes income, in see 'XX Below The comments obviously, higher in one the I were flat and for this Dan reflected I'm in retail XXXX COVID providing current of some the I'd activity, construct on targets

Operator

you. Thank

Rice from will with Our next come Credit Suisse. question A.J.

Your line is now open.

A.J. Rice

I first, Maybe year. about Can be the there that. quite front-end just think continues part strength? side, to expectation parse it experience retail the you though anything I to and also moderate just seeing an ask sort say about test at-home strong, been and underlying that even And that you your then everybody. with the had would store will is where this a of out? the growth of you're assume Hi,

Shawn Guertin

substantial continued that - of Yeah, those of underlying are And part we some our the performance, outperformance the operations. the strength the But would store of the but We've front the and to a big kind add story, retail to remainder, what's front about core absolutely and sort the retail sort going store of detail in Michelle I'll quarter I a in A.J., see of talk quarters in the more of you about. I say frame my of still strength really are the kind itself, obviously, categories in beyond XX% kits in is retail actually was right. which on offer operation. let mentioned pharmacy I'll is to for on me amount a just which as OTC both remarks, the COVID driven the by back COVID. In some

Michelle Peluso

seen proud the of That's cough, we mid-single-digit really We're cold, sort front Shawn a as see store. basket of are at fulfill a Investor wellness increase part think while strength world. in Day come and in we of of average strategy that, categories. uniquely We say off. COVID was size. to Yeah. that omnichannel also a things. the part strength continual we've positioned that And said, mid-single-digit and momentum the health and did from result of out in And trips local would service increase secondly, in is I our across community pivot all to two investments our paying We're laid destinations. the a strong just

assets, community investments strong buy modernizing smart cvs.com, redesigned things and they're stronger our much investing presence online, helping fleet up omnipharmacy, is also in pick to digital plus our And which you our store, supply growth. engagement. so We've our and in they're We're like chain infrastructure. driving fuel our in accelerating,

And were Morning note, So the which you as is strategy, really doubling and feel brand that as then happy see down trusted fuel we're ensure in-stock finally, actually trusted industry. us is smart about. service CVS in small helping the a of most we to trusted most automation position, the our recognition our Pharmacy on community, part retail know. every and And enterprise of as good most just Consult’s of to brands we one core across trust

think next we year. head and into well we're performance positioned as So solid we

A.J. Rice

into Great, maybe Medicaid Great. done to about quickly commercial Medicaid? updated what those may marketplace the you lose the on go about to might market, the or your have any re-verifications, via either your And - ability when through there effect of on recapture some thoughts analysis that exposure may timing members be? just And that thanks. on coverage

Shawn Guertin

the a or retain expanding, that our that membership. we're is a our guidance. members obviously, But plus that. Obviously, XX% with a it's of play of redeterminations still footprint it's to this talked side, won't happen really might some activity, the 'XX quarter until to kind of And exchange XXX,XXX any I on now be so the difficult so is XXX,XXX a estimate in will know, in a added about retention help. next individual obviously a, ago. assuming, about of to obviously, that estimate of you which but obviously, out. 'XX, And so our now [ph] we've caveat, A.J., of than we minus a will but lot the more overall thing result as Medicaid still block, then year put we had limited scope activity this PGA obviously, the extension magnitude, of assumption We Yeah, of

A.J. Rice

a Okay, lot. great. Thanks

Operator

Thank you.

Cherny from of America. will come with Bank next Our question Michael

line Your now is open.

Michael Cherny

early quick. appreciate how those back the the guidance into vaccines morning and what now? on in that point sit I color off How And the the you considering year? congratulations jumping nice and versus be baseline you moving real reported take as increased through Good health of for are trying upside and we about about and on the relative maybe testing provided of Shawn, to the the should care pieces a guess, the boosters a Any quarter. terms think to where in of changes do think step year, COVID costs benefits I along you as into on the to is to ‘XX think those lines, where potential store. continue in how right end potential factor implied next dynamics you

Shawn Guertin

Yeah.

terms income. in about of, lot we of prior parts, the that right. a year-to-date is the there's a that of make So was that's obviously, sort The year thing this neighborhood about right And think, classic losses. year-over-year recognized probably The I $X.XX in capital year-to-date baseline investment - capital the there $XXX moving realized losses have in and year development, driver we now would adjustments gains, here, on realized last big year's basis. is million right,

net worth sort expectations that's Obviously, insurance parts. onetime through that play one That's business. with about all long-term - XXXX, on about were we related $X.XX. of to moving story talk refine year income need of to for will So the the care the of going that just we the there a to out had that did second and the adjustment we're half investment

of the then baseline between sort of are parts big COVID some pivot pieces of So moving I you now HCB. and those think, the to, sort retail and

the I baseline always of this to we're talked down this. think, from come has really, right? this years had at the we think And We're to COVID. we've This sort kind priced time for business I traditionally, HCB, about X point of without margin then think for on trends as in position very operating for managing increases is matching a I prudent revenue good we price growth our our kind XXXX and all expected as and we're our with And dynamics. products and and I of of a where place last - that about across we've away mentioned, a kind now the XXXX. front of way cost

given retail, while logical I backwards. to that at go on this again, think will the we're think year, that level it's

level. I That's still that sort is XXXX. we business what that, $X can we That's of billion. operate have still and still can thinking with Investor anticipate our consistent the from of something think think a contribution that talked a business. Day tail in I that an endemic around at point in And on of around sort baseline about jump-off we we perform

here around still to there's where So lot a we played obviously, terms of in recommendations, be out, go with obviously, Booster. future

a So And - - of in I got we've position, COVID. to on serving do were the pricing positive we but of in think, HCV feel think in in the communities that sort obviously, our think a COVID continuing good in the as I we're the we right about - for front. good terms I serve communities pricing position now

Michael Cherny

I there. it leave I'll it. appreciate Thanks.

Operator

Thank you.

Justin will Lake question come next Our with Wolfe Research. from

now is line Your open.

Justin Lake

good Thanks, morning.

me congrats congrats. best, Larry then PBM. questions on let of And of the second, say on on all, the hiring he one First just McGrath, is

Act of Specifically, you pricing the some give drug was hoping there's the provisions inflation impact a mentioned And fully from could on about you that Would a lot quarter size headwind that might of Anyway XXXB. there. might Reduction then PBM. color Shawn, I questions in to you and us the be for that into year? Thanks. how XXXX? how this terms roll headwind thinking or into this, to annualized next

Alan Lotvin

Thank So Justin, Alan. you. it's

though provisions, the by products details, it's look you these they're if would XX structured, at the limited, if of it are all and competition. sort articulate unlikely at pricing on XX. material is are one have way the the And in first drug so that XX that look you drugs XX The language to

the down So impact the be impact on overall where is part. in the I advance of those sense that think for in of pricing work, substantial, of come definition the the to nature think will going that's but drugs to products way the going overall given positive is the just drug competition, fall be model which don't the first I we

of their it's of second ability hospitals which expected, start two decision-making there know, on need than somewhat program certain turn data slower – to is to industry. way to been reaccess Their the providing as contract people pharmaceutical on value, a level The behalf We critical the I are pharmacies process those data and financial the then think that into maintain of a of with year we a doing steady operated. of that, the expect little there hospitals order access And to critically continue entities. seeing through and but decision/actions will important is slower, that if it, next steady expansion know down, are boiled have that decision-making to and the this that financial year. lot bit many as covered essentially, to know, respect and number has we're I critical you you you of part XXXB, liability. on the to changes to In it

Shawn Guertin

we I remarks, And I bottom for a as my the PSS. just than you width give Justin, more still to And half probably range, lower be little the in a sort specifically mentioned range within we'll Yes. midpoint the but $XXX the mean, is in the of sense, of to of think million. that

year-over-year could that in bit And a about QX. by - is last But quarter in a so of down little sort flat come it think and now ago, we year-over-year be bit of in its thought of already year-over-year. of we ballpark, the which, a decrement, way, the will we sort sort little this some experienced

Operator

you. Thank

Our next Research. Eric question will come with from Nephron Percher

line now open. is Your

Eric Percher

the you side. in shift in a retail up And VAX to I'll the scripts some Did that can know Do how held the of a it. G&A of level moving second does QX? year? able of you we back find the to I that profitability And profitability of as the you in the really the staff flip scripts on COVID know that year of seeing? [ph] the around and change you is about I see increases early cost COVID for staffing given you're hold mentioned the demand. Thank G&A And you. some question you're have as then think you in investments. half or

Shawn Guertin

Yes.

anything I and of would more do So that you do to you like a say, mean get more Eric, on it. how right, for while, sort I efficient

all sort continue kind this services taken to of invest think business we to think the opportunity, and that sure capabilities of in provide and and on staffing make sort directionally, and about sort invest that's better. we've how on the But can side. obviously, retail need gotten we margin, the we that experience I of the of the with So of in the results customer

outlook. And half so the provision our the we've year. incorporated in made some of for of for that's in thinking second our and sort that

Eric Percher

able you get As efficient? it you more this you an to the shots incremental endemic, about think P&L that Or to a for is flu relatively have? to by you million think in becomes the a at where look staff even there do year pharmacy always XX season. Do already you're we moving change minimal if with during what around point

Shawn Guertin

turn Yes. think… it Prem, but No, I I'll to

Prem Shah

with we they're can gotten COVID, to it our with smarter have or work. vaccination models work and modeling. staff, part doing of whether to being a prescription-related do We plan continue definitely it's other our be every season say nimble and our very year. leverage we've would flu for able Yes, I we or as

half that going then So And and come back we're to some throughout and also pilot this preparing year. scale do a of well. year treat that's continuing for really the out from the HHS test we're for to to the of

about it. good really feel we So

Shawn Guertin

that my Eric, and like because want directional something, back in about you since volume Justin's – go I use we'd so. want for question expect as on forward, clear on make was comes commentary going guidance. specific was different about to results go confusing terms of contribution sure I XXXX I back to didn't I'll me let PVM. to of I PBM. online, usually not was our to Obviously, sure that what Just XXXX to back a make XXXB the in asked

Eric Percher

you. Thank

Operator

Thank you.

come will question Tanquilut with next from Our Jefferies. Brian

Your is now line open.

Brian Tanquilut

we congrats product on I the the my store, front across think and board. I high categories store, Good quarter. question, the store morning, for rates mean, obviously, guess - as the front the about inflation guys

forward? that what you for product how first, right relates going embedded - revenue the you you the trending? as about the about it guidance guidance? So you're the Thanks. seeing now, in thinking inflation to of are where And that's that thinking what terms are assumption What's how

Karen Lynch

Yes.

Let me start with what we're then to Shawn seeing guidance. and it turn on

customers. to we for it's So in to said our we store the at for our price. of time of to how great that we part, where all that times our environment brands. And inflation through about sure we But terms want we're pass able mindful on customers. think most that, the shelf think for Having - there's make an in a value we're about of super course,

of average brand. our XX% below on brands store national to XX% Our

pass least, the great have for passes on consumers another a with find have year-over-year. not our but do So And a care last and time of a care it's substitutability lot extra very at care store up large lever value across to we brands. XX% categories.

see with that great we're care and We path value our a coupons personalized providing consumers sure lever on have deals the extra car so to make shelf.

in mindful we're in So while across of thinking terms it's categories. price carefully able being a in good that really about guy to value of

Shawn Guertin

that mind segment headlines in seeing majority that about kind sort retail ripping inflationary is of the our through segment. of revenue impacts we're keep the the hear in you And driven, that significant pharmacy of in not the and Yes. really

inflation still the would in going really, different about- product of assumptions store outlook. even revenue our that of that be pharmacy the levels in within sort drive more than about the pharmacy be they that's inflation when and And headline sort But talk it's really of of of big kind numbers is inflation inflation of front hear that product the of inherent again, headlines. in to typical our outlook. that So kind embedded sort our rates gaudy lower you kind mix, mix

Brian Tanquilut

you. Thank

Operator

Thank you.

from Rich come Nathan Our question will Sachs. Goldman next with

is open. now Your line

Nathan Rich

upfront. the little Is mentioned second the million change and wanted year? quarter. if could more that? a expectations I the the of what like the cost could [ph] change great. revenue would earnings. favorable follow just full cost just thinking COVID questions. numbers, be give for follow-up didn't seems That half any for you you bit ask of Hi, then But in you to your morning. for Thanks you Could how that? the incremental drove was and new trying year. it million I run Shawn, to MBR $XXX the back just assumptions. out $XXX the the to incremental And a of plays there guidance And clarify good maybe on versus trend detail I if for clarify just in

Shawn Guertin

Yeah.

retail Let me raised than related to significantly that. We're It's $X COVID categories. we've than do $X these of that talking first. more billion revenue one about is about billion, well more half that

there. MBR the obviously, But performance a on about the our expectations totaling contribution side indicative double positive. QX, front, of billion for year. it's the in revenue that's the year on that. our definitely that still of $X significantly we nearly of range for of started think mentioned, year. And I full the the bigger So for that's is on were I sort on we just favorable no, where as

very think, I from remains, standpoint. an outlook that so positive And underlying

product the bit to Dan below our Medicare really has I'll out But this consistent way the very is on and similar. Commercial sort As comment we're favorability what ask seeing baselines I a mentioned, Medicaid. a little of probably been on with product rolling and little by that.

Dan Finke

Yes.

seeing a you flavor the categories. me service of Let give we're just little some in

length across are COVID expected. our of normal lower overall. of levels. slightly access steady preventative members been returned severity, costs lower and favorable, about the sand costs then all, that see of costs. seeing had to really throughout making as lines have lower the the you we First when we're a volume lower preventative COVID care pandemic. ER generally, PCP watching And focused care, have those all well, specialists. than is sure business, did visits And think of volume to the on of inpatient we overall We've

So you just of flavor categories. give a little service the

Nathan Rich

Thank you. Great.

Operator

to portion conclude Karen remarks. of Thank Lynch Ms. This now the over would for conference. does I turn you. the her closing back to today's like call Q&A

Karen Lynch

we leave you thoughts. conclude Before to couple I today, of with just a want

delivering is we're our team Our meaningful company. become health the solutions as progress leading nation's strategy to striving on

We on And and today. XXXX look we'll forward that to update are build our for continue progress. XXXX. powerful we confident momentum to through this to the on joining continuing Thanks call you

Operator

XXXX quarter This Health CVS you. and earnings today's call Thank concludes webcast. second

may a You lines. wonderful your day. Have disconnect

CVS Health (CVS) 3 Aug 222022 Q2 Earnings call transcript