CVS Health : Q4 2021 Earnings Release (opens in new window)

Exhibit 99.1

CVS HEALTH REPORTS STRONG FOURTH QUARTER AND FULL-YEAR 2021 RESULTS,

CONFIRMS 2022 FULL-YEAR EPS GUIDANCE

WOONSOCKET, RHODE ISLAND, February 9, 2022 - CVS Health Corporation (NYSE: CVS) today announced operating results for the three months and year ended December 31, 2021.

FOURTH QUARTER HIGHLIGHTS

• Total revenues increased to $76.6 billion, up 10.1% compared to prior year
• GAAP diluted EPS from continuing operations of $0.98 and Adjusted EPS of $1.98

FULL-YEAR HIGHLIGHTS

• Total revenues increased to $292.1 billion, up 8.7% compared to prior year
• GAAP diluted EPS from continuing operations of $5.95 and Adjusted EPS of $8.40
• Generated cash flow from operations of $18.3 billion
• Net repayments of long-term debt of $8.8 billion

KEY FINANCIAL DATA

		Three Months Ended
			December 31,
In millions, except per share		2021				2020			Change
amounts
Total revenues	$	76,604	$	69,554			$	7,050
Operating income		2,229				2,524				(295)
Adjusted operating income (1)		4,147				2,945				1,202
Diluted earnings per share	$	0.98	$	0.75			$	0.23
from continuing operations
Adjusted EPS (2)	$	1.98	$	1.30			$	0.68

2022 FULL-YEAR GUIDANCE

• Confirmed GAAP diluted EPS from continuing operations guidance range of $7.04 to $7.24
• Confirmed Adjusted EPS guidance range of $8.10 to $8.30
• Revised cash flow from operations guidance range to $12.0 billion to $13.0 billion from $12.5 billion to $13.0 billion

CEO COMMENTARY

"We're engaging millions of customers across our businesses and in our community health destinations, becoming an even bigger part of their everyday health. That's clearly reflected in our performance, but more importantly in our potential."

-Karen S. Lynch, CVS Health President and CEO

IN THE SPOTLIGHT

In 2021, CVS Health continued to lead the nation's pandemic response with more than 32 million COVID-19 tests and more than 59 million COVID-19 vaccines administered.

Named to the 2021 S&P Dow Jones Sustainability Indices ("DJSI") North American Index for the ninth consecutive year and the DJSI World Index for the third consecutive year. CVS Health was also one of the first seven companies globally to have science-basednet-zero GHG emissions targets validated by the Science-Based Targets initiative.

Announced a 10% increase to the annual shareholder dividend, which became effective with the February 1, 2022 dividend distribution, and the authorization of a $10 billion share repurchase program.

Investor Contact: Susie Lisa, CFA | Senior Vice President Investor Relations | [phone]

Media Contact: T.J. Crawford | Vice President External Affairs | [phone]

The Company presents both GAAP and non-GAAP financial measures in this press release to assist in the comparison of the Company's past financial performance with its current financial performance. See "Non-GAAP Financial Information" beginning on page 12 and endnotes beginning on page 25 for explanations of non-GAAP financial measures presented in this press release. See pages 14 through 17 and page 24 for reconciliations of each non-GAAP financial measure used in this release to the most directly comparable GAAP financial measure.

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Consolidated Fourth Quarter and Full-Year Results and Operational Highlights
		Three Months Ended			Year Ended
In millions, except per share amounts			December 31,						December 31,
	2021				2020		Change				2021				2020			Change
Total revenues	$	76,604			$	69,554		$	7,050			$	292,111			$	268,706			$	23,405
Operating income		2,229				2,524			(295)				13,193				13,911				(718)
Adjusted operating income (1)		4,147				2,945			1,202				17,312				16,008				1,304
Net income		1,296				975			321				7,898				7,192				706
Diluted earnings per share from continuing	$	0.98			$	0.75		$	0.23			$	5.95	$	5.47			$	0.48
operations
Adjusted EPS (2)	$	1.98	$	1.30	$	0.68			$	8.40	$	7.50			$	0.90

Financial Results

For the three months and year ended December 31, 2021 compared to the prior year:

• Total revenues increased 10.1% and 8.7%, respectively, driven by growth across all segments.
• Operating income decreased 11.7% and 5.2%, respectively, primarily due to a store impairment charge of approximately $1.4 billion recorded in the fourth quarter of 2021 related to the write down of operating lease right- of-use assets and property and equipment in connection with planned retail store closures over the next three years, as well as the absence of pre-tax income of $307 million associated with the receipt of amounts owed to the Company under the ACA risk corridor program ("ACA risk corridor receipt") during the fourth quarter of 2020. The decrease in operating income in the year ended December 31, 2021 was also driven by a $431 million goodwill impairment charge associated with the long-term care ("LTC") business in the Retail/LTC segment recorded during the third quarter of 2021. The decreases in both periods were partially offset by the increases in adjusted operating income described below and lower acquisition-related integration costs compared to the prior year.
• Adjusted operating income increased 40.8% and 8.1%, respectively, primarily due to increased prescription and front store volume and the administration of COVID-19 vaccinations in the Retail/LTC segment, improved purchasing economics and growth in specialty pharmacy in the Pharmacy Services segment, as well as gains from anti-trust legal settlements of $126 million and $263 million recorded in the three months and year ended December 31, 2021, respectively. During the three months ended December 31, 2021, the increase was also driven by lower COVID-19 related investments compared to the prior year in the Health Care Benefits segment. During the year ended December 31, 2021, the increase was also driven by the administration of COVID-19 diagnostic testing in the Retail/LTC segment and was partially offset by higher COVID-19 related costs in the Health Care Benefits segment, including the impact of the deferral of elective procedures and other discretionary utilization in response to the COVID-19 pandemic during the year ended December 31, 2020.
• Interest expense decreased $70 million, or 10.3%, and $404 million, or 13.9%, respectively, due to lower debt in the three months and year ended December 31, 2021.
• The effective income tax rate in the fourth quarter decreased to 17.5% compared to 19.7%, and decreased to 24.2% for the full year compared to 26.3% in the prior year. The decrease in both periods was primarily due to the repeal of the non-deductible health insurer fee ("HIF") for 2021 and the favorable impact of a prior year refund claim approved by the Internal Revenue Service ("IRS") during the fourth quarter of 2021. The decrease in both periods were partially offset by the absence of the favorable resolution of certain tax matters in the fourth quarter of 2020.

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Company Highlights

• Unveiled several steps to support the acceleration of the Company's omnichannel health strategy, which will include the creation of new store formats and the optimization of the Company's retail footprint to align with evolving customer needs, including a reduction in store density in certain locations and the closure of approximately 900 retail stores between 2022 and 2024. In addition, named Prem Shah the Company's first Chief Pharmacy Officer, who alongside Michelle Peluso, Chief Customer Officer, became Co-President of the Retail/LTC business effective January 1, 2022.
• Administered more than 8 million COVID-19 tests and more than 20 million COVID-19 vaccines nationwide in the fourth quarter of 2021. For the full year, the Company administered more than 32 million COVID-19 tests and more than 59 million COVID-19 vaccines, while maintaining a strong commitment to vaccine and testing equity by optimizing site locations and targeting outreach initiatives to reach vulnerable populations.
• Paid down $2.3 billion of long-term debt, while returning $660 million to shareholders through dividends during the three months ended December 31, 2021. Since the close of the acquisition of Aetna Inc. in November 2018, the Company has repaid a net $21.0 billion of long-term debt.
• Announced a 10% increase to the annual shareholder dividend, which became effective with the February 1, 2022 dividend distribution, and the authorization of a $10 billion share repurchase program.
• Named to the 2021 S&P Dow Jones Sustainability Indices ("DJSI") North American Index for the ninth consecutive year and the DJSI World Index for the third consecutive year. The Company was also one of the first seven companies globally to have science-basednet-zero GHG emissions targets validated by the Science-Based Targets initiative.
• Hosted a one-day virtual career event resulting in approximately 45,000 clinical and retail hires, building on accelerated recruitment and retention efforts throughout 2021. The Company announced a significant investment in its employees by raising the minimum enterprise hourly wage to $15.00 an hour effective July 2022.

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Health Care Benefits Segment

The Health Care Benefits segment offers a full range of insured and self-insured ("ASC") medical, pharmacy, dental and behavioral health products and services. The segment results for the three months and years ended December 31,

2021 and 2020 were as follows:

	Three Months Ended		Year Ended
	December 31,		December 31,
In millions, except percentages	2021	2020		Change		2021	2020			Change
Total revenues	$ 20,699		$ 19,103		$ 1,596		$ 82,186		$ 75,467			$ 6,719
Adjusted operating income (1)	510	153	357	5,012	6,188			(1,176)
Medical benefit ratio ("MBR") (3)	87.0 %	86.7 %	0.3 %	85.0 %	80.9 %			4.1 %
Medical membership (4)						23.8	23.4			0.4

• Total revenues increased 8.4% and 8.9% for the three months and year ended December 31, 2021, respectively, compared to the prior year primarily driven by growth in the Government Services business. The increase in total revenues in the three months ended December 31, 2021 was also driven by lower COVID-19 related investments compared to the prior year. The increase in both periods was partially offset by the unfavorable impact of the repeal of the HIF for 2021 and the absence of the ACA risk corridor receipt.
• Adjusted operating income increased $357 million for the three months ended December 31, 2021 compared to the prior year primarily driven by lower COVID-19 related investments and improved underlying performance, partially offset by higher medical costs related to COVID-19 in the three months ended December 31, 2021 compared to the prior year.
• Adjusted operating income decreased 19.0% for the year ended December 31, 2021 compared to the prior year primarily driven by the net impact of the COVID-19 pandemic, which reflected higher COVID-19 related costs in the year ended December 31, 2021 compared to the prior year, including the impact of the deferral of elective procedures and other discretionary utilization in response to the COVID-19 pandemic during the year ended December 31, 2020. The decrease was partially offset by improved performance in the underlying Government Services business and higher favorable development of prior-years' health care cost estimates in the year ended December 31, 2021 compared to the prior year.
• The MBR increased from 86.7% to 87.0% in the three months ended December 31, 2021 compared to the prior year primarily driven by the absence of the ACA risk corridor receipt and the repeal of the HIF for 2021. These increases were largely offset by the net impact of the COVID-19 pandemic, including lower COVID-19 related investments in 2021 compared to the prior year and improved underlying performance.
• The MBR increased from 80.9% to 85.0% in the year ended December 31, 2021 compared to the prior year primarily driven by the higher COVID-19 related costs described above and the repeal of the HIF for 2021. The increase was partially offset by improved underlying performance in the current year.
• Medical membership as of December 31, 2021 of 23.8 million increased 151,000 members compared with September 30, 2021, reflecting increases across all product lines.
• The segment experienced favorable development of prior-periods' health care cost estimates in its Commercial and Government Services businesses during the three months ended December 31, 2021, primarily attributable to third quarter 2021 performance.
• Prior years' health care costs payable estimates developed favorably by $788 million during the year ended December 31, 2021. This development is reported on a basis consistent with the prior years' development reported in the health care costs payable table in the Company's annual audited financial statements and does not directly correspond to an increase in 2021 operating results.

See the supplemental information on page 19 for additional information regarding the performance of the Health Care Benefits segment.

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Pharmacy Services Segment

The Pharmacy Services segment provides a full range of pharmacy benefit management solutions to employers, health plans, government employee groups and government sponsored programs. The segment results for the three months and years ended December 31, 2021 and 2020 were as follows:

	Three Months Ended			Year Ended
		December 31,			December 31,
In millions	2021	2020		Change		2021	2020			Change
Total revenues	$ 39,341			$ 36,355		$ 2,986		$ 153,022			$ 141,938			$ 11,084
Adjusted operating income (1)	1,824	1,561	263	6,859	5,688			1,171
Total pharmacy claims processed (5) (6)	582.2	537.9	44.3	2,244.7	2,112.9			131.8
Pharmacy network (7)	498.2	456.2	42.0	1,914.0	1,790.1			123.9
Mail choice (8)	84.0	81.7	2.3	330.7	322.8			7.9

• Total revenues increased 8.2% and 7.8% for the three months and year ended December 31, 2021, respectively, compared to the prior year primarily driven by increased pharmacy claims volume, growth in specialty pharmacy and brand inflation, partially offset by continued price compression.
• Adjusted operating income increased 16.8% and 20.6% for the three months and year ended December 31, 2021, respectively, compared to the prior year primarily driven by improved purchasing economics which reflected increased contributions from the products and services of the Company's group purchasing organization and specialty pharmacy (including pharmacy and/or administrative services for providers and 340B covered entities). These increases were partially offset by continued price compression.
• Total pharmacy claims processed increased 8.2% and 6.2%, on a 30-day equivalent basis, for the three months and year ended December 31, 2021, respectively, compared to the prior year primarily driven by net new business and COVID-19 vaccinations, as well as increased new therapy prescriptions, which were adversely impacted by the COVID-19 pandemic during the three months and year ended December 31, 2020. Excluding the impact of COVID-19 vaccinations, total pharmacy claims processed increased 5.4% and 4.2%, on a 30-day equivalent basis, for the three months and year ended December 31, 2021, respectively, compared to the prior year.

See the supplemental information on page 21 for additional information regarding the performance of the Pharmacy Services segment.

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