In our first earnings roundup, we looked at the fourth-quarter and full-year 2022 financial performance of three major publicly traded companies in the managed care market. They achieved positive operating and financial results for 2022, with some even surpassing their expectations for the year. To read more about earnings results in the managed care market, you can read that spotlight on the LevinPro HC platform here.
This week, we’re looking at companies in other healthcare verticals, including retail, dialysis and eHealth. CVS Health Corporation, Teladoc Health, Inc. and DaVita Inc are all prominent in their respective fields, and their financial performance can reveal much about the markets they are in. If one of these companies is performing well (spoiler alert, they all are), it can bode well for the rest of the companies in the same field.
All three companies have demonstrated solid revenue growth for the full year. Of course, this doesn’t always paint the whole picture as Teladoc’s performance was significantly impacted by a hefty write off attributed to its Livongo purchase.
One common theme across all companies covered in this roundup was the focus on broadening their services and value-based care platforms. CVS Health, Teladoc and DaVita have committed to improving healthcare outcomes and reducing costs, whether it’s through value-based care models, integrated care solutions or the use of technology to improve patient outcomes.
All three companies have also seen growth in their digital health offerings, with Teladoc’s telemedicine platform, CVS Health’s focus on digital health and DaVita’s use of technology to improve patient care.
The COVID-19 pandemic continued to impact the three companies in 2022, with CVS Health playing a key role in vaccine administration and distribution, Teladoc seeing increased demand for its virtual care services and DaVita facing increased costs related to pandemic safety measures.
CVS Health Corporation (NYSE: CVS)
CVS Health has seen positive momentum in its underlying business, demonstrated by solid revenue growth for the full year. CVS Health surpassed the $300 billion mark in total revenues in 2022, growing full-year revenues by more than 10% to $322 billion. The company delivered adjusted operating income of $17.5 billion, with cash flow from operations at nearly $16.2 billion for the full year.
CVS Health is a health solutions company, providing healthcare services across the U.S. such as walk-in clinics and retail pharmacies. It employs more than 300,000 people and has over 40,000 physicians, pharmacists, nurses and nurse practitioners. According to data captured in the LevinPro HC database, CVS Health made its fifth-largest deal of all time during 2022 with its acquisition of Signify Health for $8 billion.
Key Earnings Metrics:
CVS Health exceeded its adjusted EPS expectations for the fourth consecutive quarter, delivering Q4 2022 adjusted EPS of $1.99 and a full year 2022 adjusted EPS of $8.69, representing nearly 10% growth over its 2021 baseline.
Mentioned in the earnings call was CVS Health’s recently announced definitive agreement to acquire Oak Street Health for $39 per share in cash, representing a total transaction value of approximately $10.6 billion, to broaden its value-based care platform into primary care and accelerate its long-term growth.
CVS Health increased its unique digital customers by 7 million to more than 47 million, reached 8 million active users on its individualized Health Dashboard and interacted with nearly 5 million customers daily across its community footprint.
CVS Health’s medical membership as of December 31, 2022, was 24.4 million, up 109,000 members compared with September 30, 2022, and 548,000 members compared with December 31, 2021. This reflects increases in Medicare and Commercial membership, as underlying Commercial growth more than offset the impact of international divestitures. These increases were partially offset by a decline in Medicaid membership reflecting the previously disclosed loss of a large customer in the third quarter of 2022.
Total pharmacy claims processed increased 3.1% and 4.1% on a 30-day equivalent basis for the three months and year ended December 31, 2022, respectively, compared to the prior year, primarily driven by net new business, increased utilization and the impact of an elevated cough, cold and flu season compared to the prior year. These increases were partially offset by a decrease in COVID-19 vaccinations.
Prescriptions filled increased 0.8% and 2.3% on a 30-day equivalent basis for the three months and year ended December 31, 2022.
CVS Health’s 2023 guidance includes revenue growth of 3% to 5% and full-year adjusted EPS guidance in the range of $8.70 to $8.90 for 2023, which, at the midpoint, represents high single-digit growth above its 2022 baseline of approximately $8.25.
Key Quotes From the Earnings Call:
“We are making significant progress in advancing our strategy, which includes expanding our care delivery and health services capabilities in primary care, home health, and provider enablement.” – Karen Lynch, President and CEO of CVS Health
“Retail delivered another strong year, outperforming our initial guidance and long-term targets. Revenues for the year grew by more than 6% versus the prior year, and we generated $6.7 billion of adjusted operating income.” – Karen Lynch
“In our pharmacy services segment, we are seeing strong growth in our specialty pharmacy business, driven by our focus on providing high-touch, personalized care to patients with complex health conditions. We are also making progress in expanding our offerings in areas like gene therapy, biosimilars and digital health.” – Karen Lynch
“We continue to be a leader in the COVID-19 vaccination effort, having administered over 31 million COVID-19 vaccines to date. We are also playing a key role in the distribution of COVID-19 treatments and tests, and we remain committed to supporting our customers and communities as we navigate this ongoing public health crisis.” – Karen Lynch
“We are a big company. We are going to need a big footprint over time, and being in 21 states was important in and of itself. But, the scalability element was the ability to demonstrate the model worked in different geographies.” – Shawn Guertin, CFO of CVS Health
Teladoc Health, Inc. (NYSE: TDOC)
Despite a challenging macro environment, Teladoc’s underlying business has continued to perform with positive momentum. The fourth quarter consolidated revenue grew 15% year over year to $638 million, and for the full year, total revenue grew 18% to more than $2.4 billion.
Teladoc is a telemedicine company that provides virtual medical consultations, including medical advice, diagnosis and treatment plans, through phone or video calls. Patients can access Teladoc’s services from anywhere and at any time, allowing them to receive medical care remotely without needing to visit a clinic. Teladoc Health has access to more than 80 million individuals in the U.S. through its relationships with employers and health plans, and more than 50% of that population has access to more than one of its offerings.
Teladoc was particularly active in the M&A market in the 2010s, with 10 deals completed between 2013 and 2020. However, the company has not made any acquisitions since its purchase of Livongo Health, Inc. for $18.5 billion in 2020.
Missing from the earnings call was any mention about Teladoc being hit with non-cash goodwill impairment charges of $13.4 billion in 2022. In the first quarter of 2022, Teladoc took a $6.6 billion impairment charge and a $3 billion hit in the second quarter. The company logged a net loss in the fourth quarter of $3.8 billion, or $23.49 a share, which was mostly attributable to a continued write off of the Livongo deal.
Key Earnings Metrics:
Teladoc’s consolidated adjusted EBITDA was $94 million, in line with the outlook provided during the company’s Q3:22 earnings call. Teladoc’s BetterHelp, which primarily consists of mental health services sold through its direct-to-consumer distribution channel, grew 29% year over year in the fourth quarter and delivered on its profitability target. The company has also seen momentum in its integrated whole-person platform, which includes chronic care, mental health and Primary360, which is accessible through a single login and account in a new app.
Teladoc’s goal is to become the leading whole-person virtual care provider and its key strategic priorities include expanding the suite of services, particularly its virtual primary care offering, mental health products, Primary360 and the BetterHelp consumer brand.
Teladoc provided its plans to focus on vendor consolidation and rightsizing the cost structure to reflect current growth rates, while still actively pursuing growth and increased adoption of virtual care across the industry.
The company’s guidance for 2023 reflects a balanced approach to top and bottom-line growth, with a focus on efficiency and cost optimization, and a plan to expand margins consistently over the next several years. The company expects revenue of $2.55 billion to $2.675 billion and adjusted EBITDA of $275 million to $325 million for the full year of 2023.
Key Quotes From the Earnings Call:
“Overall, despite a more challenging macro environment, our underlying business continues to perform with positive momentum, demonstrated by our ability to continue driving solid full-year revenue growth.” – Jason Gorevic, CEO of Teladoc
“Given the current operating environment as well as the larger scale at which we now operate, you should expect us to balance growth and margin with an increased focus on efficiency going forward. With the more balanced approach, we will pursue growth in a more focused way with the goal of expanding our margins consistently over the next several years, as we march toward GAAP profitability while still achieving an attractive and sustainable top-line growth rate,” said Jason Gorevic. We will continue to watch the company to see how they can continue to invest in virtual care in a more economic and balanced way. If a business like Teladoc isn’t seeing economic viability, with its scale and maturity, that says something about how long it takes and the real risk that these virtual providers are taking on to reach profitability.
“The pandemic has significantly accelerated the shift to virtual care, and we believe this trend is here to stay. Virtual care’s role within the healthcare industry remains underpenetrated, and we will continue to invest to expand our leadership position.” – Jason Gorevic
“We have completed several thousand primary care visits already this year, and it’s growing rapidly. We will deliver… somewhere between five and 10x the visits in primary care in 2023 that we did in ’22 and the pipeline is rich with opportunities.” – Jason Gorevic
DaVita Inc (NYSE: DVA)
DaVita’s earnings call in 2023 began with a mixture of optimism and uncertainty about the year ahead due to the impact of the COVID-19 pandemic on treatment volume and labor. DaVita’s consolidated revenues were $2.9 billion and $11.6 billion for the three months and year ended December 31, 2022, respectively.
DaVita Inc. is a Fortune 500 healthcare company that provides kidney dialysis services and related treatments for patients with chronic kidney failure or end-stage renal disease. The company operates more than 2,700 dialysis centers in the U.S. and serves approximately 200,000 patients.
In January 2022, DaVita announced its acquisition of MedSleuth, a company that collects and analyzes a patient’s medical history to match them properly for an organ transplant, deepening its efforts to fuel transplant innovation.
Key Earnings Metrics:
DaVita continues to be committed to its long-term capabilities and strategy in 2022. DaVita’s clinical initiatives focus on improving the quality of life and vitality of its patients, which has led to a 20% improvement in bloodstream infection rates within the last year.
DaVita’s full-year 2022 adjusted operating income was $1.45 billion, and adjusted earnings per share from continuing operations reached $6.60. The company generated $817 million of free cash flow.
COVID infection and mortality rates during 2022 were lower than in the prior years of the pandemic, and the lack of a winter surge did not result in material improvement in the company’s treatment volumes. There continues to be a pressure on patient admissions and missed treatment rates. For 2023, the company continues to use a range of possible volume outcomes in its guidance given the uncertainty of the virus and its repercussions.
During the call, DaVita highlighted its priorities for 2023, including digital modernization, policy advocacy and educating patients to increase adoption of home modalities where clinically appropriate. Additionally, in support of its more than 1,700 existing home programs, DaVita is launching transitional care programs across the country to educate new dialysis patients on their modality options.
Key Quotes from the Earnings Call:
“We start 2023 with a mix of optimism and uncertainty about the year ahead and with continued conviction in our long-term capabilities and strategy. We’re cautious in our optimism today because we’re still experiencing the impact on volume and labor.” – Javier Rodriguez, CEO of DaVita Inc
“Our focus on reducing contract labor produced results earlier than expected. We still expect contract labor will be higher than pre-COVID levels in 2023 by $20 million to $40 million, but that will be a significant improvement to 2022.” – Javier Rodriguez
“Despite early optimism for improvement in 2023, the labor markets remain highly dynamic and will remain a key swing factor in our performance.” – Javier Rodriguez
“We remain committed to educating our patient, and our position to increase adoption of home modalities where clinically appropriate.” – Javier Rodriguez
“We continue working with the broader kidney community to restore benefit protection for our patients through legislative and regulatory efforts.” – Javier Rodriguez
