CVS Health Corporation

Hello and welcome to CVS Health's second quarter 2025 earnings call. We ask that you please hold all questions until the end of the prepared remarks, at which time you will be given instructions for the question and answer session. As a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. I would now like to pass the call to Larry McGrath, Chief Strategy Officer. Larry, please proceed.

Good morning and welcome to the CVS Health second quarter 2025 earnings call and webcast. I'm Larry McGrath, Chief Strategy Officer. I'm joined this morning by David Joyner, President and Chief Executive Officer, and Brian Newman, Chief Financial Officer. Following our prepared remarks, we'll host a question and answer session that will include additional members of the leadership team. Our press release and slide presentation have been posted to our website, along with our Form 10Q filed this morning with the SEC. Today's call is also being broadcast on our website, where it will be archived for one year. During this call, we'll make certain forward-looking statements. Our forward-looking statements are subject to significant risks and uncertainties that could cause actual results to differ materially from currently projected results. We strongly encourage you to review the reports we filed with the SEC regarding these risks and uncertainties. In particular, those that are described in the cautionary statement concerning forward-looking statements and risk factors in our most recent annual report on Form 10K, our quarterly report on Form 10Q filed this morning, and our recent filings on Form 8K, including this morning's earnings press release. During this call, we'll use non-GAAP measures when talking about the company's financial performance and financial condition. And you can find a reconciliation of these non-GAAP measures in this morning's press release and in the reconciliation document posted to the investor relations portion of our website. With that, I'd like to turn the call over to David.

David? Thank you, Larry, and good morning, everyone. This morning, we are pleased to report another consecutive quarter of solid results as we execute against our ambition of becoming America's most trusted healthcare company. In the second quarter, we delivered adjusted operating income of $3.8 billion and adjusted earnings per share of $1.81. We again increased our full-year 2025 adjusted EPS guidance to a range of $6.30 to $6.40, up from our previous range of $6 to $6.20. Our strong results and updated expectations reflect the power of our diversified business. We are seeing the impact of our intense focus on the execution within our pharmacy businesses while managing incremental pressure and healthcare delivery. We are encouraged by our enterprise performance and revised outlook, especially in this very dynamic environment. At the same time, we continue to maintain a prudent and respectful outlook for the remainder of the year with clear opportunities for our performance. Ryan will provide specifics later in the call. As we focus on delivering against our financial commitments to you, we are also taking on the largest challenges in healthcare, affordability, access, and inconsistent care coordination. The breadth of these problems means that they can't be addressed with a fragmented piecemeal approach. Instead, it requires holistic solutions implemented by companies with the necessary reach, capabilities, and focus to execute on them. CVS holds a unique position in healthcare with our diverse and scaled businesses our national footprint of community health destinations, and the deep connections we have with more than 185 million consumers. We have unmatched reach and powerful insights that drive our innovation and differentiated solutions. Tackling these challenges requires that each of our businesses be best in class. I'm pleased to report that we are making meaningful progress in the Aetna business. Our recovery has been a top priority. We've realigned the organization and strengthened our talent with a clear focus on creating distinction in the marketplace. We enhanced our operations using technology to automate and streamline processes that improve service and reduce friction for our members and healthcare professionals. We're starting to see the results of these efforts delivering better experiences while also allowing us to better navigate this elevated utilization environment. But our work is not done. As we look ahead, we will maintain this intense focus continuing to diligently execute against our margin recovery plan. While we are pleased with the improvements we are seeing at Aetna, we continue to see pressure in our healthcare delivery business driven by higher medical benefit ratios at Oak Street. This is partially offset by continued positive performance that signify health. Value-based care remains a critical component for our Medicare Advantage strategy as we know that it delivers better clinical outcomes, better patient experiences, and a lower total cost of care. We are working with urgency to further strengthen this business and ensure seniors can benefit from this industry leading model. This includes improving operations through investments in technology, enhancing leadership with talent from across CVS Health, and improving our partnerships with our payer clients. We know that Oak Street capabilities are best in class and are taking the right actions to improve performance. Let me turn now to our pharmacy businesses. At Caremark, we are delivering on our commitments to clients and members by doing what PBMs do best. Adapting to client needs, driving down drug costs, and helping to deliver better access and outcomes. Managing trend remains the most important focus for our customers as they try to balance the benefit of new drug innovations and their higher cost. Our PBM is saving consumers and clients billions of dollars a year on drug costs, but we must continue to innovate and drive more savings. For example, our clients needed a solution as they experienced the impact of the rapid growth in the use of GLP-1s. Spend in this category for our employer clients has nearly doubled over the last two years and now represent 15% of their pharmacy costs. On July 1st, we took a significant step to create competition among manufacturers to lower costs in this drug category. We used our unique capabilities to minimize friction, resulting in over 95% of the eligible members adopting a preferred formulary weight loss product. However, we know drug therapy alone is not enough to achieve the best outcomes. To address this, we offer a powerful weight management program that empowers patients to achieve greater weight loss than drug therapy alone. Importantly, our program participants on average achieve double digit percent weight loss at 12 months, regardless of the drug they use. Our innovation, reach, and clinical capabilities differentiate us in the PBM marketplace. We're having a strong start to the 2026 selling season, with retention expected to be in the high 90s. Our approach and commitment to lowering cost is also leading to new wins with the most sophisticated clients. For example, in our new business win with CalPERS, they specifically highlighted our commitment to delivering more affordable drug benefits and our performance-based model that emphasizes managing pharmacy costs and ensuring clinical quality. In our retail pharmacy business, we are working tirelessly to be the source of stability as we ensure the communities we serve across America maintain access to their medications. PCW delivered another strong quarter, despite persistent reimbursement pressures. Our performance is a direct result of our ability to anticipate market dynamics and take the right actions to lead the industry. We've made deliberate investments in technology and our colleagues to strengthen our operations, deliver -in-class service, and ensure we are the employer of choice in the pharmacy market. Our front store business continues to improve as we grow our customer base and gain retail share. We continue to have -in-class generic drug purchasing through Red Oak, and we share those savings with our payer partners through our CVS cost-vanage model. Under this new model, we are fairly reimbursed for every script we dispense and the value we provide to our customers. We are encouraged by the transition of our commercial scripts to CVS cost-vanage, which continues to be in line with our expectations. We're making good progress on the next stage of evolving the pharmacy reimbursement model as we transition our government business to cost-based pricing models for 2026. This quarter, we made a number of important announcements as we strive towards our goal of improving the healthcare experience in America. Last month, we announced our pledge with CMS to streamline, simplify, and reduce unnecessary complexities in healthcare. We've taken a leading role in the industry's initiative to improve prior authorization and deliver a better experience for providers and patients, but we're not stopping there. We've taken steps to make the prior authorization process simpler for patients undergoing cancer care. We are bundling multiple requests into one upfront approval, eliminating unnecessary complexity. The response to this initiative has been encouraging, and we're working hard to expand the program to additional therapeutic areas. We also recently announced that over the next decade, we committed $20 billion to support our transformation of healthcare. We will deliver a better healthcare experience with reduced friction, greater visibility, and a stronger partnership with doctors and hospitals. By delivering on these ambitions, we'll enable providers to focus on patient care instead of administrative task. Members will benefit from the clearer communication and simpler healthcare journeys. We will develop new ways to connect the healthcare landscape so it works better for people. We will use emerging technologies to innovate and drive the transformation of the healthcare experience of today, making it unrecognizable in 10 years. Our investments will allow us to drive change at scale and will empower consumers with the right information to engage on their terms. We look forward to sharing additional updates and innovations in the near future. We are building momentum as we navigate what continues to be dynamic and evolving environment. We're strengthening our position as we execute against our strategic priorities and deliver solid results. We remain focused on building trust and are setting expectations that are appropriate and achievable and continue to focus on areas where we can drive out performance. With that, I'd like to hand the call over to Brian.