St. Louis, MO – Express Scripts Holding Company (Nasdaq: ESRX) recently announced 2015 second quarter net income attributable to Express Scripts stockholders of $600.1 million, or $0.88 per diluted share. Adjusted earnings per diluted share were $1.44 for the second quarter.
“It is clear many companies across healthcare are validating the need for size and scale,” said George Paz, Chairman and Chief Executive Officer. “But, what matters most is how that size and scale is leveraged. In our case, that means creating a business model fully aligned with client needs. By aligning our interests with those of our patients and clients our scale is focused on driving down costs while improving health outcomes. Our focused size and scale helps us make prescription drugs safer and more affordable which benefits everyone in healthcare — patients, plan sponsors and medical professionals. We are pleased with our second quarter results and outperforming our guidance. Our results are a testament to our model of driving performance through our focused scale and alignment.”
Second Quarter 2015 Review
The following compares second quarter 2015 and 2014 operating results:
- Adjusted claims of 321.2 million, down 1%
- Adjusted EBITDA of $1,794.5 million, up 3%
- Adjusted EBITDA per adjusted claim of $5.59, up 4%
- GAAP revenue of $25,454.2 million, up 1%
- GAAP net income of $600.1 million, up 16%
- Adjusted net income of $979.1 million, up 4%
- GAAP diluted earnings per share of $0.88, up 31%
- Adjusted earnings per diluted share of $1.44, up 17%
- Net cash flow provided by operating activities of $899.9 million, up 22%
As expected, revenue and operating income of $141.7 million related to a large client contract was realized in the second quarter of 2015 compared to $129.4 million in the second quarter of 2014 due to the structure of the contract.
On April 28, 2015, the Company entered into a credit agreement with Credit Suisse AG, as administrative agent, Citibank, N.A., as syndication agent, and the other lenders and agents named therein, providing for a five-year $2.0 billion revolving loan facility, a two-year $2.5 billion term loan and a five-year $3.0 billion term loan. The Company used the proceeds to repay its previously existing term loan and to terminate the commitments under its existing revolving loan facility and to execute an accelerated share repurchase program (“ASR”) and used the remaining proceeds for other general corporate purposes.
On April 29, 2015, as discussed in the previous paragraph, the Company entered into an agreement to repurchase shares of common stock for an aggregate purchase price of $5,500.0 million under an ASR. Upon payment of the purchase price, the Company received 55.1 million shares of its common stock at a price of $84.79 per share, which represented approximately 85% of the $5,500.0 million purchase price. The ASR program will be completed in the first half of 2016. Due to the utilization in the ASR, 28.6 million shares remain available under the share repurchase program.
2015 Guidance
Due to Express Scripts’ model of alignment and focused scale, the Company exceeded its second quarter adjusted earnings per diluted share guidance. Therefore, the Company is increasing guidance from a range of $5.37 to $5.47 to a range of $5.46 to $5.54, which raises the mid-point from $5.42 to $5.50. The new guidance range represents growth of 12% to 14% over 2014. The execution of the ASR enabled the Company to update its capital structure plan and revise the diluted weighted average shares outstanding range for 2015, resulting in an approximate $0.05 increase to its adjusted earning per diluted share guidance. The remaining increase is largely due to improved operating results.
2016 Business Outlook
The retention rate for the 2015 selling season is expected to be in the range of 95%-97%, while the acquisition of Coventry will result in an additional decline of approximately 3% of claims. Although 2016 claims volume is impacted by many ongoing factors that remain unsettled, the Company’s preliminary estimates indicate that 2016 adjusted claims will be in the range of 1,255 million to 1,295 million.
“Express Scripts has built a unique business model focused on our clients’ best interests. This singular focus on client alignment has never been more important than it is in today’s complex and challenging healthcare environment,” said George Paz, Chairman and Chief Executive officer. “Due to the dynamics of the market, we continue to invest in a broad set of innovative pharmacy solutions designed to lower costs, eliminate waste and improve health outcomes. Express Scripts is well positioned to serve clients through focused scale, alignment and innovative solutions which will drive value and earnings growth in the future.”
“The discussions we are having with our clients are forward-looking and focused on how we can collaborate to provide better access to medicine for our patients while controlling costs,” said Tim Wentworth, President. “It is exactly where we want to be as a company: actively engaging with clients, bringing to bear our innovative solutions, operational excellence, specialized care and bold actions to add more value to the pharmacy benefit as we better serve clients and patients. We are proud of the relationships we have built with clients, consultants and prospects, who are more interested than ever in what Express Scripts can do for them and their members.”
The complete earnings release is available here: Express Scripts Announces 2nd Quarter 2015 Results