WBA - Earnings call transcript Q2 2018 | Walgreens Boots Alliance, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to Walgreens Boots Alliance Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct and question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call maybe recorded. I would now like to introduce your host for today's conference, Mr. President, and Vice Projects. Senior Gradwell, Investor Special Relations Gerald Please go ahead.

Gerald Gradwell

and ladies to gentlemen, our morning, XXXX welcome call. and Good earnings second quarter

a and usual, today of Officer where be. Officer. a where you with you Chairman As Officer some call. opening Chief business welcome to better needs. updated of give Alex our today Financial are we our host your will Alliance and Operating to George here thinking, Vice comments feedback and slightly Fairweather, Boots addressing the Executive I Global President overall Gourlay, Stefano picture over Co-Chief we in Stefano of and shortly format to and with the we're you Walgreens different We're the to may of any Pessina, Executive try We presenting Walgreens format Boots make and have Walgreens; Alliance; on Chief to ensure I'm want would our hand

we obligation however, our otherwise. forward-looking extent as required so, to events, discussion the and legal expectations things to by and related result declarations. I forward-looking changes market, this of results through statements you latest do Form made ask GAAP for of most constitute that and take Investor materially. of projections to on the refer based future reconciliations attention In we cause vary appendix Harbor measures, Except measures website XX-K information, please forward-looking the in I as no and presentation on indulgence non-GAAP and Please and I'd available risk any so information. that are Relations actual are the there financial whether our and Certain after the could directly a presentation we regulatory will publicly use Safe update the factors cautionary relate comparable statement our subject that competitive see current your to and Before uncertainties materials in statements. in you today's risks to results for future financial change; they while presentation certain never some assumptions or undertake to XX-Q statements this are to new presentation, law,

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Stefano Pessina

Thank you, Gerald.

If our numbers. some the seen key has you the and year. from the and rather like mornings George Company. few give then, operations. a has It we widely to through that a you been will it progress as retail in the Alex strategy mixed but and rather is in ask these markets in for would good how to you words stuff seen financial would I have despite implementing to the quarter what daily our run announcement, markets the about We've insights interpreting before re-run been strategy are numbers, about say our

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most sophisticated system. continue can more more and than same in are that need reducing the of to on the greater the these predicted, life which healthcare and that the sign free recognizes alone significantly GDP economics. with inevitable managing under combination add such are XX% the these for the free approaches Population the growth pressure, different most recognizes increased world, sign based scope over market from of to two. The in everyone into built for element the is these of is their availability demand. working of of funded. of keep all leading greater systems of economics people government comes with as U.S. greatest the manage to system, state cost healthcare. control market managing the treatments which market the Although us the always more of countries limit and the and care other means as higher a markets economics increase some evolve productive way rise. medication be in materially number or increased with Against the It payers the cost for I that been any customers. U.S. The in through and have pretty markets to through with and combined half is United in of expectation of system supply. demand But can see community free element is the U.S. greater continues innovation States healthcare one is now the of spent are XX other of with The already reimbursement, the the percentage The the the the country and one to cost both around entirely and have in this the infinite some demand efficient. limit care element relative by many delivered these prescription over of in life by healthcare. everyone healthcare age; increased in achieved In either overall cost in continues remains expectancy most drugs the some of taken even the The The treatment or quality than healthcare to usually, ways intervention spend. total the countries. of life In we to much healthcare system attractiveness value of funded lower cost backdrop, healthcare, world, medication we to

experience area outstanding strong and of managing have track in record play We healthcare a to management role success our in costs. active an of business our the of

other -- and the tie the market. healthcare partner team payers, our need the governments market and a differentiation. form can own other innovation; and growth across growth for organic than that approach strong underlying really done must in back traced a strategy delivered and and doing our these shown And quite points commercial the can markets. for geography Build partnership been and to U.S. main in to have most cycles or approach the unique through one and broad many the of drive leadership a I to be each I both and of that two And benefits many, across market of growth. consolidate ensuring Company specifically trusted our system. the acquisition of relevant we protection organic team growth simply. sharing any we importantly, The made with basic our the has volume so, for the while Naturally, nothing the to use lead growth the levers not summarize and best-in-class, to a a have trends We cannot We quality our we we from that times the without area. in strength financial approaches financial pains buy cost market everything more foundation on portfolio is these different, are us competitors. volume our are and we provide we from the at in of ensuring day of of management partners give point that to business companies, external service, these U.S. significantly portfolio value, in indeed and where performance. honestly adapt with cost that can day efficiency exclusivity, excellent relevant applying drug patients, operation strength. of move and a complementary systematically in has right have us teams. can condition to ourselves the financial U.S. the these many the better leveraging business the of than multiple or experience. Differentiate dynamism of apply are discipline to course development. growing These skills if the say opportunity fact, in rigorously and of has of notably, providers; have which indeed strategies anywhere it's that through we more principles; and to one foster control there these directly we delivered are of most years combination optimizing Reinvest of course, markets. for In financial Control to do us commercially right the our anything

exceptional lot lot work we to you we how a to to work will development he are Thinking committed time to experience. in Officer us after our Financial this demonstrate approach and which current also [ph] of organization. as to with tell James join lot outstanding of more for done contribute attract It you Company. to Our at of the do, going X U.S. have as Kehoe's me for Company June ability we many our to an Chief prevail implementing the a I appointment are the but skills as indication add take much announcement over engaged from other transition, reinsures thank our an anywhere, and George him our in level carefully business strong. is to has appropriate done members demonstrates more commitment managed these it about of CFO the still over have for, team keep an remain that team and as team in years to strategic who me is every that has relevantly do hand to still it team a the to there is as future am all as a Alex probably our great the Don't but indication who a

Alexander Gourlay

in the goes action so much of of defined the although stores our Thank focus to is a in behind this a clear of evidence on more represents and scenes. on recent as the strategy and the course Stefano today activity. earnings Stefano. succinctly, strategy from a performance lot you, U.S. going has I'm

for comes to everything partners. back eventually deliver I service As said, give we do and we customers our to patients we how and the the

we today Before of lot needed. a needed about work I strategy U.S. way we and just review we our it market how quite besides to what to the in talk data do had we in future, apply the when apply we've the the

those in in we making starting we're our and platform next and growth, we're files know, turn what about we a and XX.X more transformation although our We've good nearly the million give million of a to enabling number efficiencies. investing lead you to systems years the direction We're was as users updating just working implementing stores We're and business so data. in simplify and program building, been a getting are have customer excellent mine which are who pointed we to but now this helping big us need. even of core insight Overall, than key tool given get needs assistance the we We're of better. on-track when this years and for still significantly a the in experience the and been lot data the to are it cost to-date awards in new our testing recent well work on working future in the as for As is us, will running our is XX the customer and the spending a over anticipate tool much time working a now program provide we on systems; are suite and very further X have pharmacy X we progress program open Company. ago us in of that developing the as savings on-track constraints state-of-the-art has we as of through other handle balanced will towards data performing it's priority other part investing progressing better as considerably this now some in full age from active business of ability markets. of area systems way by marketing available to business right and systems. the million retail for addition, elsewhere data $XXX and $XXX which our and This some years of spent system implemented very we've future management designed

the to processes of changes performance addition, giving and his visibility assistance with us much team are In financial timely quickly. track the and the our Walgreens to is some within helping financial work update which doing on more on more already a much George additional is and respond basis

As ever kick-in they and is great change insight more combination to and to the business. customer of there of but begun our form in really data management deal do has a

bring but for now our not to have to gain. in make cutting in of in our our of markets reported, The us pretty pretty know, on shift volume We internal improving work consultation both with back this line pharmacy; implication our and to leg designed Stefano's availability seen that off. it judgment market call information; speed had out made us as a into approach. that you've on with forced market, service in particularly a Once network, prescriptions serve thinking service position X was one would grow on fully manage again the we increase extensive but standards, and with was and Turning replaced. and judgment our everywhere to work us years clear In had we levels priorities we keeping we that to the We based the on strategic highest the and and we work peers did prescription focusing ago ever communities top service. It with of our attractive have significantly been compare paid the at to volume with XX.X%. information a our places the which cost you this quarter and updates approach own to clear consultation validate of volumes prices. market meet the to lost prescriptions was grow big some is hard also share has base been this level to our

few share points. past years, over the Over grown we market XXX our by basis have

value and a overtime. strongly. and I'm to the share are well we short-term go now are share positioned volumes that back contract market position and we shifts competing see confident market gives any we market, come as shift, Despite in where the growth This them pharmacy While are ways basis volume to in our us we can on and both a ourselves review strong which costs we volumes. for to partners, efficiency areas where operations to look and our more generate will see augment and improves growth in and at to improve overtime

we and you those partnership our to do we of performance added Walgreens procurement. volumes as with Prime in Of products buying. the to successful counts are community course, pharmacies Therapeutics cannot I do much us there quarter's terms sites. been specialty job Alliance seen the early grow pharmacies. have the in at to partners we continue here we well the extend that share on rely clearly specialty And our are procurement pharmacy, having in retail number area specialty in in work despite this stage. and believe specialty but volume solely The Especially RX Overall, great discussion pharmacy the community recently is in [indiscernible] can XX also a we buying be support are team future. of business, based growth to this know, and side of market In an these positioned fantastic the develop alongside of procurement terms truly Switzerland of not as using getting a

margins. the good basis changes has in and which higher through we X over profitable our would and good been driving own has been followed by in have of significantly of in gross usual our and our with and health Through financial progress retail comparative This and made on offerings, have on X on focusing This through improving new looking quarter profit a points. platform growth, by we progress the mentioned. a at as made but [ph] hoped competitive brands XXX combination ago not has gross Stefano the management plan of I already store to Over basis, achieved us a solid growth. will adjusted provide merchandising last perhaps have we good promotions retail rigorous working discipline formats differentiation penetration but quickly while mix, years we delivered accelerate been we're driving strategy product focused increased as improvements for years markets margin improving this

together material very platform that already our We've all much the will the quick in the as more gone known but The provide for is quarter opportunity new some a as offerings store our sales of as range we'll the X Walgreens our we we to as from learned living stores or proposition. testing stores further provides different retail and [ph] non-beauty royalty together as which for pilot there formats add all intend plan network for scale The this suppliers, they store bringing Of care just of been updates. of differential beauty already beauty and roll a points. but which optimize and to improvements in accessible differentiation been are to stores market stores from in of have within of to during continue upto our store bring accelerated wins be we areas existing We launching stressed beauty ranges first there development all all The Such performance. said also value, was progress being clearly with the optimization the the In value be no have we've as past the differentiation such have with which from in format, cashes make -- more there promotional coming our of more improving change. phase wider chain the have have months position formats their initiatives. hearing [indiscernible] we've services also at to unique course seen this our feel completed Equally, partnership able have bring future mentioned delivered can support introduced. to I right almost supply such us and in rollout the of FedEx This will we the stores and comp the learning ready begin performing X,XXX optical, the can for our many outs have with concluded which lap within skills transitional in along available stores, making our activity, in as our initiatives this to new It's provide on quarter, we fundamental future retail will We of the don't us on that the attrition including acquisition date and extended our develop brands and of healthcare. a we this in partnership own services, fiscal stores year. formats not to areas work. outperformed accounted having and strategic own the we out, but beauty. to expertise development about all we at more our grid. and of brands. training own the sure more with in accepting would team around look deliver as now themselves stores and Walgreens Since percentage of margin the performance platform at differentiation just well. is new

in a have well buzzword it the which we in again, that's just in obviously still area. been true a healthcare as as is, and initiative of digital not but retail increasingly sitting key whilst not as area, presence Another developing this is relevance

times, Our million has Store. customer app has been X-star on rating downloaded XX.X a U.S. the App

X of last comparable points were year. up XX% around quarter resale versus the percentage scripts through channels, quarter, digital second the During initiated almost retail Walgreens

are go, So market in to with there must the while business. transforming we the long all initiatives way a sight of lose these while is the not we ships

many team, of to sure follow customer drive a this a Sebastian as to opening USA. the in many I later business the we tools, sure to beginning $XXX we an experience that delighted less have right as the calendar Stefano able paths talked forward of is our why how all tools job head U.S. how we the renew also and our example have of doing is we've are proposition with [ph] to comments into I'm great execute choose to we providing and wages paid focus; example of to operations. My within in forthcoming the increased can can stake is the broaden right make of investor We booths and of that and said this, we That's that place make right year. operations. and we keep opportunities James base and more skill planned differentiated in our I'm at we my the our about our the our systems been business. right in to dynamism million have per succession the appointment create team, Putting the the the within annum good reaching parts

George. to over Now,

George Fairweather

Thank you, Alex.

basis. the quarter, reported expect for In the overall we comparable have through year. fiscal year up quarter on the continue to were are with raised today in year and XXXX. metrics of our our the And pleased first and last to key half our quarter, We a constant all profit and fiscal solid currency guidance a we both progress, on the both have

per in share the key offset net income. good on XX.X%. in the buyback expense. the very was provisional up As GAAP growth strong basis, adjusted tax were operating adjusted due part our and last growth a Most and same we the X.X%, diluted discrete difference partially program morning, was changes, by adjusted basis, program growth cost increased per share law course earnings being XX.X%, to tax of reported up income were diluted This earnings net a the net by by importantly, sales diluted in up net adjusted announced transformation operating XX.X%. between year, adjusted quarter share U.S. and XX.X%, On earnings increased GAAP this

For are here growth first completeness, per earnings XX.X%. net adjusted half of highlights diluted financial showing the share

pharmacy retail comparable quarters adjusted gross of higher increasing store in both retail. increased has quarter, SG&A percentage and starting So, the profit comparable time turning adjusted performance divisions USA for of pharmacy year comparable as consecutive operating our Retail now gross X.X%. improved quarters; sales USA. the to being pharmacy adjusted profit versus same At all sales, XX versus income the quarter total last with with in and sales adjusted a these together in resulted by the

a Medicare immunizations had by retail X.X% to offset on failed basis, partnerships in strategic reported XX-day to basis impact including quarter On the points. market partially due basis a in prescriptions acquired the pharmacy D. increased of increased to U.S. impact, let's on in prescriptions Reimbursement and we've of from RX look partially negative including specialty generics Walgreens share XXX due increasing pressure a of volume. leading prime basis, this volume good significantly, the was following detail higher On The was sales number filled formation Rite central up to increased increase by primarily our continued Aid X%, were to a up to comparable where So make an more comparable adjusted mail due primarily Part the by and brand Alliance inflation. stores. XX.X%, and This pharmacy positive by pharmacy sales X.X%, to higher at pharmacy XX.X%. progress. prescription

pharmacy As in pressure we ongoing points. gross the despite adversely and a by higher XXX which first gross quarter, basis profit impacted specialty delivered higher margin of proportion reimbursement around

continue retail were next X.X% Total retail on improved gross sales higher turning action year. retail quarter focus in X.X% the sales down comparable margins. as Comparable we in lower. delivering retail. were last than This resulted to So to profit

quarter ago, by As basis points. comparable Alex at improved XXX years looking have over retail gross said, has we adjusted X the margin

conditions quarter, let's Next, constant at pharmacy lower. international. lower basis a UK market to being X%, being retail sales be pharmacy tough, retail. Comparable and store decreased X.X% were Comparable UK in total currency increased pharmacy Retail with sales mainly this X.X% international continuing sales comparable particularly to look X.X% mix. by on due up retail with

As businesses this. January has I indicated our particular, earnings base we well are In on to challenging, trading our address cost managing our managing call, are been very our we tightly.

constant we've currency been able basis by As adjusted operating a result, increase X.X%. to on a income

wholesale let's basis; now to division. our increased weighted continental country growth this by basis in estimate currency X.X% due the on look constant our conditions behind sales at So challenging Sales of pharmaceutical was on market market a wholesale certain our of countries, markets. emerging AmerisourceBergen, X.X% was a performance in Adjusted largely partially offset basis, pressures income offset earnings tax U.S. by the by procurement European to margin primarily down strong law operating being changes. on currency constant generic adjusted due higher from

to next turning So cash flow.

the quarter billion. We continue to flow was deliver strong cash cash in $X.X generation. Operating

million reflecting $XXX Cash inventories. our was our capital in expenditure quarter, capital was seasonal inflow reduction million. $XXX the working During

Overall, which our free billion. to to for as first brings is this IT strong has and areas invest free flow key our cash proposition, the differentiate to continue We the billion of well our performance. Alex develop This as in core systems upgrades flow $X.X to. customer $X.X in half another resulted cash to which referred

turning So to tax. next

recent Now that was primarily tax the XX.X%; the the year, we for explain have this tax the impact. quarter useful to I ABC excluding this The would benefit better rate changes. lower due and law to last clarity in on thought than tax quarter it we which effective adjusted same for U.S. was year calculated the be beyond,

For basis statement income a our on half the first rate tax in is blended the year rate was rate. same the half XX.X%. tax The core

old the reflects As of this year in of new X/XXth we rate. and have X/XXth August end, fiscal tax U.S. rate the

of million by net tax XX.X% Our last associated year. provisional the a comparable second compared XX% discrete in $XXX effective rate period million expense quarter with was impacted This tax GAAP significantly for with the was the by This of consist offset in $XXX years, law. taxes over deferred the transition new tax. figure net estimates X U.S. tax of reduction current next partially million payable of $XXX

XXXX than with year to estimates our tax continue of current All fiscal to expect over million; previously benefit, the these estimate terms cash In we are this more of refine. announced this $XXX will compares $XXX be we which figures million. now

for to financial of year. be range guidance We the in adjusted earnings to turning Finally, share per $X.XX. full to diluted now $X.XX expect the net

Our expected law our per the now benefits tax upper changes. $X.XX range. guidance U.S. marginally than now share incorporates of indicated The higher the previously end are

usual, As constant fiscal impact current this Stefano. rates said this not to exchange Rite Aid the the we adjusted and you expect rest is on of for remaining back per earnings year. now to net before, share, we do years as significantly diluted I'll hand guidance based

Stefano Pessina

Thank you, George.

performance the the any in return. entirely it's like in single in It have specific placed strength opportunities, So hope The our drive against heard, partnership in bear, I that our multiple can of we it. you from see our our to very is you growth and and cycle. of have to we ability Alliance business to position confident the The a remain results robustness market business deliver that businesses our the consistent multiple our deliver today reflects of as are to the company, we delivered have real financial and bring of does the in lies business demonstrate not continue Company creating, to the lie with our solid portfolio we business Walgreens as ability to to confidence Boots our overall. a guidance Company manage to and business ability create our we value transformation continue momentary updated what opportunities

this confidence a that despite of the of great doing changing to see going ever we do much have that to and markets that forward. us deal give we continue can We experience

we Thank as as have look are been. ahead, optimistic So we always to conclude, you. we

take now will have. questions may any you We

Operator

from Ross Muken question first from our Evercore. And Instructions] comes [Operator

Your line open. is

Unidentified Analyst

Hi, Ross. for this [ph] Elizabeth in is

Given all at that if allocation how industry has your any the consolidation, your priorities? view reasons capital changed in be on of

Stefano Pessina

Well, it it all. at doesn't change

We our have used see expect a deal. can the if right the have way is deal that indication our deal follow deal, have back we course, we what to consistent if a strategy which the return, we I in we consistent willing we with and strategy believe. to a our are always announced to for have just from what principle, do we of trying and we be are if

to not to we to capital. that So are these possible ventures, amount investing possibly capital deal, synergies, not cost and attention to can our other would to be order in But if inspite we partners open benefit market. but are with of share, extract joint open to of all we collaborate extract enormous the always the

cash money will companies, We return we of a create. the to the shareholders, somehow generative that good today money use we to we course have are

possible, give to to reserve if the money the we will do shareholders. We try M&A back otherwise will

Unidentified Analyst

going your really off And do Alliance think in about it partnership offering what is be seems with that's great; your you to it resonating is addition, RX clients?

Alexander Gourlay

really I where mean pleased so are it's stages, we with early are. we

things; I terms able way really of visibility in that part there seeing there and to a do of payers we're I more one the it. but think of in couple think the partnership. partnership that's Clearly, to of is the are different a work is within here what that

connect local acquire these some result pharmacies that and to all to a specialty RX is, that as able of they both in it of Alliance handling we're been that we've our LDD additional network. pharmacies, within are of local of part our customers able community the partnership to drugs the with also Second expansion

So have we are, relevant Prime as more with we with Therapeutics. good a about great we partnership think along feel we more local model where the

Operator

Robert question Goldman our from from Jones comes And Sachs. next

is line Your open.

Robert Jones

we saw seeing still back earlier from benefit a year season. looking had comment the maybe know as thought I lighter talked strong far what a you'd scripts arrangement script back growth about the were Could to expecting, scripts up wanted X% just was guess then a than have X% this the valid just maybe flu basis you what on and a on on you I same-store very the X% given half, quarter? residual little obviously, I prime growth, that we was in volumes to as if still in see target? And you range; the

Alexander Gourlay

year last happened contain and remember so X; I obviously January wins think it QX, an investors they in as of of the that. element does QX that meet

sense, from to remember, December [ph] And saw January we relatively a pretty off the strong unusual in of for normal. -- X Secondly, to it overall, flu us we these season our so pretty was season. a and our months; view, normal can it the level QX season the point much flu was flu is in but very was feel pretty

impact, say wouldn't I much volumes there know there. So don't was I

Going to forward, half and of year still grow going the back to expect expect we before, as the we said in grow also we forward.

not confident We as and is this just said in but part as we're have of in of we much And growing rating and competition volumes not -- last strong transfer very our year seen this on the the very we a fiscal course, the year. we purchased position, volume, least, that which impacting pretty some to smooth businesses are well. additional ourselves, again future second this of some marketing of really the for some the activities calendar is comparative again of course have is importantly, the from but of

Robert Jones

in clarification fiscal or it sense for this think one $XXX think affect wage you're plan on then importantly, you correct? think by where others market to you 'XX. won't And any guess just on more give that competing relative us I year, I where the in I can start said wages, is increase you would hourly our you quick you earners? follow-up guess the that fiscal I million; mentioned puts to this

Alexander Gourlay

calendar on yet can we little this haven't on Yes, have effect it or we that but calendar assume you this a no did say this date based year; year. so fiscal given -- will

later a over invest will all what year to this of the In in people we're we've we're terms announcements keep marketplace, doing this competitive our is in us lot situation review of made in in there people confident the and and the a from continue we marketplace the time, we long-term. in very quite

with outlined plan had really fact do in to to obviously something tax George that this as by the the nothing we release that While helped we benefits already remarks, well. date was but has do was this some prepared that his

Operator

RBC. question Hill from comes from next our And George

open. Your line is

George Hill

the -- tax guys like if guidance came coming updated at with I look benefit from the of change, George; the it most into I the start versus is any I changes most of we it have any the guidance follow-up relates there for operating quarter think just First, looks are guess the for guidance assumptions I you change, kind where your the to should Alex. of where ask a of as just of internal would then changes? And quick I

George Fairweather

Yes, it pretty you've summarized well.

more you really it's the to benefit, change. as to will call; last the 'XX And Our the which really reflects case midpoint be and no just see halves reform change said do was no the the really I we tax two add our to to earnings in expected primarily growth think 'XX. we the that from you updated in core math from you so can fiscal that, that to if that midpoint; guidance balanced between we said two fiscal expect assumptions

George Hill

we they're does future payer do commercial end -- alignment -- as the or CVS-Aetna we've you going then seem about impact Alex, the organizations anything this I pressure to seen guess deal from the Cigna-Express and reimbursement? that environment, are And seeing the buck guess the these of the on deal; side reimbursement I think of consolidation you payer about concerned makes payer your from future not like

George Fairweather

work early that free be see market. will will but consolidation effect are the overall, not the will expect slightly any we and be have in a early we for part there would see some or many people too It's positive bit people work taken too in be effect negative but were so the case in the consolidation effect it. the But because market remember to No, a to independent willing there sure these positive for us. who to to effect -- more on to a

Alexander Gourlay

the just to have I nothing same to way. add, see George. Thanks, those remarks, I

Operator

from Goldwasser Stanley. question Morgan from our next comes And Ricky

open. Your line is

Ricky Goldwasser

is kind of we store on My should per about and of if what help like store you the as can the just of do you envision capital investment quantify rollout? format; first think the us cadence question new required how type

Alexander Gourlay

a digital tests with of platform in front are These X some already on place. the tests course services both we've the platform we've stuff product tests, years, healthcare X a really importantly, learned along markets are new based that and on that our there have in with separately also in on with mix, that the lot and we got last of

of really is really so to any all on together test, So putting understand more information the we rollouts. this haven't got that that

improve we're what in small to mix a format. you as we about very from box get expect to are the the out that affordability a plan. in business our reasonable good initiative has terms in you and of the that return that overall we start how back then this capital these we'll let experience a we've disciplined, the terms that's have and case and you in value and past that And with looks spending I formats, proposition will ready, and In induce when would proved Walgreens, been come and to work of shift know in exactly would we more think the we one, like very fiscally we that including intend a services, also it's that been achieve rules returns within clear any rolling normal can

Stefano Pessina

lot work over activity trial, we money. doing. a we don't all adjust and to we're is is make holding over and or -- of at before the if hold a money We save the is on of quite so typically to a but format that takes it's want under-risk try to which trail any to at of end after have these and that substitute, in we a or money spending the we And the we little trial we spend refine because that robust. more when today we we what but know times amount these This it waste course, limited perfect do stores, be but after we many have we over the a time what a we clients end to order trial sure sometimes to because worthwhile to model that not not of probably to believe of

Ricky Goldwasser

X.XX as it SKUs? And should comms how in decision think think there economics we insured then second impact all, any front fully to of of the -- is should Aetna we about relates end the and SKU from when moving And the one. have your on looked basis? United we at are quarter, about pharmacy on my the the rationalize So point your to to follow-up; rebates but impacts co-pay? members. comps, one this Does how That's are on same of down the where service door

George Fairweather

care that We be a actually is for visibility. consistently to And the creates of that good get good the of this. which But point experiences clearly, pharmacy from to we an industry help a better as over these that the actually thing us reimbursement a efficiency we'll don't point point any and this colleagues we've of normal customer result seen view move expect our rollout of years service in should believe but pressure expect we customer, that what forward, we think is a see so happens initiatives. than when more view, more

the one important stores any I the of points to think as the customers. as end part with offer, point number we a front customers SKU comps, an as last quarter don't you good more the growth. really but Part a and was who people significant actually XXX year the give reduction in for bottom are wanted simplifying over of have are I who we today that well. that of pleased we today some serve moving have important driving is about On consistent in and data we been and the both for saying profitable basis importantly, gave performance But also that specific for to on our these data gains stores are experience have thinking

good have So a is we work. result of as that the MPS seen things in one of improvements

in to it. this confident more but accelerating more to that's work remain we're is there why do, approach do So management and

Operator

And Morgan. our JP from Lisa question from Gill next comes

is line open. Your

Lisa Gill

like quarter it be so taxed modeled look George, had just the expectations? I expectations? we a it understand your and comments understand that I your is internal think the internal execution; way Would primarily what I'm your to nicely, around straight guidance versus being did trying versus but first

George Fairweather

the for is turning out really had about as today we what Overall hence the said very the we year-to-date guidance anticipated, much year. full

Lisa Gill

back Stefano, but better we anticipated integration understand capital about CVS-Aetna I And secondly, I today consistently I would question, about this more in was about want get allocation then the first to where you and our understand if even talking whether know question talking January what more vertical go and discussion about, consistent I to just deal. of be or talked the but you're from there you our that's is that opposed just think returns where things to to financially want with something a at. that's when -- today a fits about I you strategically you deal looking you just is believe if sit better strategic about we're need thinking something criteria, you there from that comes standpoint? the you're direction along understand financial how you're it

Stefano Pessina

sure a our rationalize would you and this to our that for so very, one-way tomorrow different I with to believe have lot only but change believe -- to strategic stores I strategic our pharmacies, possible don't standpoint is if a the is a market. health rarely standpoint, be the very that change a plan, we From merge from have market

that you plan, radical consumers in see transformation change extract the is merger to it serve substantially this in that to a without but stores price doing, to the Of way; And are direction customer a there the main value with have will these even others see what something and what will merger go with of mentioned future extract for to are is in and we people Alibaba value have model future the would is future today. doing you from would that be health quite our The main will at because us one look way different with is the you from or can Asia adapt ineluctable. will if the model, to with will can so many do at not and justified -- [ph], if a given with of just end the without I if to in other pay we the of much there, happening that course, very this a talking or is you to the if other it's it, one And what part we a are that future but we you stores, market. see merger like be we Feint think there the are players and course in a require.

would in a on ineluctable; an insurance the or merger basis. whole not be with this While if with future not with or PBM sellers, fight company

Operator

Barclays. our Valiquette Steve And from comes from next question

line Your is open.

Steve Valiquette

the stores; you or completed anything now just X,XXX your and of purchase surprised assets you curious the under the Just plus all there Rite that Aid you downside if has that ownership? curious is on now upside have these here that

George Fairweather

the had No, us have plan. it's been upside big a confident we downside on process to but plan what point actually nothing I X,XXX we're stores will pleased on that is we network have quite and good, not your imagine really the confident and do to as that forward; be able or surprised to remain so has and remain mean got you expected. lot execute a adopting this still will to can returns still an we over into we give we is us

Steve Valiquette

rest of own? news of nobody these curious it articles, and that or two quickly, there And out currently potential the suggesting able brought were ABC ago Walgreens there between are then ABC you out talks there. up; on don't to again, to buyout else a Thanks. at Just on since it comment the just broad just throw throw on to you just going month it all

Alexander Gourlay

market on We don't comment speculation. any

Stefano Pessina

about are Maybe that. curious people

Steve Valiquette

you're about now right that. Yes,

Stefano Pessina

-- People reading press. the curious are we so become curious that we have too

Operator

question next from our Cherny Bank And comes America. from of Michael

open. is line Your

Michael Cherny

the So I about bit the you're store of Lisa's future; globally. of Stefano want regarding seeing think the little some to changes you talked I question go to back

make you of know, you business. right doing future in partnerships can do of that are react demands? where the to you now you're that making staying whether versus ahead the stores but of think along the whatever Corp those As target [ph] now is positioning you're consumer to Lab sure it's you How with might the think some think moving expressed about the investments my the about of that demand in transition terms the of you

Stefano Pessina

from additional services we'd With that an can an the offer, that, is customers, it's and additional you apart not but clear easier to service represent revenue would course keep be of of apart source the profit catch additional from services to offer which customers that these most be the able review. irrelevant to

-- improve delighted future service things but in see have services earnings excluding; reasonable repay offer complicated was I doesn't good a store more we to to world the would and asking of to is a I but to not says knowing things asked now two for about in from of have now. in IRR-- customers course your do or one. it. in able profitability more to the do also expand this future, terms, years in the cash to have X-XX All today to have anticipate I you that before, of see be that preparation the being that probably everybody under way with efficiency, can mean company. or we pharmacy substantial return, and was different we could share [ph], will and would it in company could a way lead just we the to sophisticated we are Just the your we your return, much someone deal ADA of where if and quite what do also will need. customers in pharmacy at it's don't not This quite our The course necessary to whatever But today improve seen stores I -- in per

Michael Cherny

And do $X.XX savings; increased $X.XX million previous I'm about I the the in a we won't But on here. those official then the just CPA, million, to two that terms admit you expert question change original so benefit, bridge tax think $X.XX, your George, the midpoint based I'm tax $XXX was the if about by of to that guidance. about you an clarification it's $XXX not the guidance how The led numbers? between tax benefit terms in for on difference of one quick cash think

George Fairweather

in rate they two law the rate I mean essentially that about, tax is, half And -- on what is then charge effect about best think numbers way came XX.X%. year X.X%, the a had at of about and I based and it should looking year that try you a different are year forecast, the at in of for would structured. anticipate minus discrete The -- year so because you I the the the whatever rate that this for think the we plus effective thinking be or within for tax end says because quite if we of way full that at think is up around and that is being. discreet way the XX% half adjusted mark,

of certainly we're careful comfortable that to also very estimates, that before our to year, and come I of have are all work numbers since terms have time, increasingly today. numbers. first we've we through and little this tax bit we'll enacted was of things remarks, authorities course clear quite feel changes very time a to then our starting the various taken of and place, to under from course, little have have clarification the seeing other year, short period have you prepared that and the so in overtime, before very, the out the everything, a put that quick really of and of what's numbers when we to the numbers really estimates publishing, come said it's the a really when details In the bit full came always X law repatriation of how and again just because exactly finalize that months that's and estimates about of really then accounting we're you're I'm absolutely that's was this and XX remember I'd the year afraid a it tax into next the sure provisional year before only complex as set driven reform I the the that interpret thinking are on some And we published always very publish tax we after more stressed we on cash months the timing But time. at fiscal we're were about tax good talked us numbers in deferred obviously the that in increases.

Michael Cherny

a of or want tax half for second rate I apologize should be quick. year just good -- I -- for the to this the make XX% the annualized the get rate? So this sure full we just

George Fairweather

a year the what the discreet as to is have the mean, and works; you have and half of first use for before year. I year the for accounting to that proxy, rate the businesses on -- way forecast your full half not forecast based you your

good on different quarter quarters vary some be and could a discreet which can time indication they but it depending can it obviously In So change some the course, half vary quarter; year quarters it the this half of also positive, depending charged. rate mix. internally on the is the second by we it's could versus what forecasted be

Operator

final from Nephron our Eric Percher from comes And Research. question

Your line is open.

Eric Percher

you've So like have consolidation the pressure to reimbursement where bear, How overtime would expect as of on get as seen seen years do last your brought the but not the past a X next they you for discussion do think commentary thoughts then point I pressure, volume on there pressure you will headwinds to state to growth there and be what share on would are look do as wanted where view on are And on -- that on we've it may and reasonable gain steady you both, you we sounds some that's do at couple the expectation, in opportunities those consolidation? reimbursement. same. the your relationships X a the be to the of reimbursement growth? in given similar place What much a years? evolved over relative

Alexander Gourlay

same as that yes, have but I crystal done X X a ball have think the to assuming are opportunity years. it's the hard years we last over to grow we we have always

assumption terms that reasonable a would I think volume, to of be So take. in

to past, and we bit looking In earlier and is we of pharmacy, terms will the to trends as any the are as a forward indication we're of see be think is as at care to and year different better materially pressure going ebb be we think and it's no different. flow What so same anticipate there customers take but similar is to to reimbursement the the ability margin is link pressure, year, but there within them about moment harder business think how the total to offer. build the a we better going mentioned now, right preparing for for future Stefano the

Going is a technology about forward, for experience include and that investments in the more more which we're area data as in try forward. X we reason doing probably opportunity next mentioned our a going for years and pharmacy quite the and got up our joined we customers to a we where see lot have

be pharmacy the next X in future see in So the happy would years. to I

Eric Percher

is investment are investment would and in capabilities impact to your you I that efficiency; team? impact ability make your pharmacists cost. I data on the speak transactions clinical enabled heard to of be to to part view and today going this looking peers that at the the think What also On these care

Alexander Gourlay

I which as to I'll said to have it the see able what way. you is many with services to integrated patients. be Stefano don't this, times same the back vertically to to well provide go same We payers, as agree to and the be the

the assume you there remarks, moment. in are my that in at same down a shape the investments I course route going decent we're with the prepared and we're So we're as getting making already of said pretty we and can

Eric Percher

legal us? to the $XX could just quarter, squeeze define this million wanted I for you in benefit And just that

Alexander Gourlay

that have I obviously nothing is to else else really about We we add. to it it we nothing have to what Eric. it, add know mean speak so can't I is,

George Fairweather

ongoing it's U.S. see, as related places can it's an some just to you models. -- At accrual regulatory

Stefano Pessina

for We consistently have and have carefully the ways risks our see. potential are we to what account that review we we

Operator

remarks. over Thank for to any turn the Gerald Mr. conference to like Gradwell you. now back And closing would I

Gerald Gradwell

questions. Thank for your all you, you thank

will myself was presentation in new As few well. the anyone have wishes take format appreciated indeed. feedback I and mentioned -- us, next format the talking be to you Patrick IR so beginning, who and any Thank all team on days Jay, presentation Debra, us, Ashish, to as questions talk much here, a while in for the the much to this the over very your we're to are afterwards you

Operator

does Ladies day. disconnect. thank the you and Everyone have participating This gentlemen, you wonderful may in all a today's conference. for conclude program,

Walgreens Boots Alliance (WBA) 28 Mar 182018 Q2 Earnings call transcript