WBA - Earnings call transcript Q3 2018 | Walgreens Boots Alliance, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Walgreens Boots Alliance Inc., Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to turn the call over to Gerald Gradwell, Senior Vice President of Investor Relations. Please go ahead.

Gerald Gradwell

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

at here who Stefano quarter, welcome Boots Global today Vice I'm of like of usual, As with to and Alliance first joined Chief Gourlay, Operating the Financial month. the President Officer Chief time, Walgreens Alex would Boots Chairman And beginning Pessina, our Executive of the of and James Walgreens this us Kehoe, Alliance Walgreens. Co-Chief Officer, Officer for and Executive our we

directly materials most presentation, on the our financial certain to presentation, of as they to forward-looking are website market, information. Before latest some this Please GAAP regulatory forward-looking measures. any presentation Except materially. and I we reconciliations non-GAAP harbor XX-K take In the our in information, to results the subject our and for we forward-looking assumptions that hand you statements undertake or whether changes as over that related and this to safe after of uncertainties a projections to and to the available you use no on opening by otherwise. Stefano see and publicly make in new risks the result the cause and expectations actual legal Investor Forms XX-Q to today's will Certain and future based constitute made could will comments, We obligation risk statement factors law, events, discussion financial declarations. of refer extent in required future to cautionary current I results appendix statements. presentation are to through you vary for competitive relate measures Relations comparable update statements

Investor at Stefano. hand months. be webcast You'll website website find After webcast over on this call, to and archived you to XX I'll Relations investor.walgreensbootsalliance.com. now will the presentation on our the link the a for

Stefano Pessina

him brought many has out that way he challenges. George well-qualified plan But and wished delivered it with with everyone. very he must Officer, welcoming through stepping to am James to like here It is usual I he Hello, and which our Chief extensive a say I his us much Gerald. Company for Company new perfectly both his handover. working forward stand looking to great he albeit when I thank as the an start years, George development business for CFO, an closely has the made and with how over him. I of by adventures worked diligence with is and and body CFO, true as helping Thank been as today. the find extremely of went work remain you, for tirelessly characteristic has and a George will fewer pleasure spirit. Despite George Financial would who also Global projects. working, as George qualified, role us to XX hours, today a with value to down us successor to shareholders. say, huge is to on down much Fairweather, still now in and is corporate contribution has

to forward been has his work his so to for date look George well am year, he welcome after I allowed and the vacation. a short look as And to contribution while his James coming thank continuing delighted forward in I to contribution and

our strategy maintain the markets overall reporting elements of of a has way presence respectable we So serve. valued in in the performance. we quarter our we hard and continuing through the toward and are grow are to three putting quarters of been here that a our the It work year, relevance place

of matter our strategic against been Event. a hosted our since weeks solid have We webcast progress It only we made Sell-Side public goals. has

today, will key only highlights. few So I a cover

in steps the of relevance further work taken here an our stores as announce in and of have true to U.S. attractive community the products. range We services our hubs with

the our know, and and health stores identifying our of priority offer development to a for partnership good us, store. services a within care our is continuing make services of strategic that you we As range high-quality progress, balance are to

in nurse urgent stores been We working [ph] clinics the announced area with for that care into to care we date. our evaluating the ties to the bring City first have Humana clinics practitioners with and the primary full time have and to Kansas complement

intended be services. patient these available those are clinics supporting population, care to who on focused community-based most Given new will fit existing benefit readily and to an the Humana's heavily our of excellent are profile from

continuing also are improving in enhance and to convenience customer our store services our and offering as ways insights to enhancing by retail further well look our and in We focusing merchandising for procurement retailing. as

to continuing upgrade rolling final Our to the and systems processes. our it platform for work course, it. out in This will of the we will in and across also we completed create expect a approval for us now further holding of receive strategic but Internationally, is stores. Aid only to acquired percentage shortly partnership and Company up-to-date, have not And the the development. we keep are strengthen, sale FedEx Pharmaceuticals with Guangzhou Rite a are China, our grow continuing of and

business these as how are we at our our could and once on again as understanding to markets allow our of customer to efficiency expect We way, potential partnership have doing build as we Indeed, looking experience. the the work drive us internally. is well overall been

experience in core how could partnership at a how technology potential omni-channel true an customers, our with help and in everything, looking also to for lives. we are the We how us we daily world, to in deliver of engage remain leaders review their give ever-changing us working the

is we a today, XX% more all billion in significant made So we work announced future. progress relevance the are coupled that have buyback in today benefits convinced our with immediate I and authority increase quarter, deliver dividend. am the we $XX will solid in doing share this the Of have

share our cash program This buyback confidence deployment our value of a is performance priority the While will of us us to of is strong shareholders. to flexibility It returning cash investment sign top with continue in to investments, Company. continued we cash duration that provides corporate the confident the give for development that return to the the the are on flows of to generate enhancing strategic cash flexibility our our excess will shareholders. we and cash aims while reflects this flow deliver open-end

of key Before doing that Alex? we James the things today. are quarterly numbers, goes will through some through take the you Alex

Alexander Gourlay

very we are U.S. here of but where actually in the good summary Thank you, the Stefano. Not just for introduction, for

we and benefits. a our progress and financial Event, behind at lot As the we and structural changes, webcast explained level, Analyst operational at of with and central in the efficiency, efficiencies Sell-Side course procurement both have chain scenes made supply of

continuous in a to can often is achieve we still process improvement, of non-stop however a have and there’s areas. another small lot these We all It one. leads work as every

been have position and the we've the our retail customer’s on both of offerings want improving strong know, to We're in thinking capture types and in start data use and shopping a of about our now preferences. to services you stores. As habits we our businesses and

was key past few Our of the years this. pharmacy part over action a to reprice

to not work enough have and optimize through Our pricing competitively economics. pharmacies in-store not regular we to our volume our showed, were the did going market

to we did and partners a situation. the As addressed math, we peer the result, spoke your we

our market we in still had share Walgreens the more XXX changing we've has convenience anecdotally not we expectations. for of While our Similarly, the as consumer continue formation because we're to market retail do, of more good Since validated making Alliance, market Boots part competitive, that have to progress with by points. we have insight share than have grown more in seen grow. our to what part be need all pricing because moved and basis

some environment of been we with area by with up a out ideas other trials stores. the try come the in our geographical new network can other have where and a interfering impacted in We without test them stores to

performed what isolation. to necessarily continuing this test to we're to terms the different mix blend work, a Of of ratios areas have up and concepts also the in to for the of we put with retail, America In clinics But only in the is improves trial and now of time a deploy quarter, elements a need we price have aim trials SKUs can last concepts not and over our does we to course, validate This the the and in setup extension of the running provide we test where not space we our of across of our in We're stores part area. mean in number LabCorp Gainesville is to These stores. this have degree stores. study services months. range opened in we base and in in right of all what important clinics number those ideal what going free been will our identifies as offerings products customer how LabCorp well. of can but

trial we continues early further work very faster how discussing we advantageous partners, for own potential is This the and their the we’ve prove the staff success this Gainesville relationship in the promising. trial are are out Also, of Gainesville. we comparatively and both trial, the customer network. expand nature undertaking to their looking alongside limited the associates. service this of Despite our beyond already the service As timing can proving to throughout Sprint. with coming is been expert services expand offers our with it of And

stores have FedEx in a strength As Stefano of Volume our said, to portfolio. the majority we to continued FedEx our and partnership to from steadily, to increase grow offering now continues the with strength. have

broadening has but additional been year. care access extensively. us and we less clinics population it drop-in for also are we Humana holed many stores majority strategic to available. other care clinics as state, as up trial mentioned which Advantage is expand we to to new trial that a access the the at the base Humana's business customers plans. towards business high-profile These clinics we Humana popular decide clinics these of usual Elsewhere, accept network, and will to signed customers. urgent markets Medicare Medicare insurance patients, wider us, our Stefano group patients stores service to likely stage a have are with our customer full cash-paying. it already If serve of clinics FedEx of have given customers. roll in good are These in through already heavily primary Walgreens primary complement out to would to wider a this proving care increasingly at of the the and of and the our benefits partnership the primarily bring in with the types New skewed

Aid a Rite have hardly Clearly, it's stores. from begun this While acquired new contribution also the The into and the good further properly progress of made integration we stores. progressing number already the well, to the network them reflect trial Walgreens these to work news, format. our conversions with we of to numbers integrate the is quarter

under the customers retaining closed our successfully program, end at we to plan nearby. files their As last have our stores pharmacy XXX to optimization store transferring of week, stores and

Part continued despite of you grow about the continue positive to systems dynamic market, this XXXX have numbers, aware nature progress with We Medicare updates Medicare In feeling The the our and the finished. core prospects. is D in are already are And for selling just we we'll our that D of. despite to overall season network processes. current changes script Part make pharmacy,

numbers the with Aid year-on-year state script stores. our by Additionally, Rite from this contribution acquired a

is current received. well on work continued also to digital be Our

allows under channels, our work retail app And Our third refill area launched the on. services X XX retail were percentage year. their us that we guides over to to identifying move to Walgreens models on update customer-centric streamline million quarter points operating beyond customers clarity allow future up is and all customer XX% and which the around to initiated our scripts I've renew times. driving creating stores around quarter, care will customers Now, agile aspects They us and of in-stores basic many keeps most a in the responsive furthering our direct everything modernize initiatives our mobile the app of customer the provided can new also while promote a a health It future health convenient, and of Care the the navigator care comparable Walgreens suppliers, employees and benefits the to also in performance of the that for and decision-making development Find services all offerings focus omni-channel the customers, offers. recently of our and and to more our now within far improved integrate our been can said, form options bring the this experience. on supply development. digital truly walgreens.com. improvement yet revitalizes and Now economic has platform downloaded and of typically provide last relationship This the contact Find We've some as digital Care of culture work chain and with a through versus structure strong we and our partners. both in for a and management by relevant And approach us health do. Underlying cost-effective Walgreens focus updating running local and benefit

service, strategic heard to be points of growth provide businesses portfolio of our And all and organic across drive our efficiency our reinvest he simply through so on opportunities often numbers. linked from optimizing the I'd area welcome of in the through volumes principles innovation we hard us quarter a Stefano or deliver or complementary broad to ourselves to some leveraging more to in where protection to all costs, acquisition; efficiency, update and and work that to Company, differentiation; and evolution partnerships and way and build multiple unique for levers foster growth James one geography; back initiatives brands strong financial another to exclusivity like the to to continuing are described a quality organic the can and one cycles business or through can you of value, a the strength; core we've been any in has differentiate to before: it financial growth. So consolidate to control will form of on portfolio as give growth of external both now growth, our

James Kehoe

I'm And to be Alex. and delighted here Stefano you, Thank today.

and our expect XXXX line EPS net solid with to to in with now of our pleased expect our growth we end this we The quarter. fiscal are We the a raised to have diluted XX%. of we progress adjusted and Today, expectations, overall broadly were results continue year. XX% lower guidance,

income in basis, On reported our the Turning acquired adjusted metrics quarter. the net up was advanced impact results. Aid to and X.X%. operating diluted XX%, now Sales profit Adjusted quarterly a X.X%, earnings the of up the key including Rite were stores. increased

XX% U.S. in X.X rate downward of tax comparable for XX.X%. The program due transition share. quarter per same from in operating quarter and last and diluted net the a adjusted Importantly, benefited tax between This income. GAAP lower the cost-transformation tax points year was repurchase accrual. program, and to changes. share increased strong differences per adjusted a earnings earnings year net growth per the tax are increased year's $X.XX XX.X%. This The impact share our last last lower EPS rate key revision share adjusted percentage adjusted growth effective diluted GAAP than in was quarter the to law the

fiscal months first our now for nine the Turning XXXX. of to results

sales per key up, our operating adjusted per was net metrics adjusted XX.X% again, profit increased strong by to diluted advanced Here, share growth share. $X.XX a net to XX.X%, and X.X%, income earnings were

Pharmacy the Let USA me versus comparable Pharmacy $XX.X Total and sales profit from both sales, X.X acquired to year sales both XX% retail gross was quarter, last pharmacy $X.X the SG&A retail. Retail from X.X%, and central Adjusted Rite growth profit retail. quarter. billion, entirely now stores sales to due pharmacy mainly sales profit Aid X.X% due year-ago stores. year-ago adjusted and adjusted turn Aid year and comparable up specialty, and USA. Retail the of quarter growth was in benefiting increased with gross acquired the to were billion, over the improvement and quarter, Adjusted the the Rite up XX.X% decreased in an gross compared over of by contribution to percentage reflecting store points ago

has quarters. increasing improved a consecutive as $X.X adjusted of income basis, This percentage to XX operating billion. by resulted X% the SG&A adjusted same sales in On for

stores in As higher Rite you almost and factors: mind these have please review these stores include two cost acquired Aid the numbers, results bear mix. First, for the a following the months,

services we are fiscal relating an we EPS to that finally, was the means benefits. cost This to due million transition do impacted significantly year back Aid. a $XXX to XXXX postretirement adjusted amendment to adjusted agreement. additional And gain an incurring by our the not our Second, Rite by expect prior Aid be operating growth income Rite held in curtailment

due in primarily significantly, pharmacy, This volume up specialty. pharmacy acquired Now detail central higher good look stores let’s more XX.X%. prescription where make continued and Total were was from to have increasing the Aid at we sales progress. Rite to

Rite immunizations, and of Excluding by in share points the partnerships prescriptions On including impact comparable of a The is impact offset our pressure increased digits, our third line the contributions, were basis, nicely up basis Part positive last market sales specialty. comparable Medicare quarter, business with Aid and filled strategic adjusted with prescriptions led compared number offset with of year-ago was brand retail reimbursement growing the XX.X%, On D line to XXX XX.X%, by quarter a basis in on pharmacy increased network inflation mid-single filled XX-day year. the changes. Prime year-ago The generics. the basis, at a pharmacy were by by to quarter. and

This we basis pharmacy which As of by impacted in higher the quarter reimbursement was delivered despite first achieved adversely proportion and higher pharmacy pressure XXX specialty, gross margin points. ongoing gross two profit. quarters, a this about

the in from our to acquired Medicare would we D factors be these about season we year-on-year numbers. an expect reflected XXXX to We expect prescription and positive the stores. Rite feeling As also are selling contribution Alex for mentioned, increased Part see Aid

reflecting the flu quarter, mainly Comparable than X.X% stores. the The and the procurement promotional Aid year, cough, to cold, from increased continued slowdown margins. contribution the we sales decline and sales. to experienced both on in improving weaker sales year-on-year Rite a focus health the wellness on next to acquired in retail continue X.X%, optimization of first improved through sales half reflects efficiencies. retail, as greater third face Turning category The retail allergy profitability due as we sales retail and sales we was our declined focus delivering in evolution the

higher We quarter the program. lapping pleased and increased start we strong a optimization comparable than As both differentiation the was that year. to which promotional profit performance also non-beauty stores. gross are quarter, were the quarter margin stores, reflecting the this Remember category sales percentage before outperform beauty last differentiation in in beauty result, retail gross that in this continue the our last

Adjusted UK a lower X.X% Next, sales Comparable look of The remaining Pharmacy a measures. with in sales gross containment Over continued sales X%, due Pharmacy market certain down income on International at to decline phasing basis. Boots a declined expenditures. on volume decreased Retail pharmacy was XX% decline X.X% be lower offset with declined currency of and mainly to X.X% SG&A profit, basis largely let's conditions funding. retail constant cost due Comparable to UK down currency was prescription International. tough. challenging X.X% as government the operating marketplace. by reflects Retail constant lower Boots X.X%

adjusted performance currency to of up conditions our Wholesale X% offset AmerisourceBergen. operating in basis. Turning continental reflecting certain market by constant Pharmaceutical a earnings the and constant European UK. behind now increased emerging in from markets This countries, our on was estimate X.X% Sales market due was a basis, division. to on higher from growth income strong Adjusted by currency partially

cost procurement higher more generic of impact inflationary and offset pressure sales. margin AmerisourceBergen, favorable than Excluding the

cash Moving now to flow.

was last taxes Operating $XXX deliver cash million to up in the flow quarter operating and cash flow. lower continue the higher billion, quarter year, paid We comparable income. reflecting strong $X.X on cash

inflow were During $XXX the continued inventory million, in improvement quarter, was our million. Cash working capital expenditures reflecting capital management. $XXX

program billion. to resulted upgrade repurchase earlier, this to new free year-to-date year. our to we quarter proposition last free policy, The Today, core invest cash date. the But our an compared differentiate The IT in continue After cash consideration, $X.X to due dividend share to billion in large M&A, our $X.X our systems. to refined comparable next in is our program of as expect to flow and Stefano increase quarterly $X.X the brings This XX% years. also we does mentioned our would We reflects not complete year, customer and flow we the a and billion have during each increase of announced $X.XX. $XX billion announced develop program. which course dividend absent quite three increase the simply expiry a have dividend

and good expect Premise This fact, dividend a agreed years have marks consecutive a relationship close has today's minority exclusive gain Premise XX after-tax with to forward the $XXX we In deal our million. for Health dividend to related to book do of investment we On of in look and corporate commercial We customer. to Health, interest increase a in the increases. their approximately sell expect been an topic, July. pharmacy maintaining us, partner and our as both as we

to next guidance. Turning

growth fiscal to have for XXXX, expect XX% our earnings of share adjusted in to of of net now compared guidance versus adjusted guidance to fiscal per equates This EPS and $X.XX EPS guidance range be XX% $X.XX approximately our to to to $X.XX XXXX. We previous revised year $X.XX. the diluted year

up summary, bringing had adjusted XX.X%. a our year-to-date growth in XX% EPS solid with we year-on-year, adjusted EPS to So quarter

demonstrate and you also our Stefano. strategic now And returns. progress commitment We initiatives. our you. hand making back on to dividend share program are Thank our new repurchase increase shareholder And I'll to

Stefano Pessina

James. you, Thank

So have good solid quarter and a as a heard you outlook.

invent or Company people growth change we core is about of creating is how of essential the to an lives opportunity, daily our It life, value. it is of indication an need to part and a us, our and constant serve. is For change the

the or and beat in serve committed year. confident that and that tell meet from of the hub position continue convinced years from attractive us you. opportunities. offering competition of all, operationally their about of with have that local That lives come. real differentiated We provider highest-quality can convinced remain relevant to strong is for future products. many teams range most change for U.S. services with absolutely our share immediate our program must communities. stay the and year, using remain deliver potential and developing the services we serve being we dividend our for why the communities billion our we remain grow Company sure efficient, and to will our to value growth our however, make we you in and presence of create We the the we Thank remain for can an just of on our has task as Company communities both omni-channel them. extraordinary create it’s plan about convinced in to our to remain opportunity and as working not to people's relationship we change, in and We as stores you and and Our our it, prospects, of is are convinced value policy. buyback $XX the growth, financially. Most investors and value ability community but the this strength our realizing about to the remain and guidance to We the that our see for those the built convenient in We deliver on

We take will your now questions.

Operator

Our Lisa from [Operator is question Gill JPMorgan. first Instructions] with

Your now line is open.

Lisa Gill

growth quarter on then think ask about a remember, going business the I gross we talked a was in Can we the the do wanted as be business script about headwind about out how of questions sales we lower X% to in carry they your January, talk margin just around to about the secondly, Specialty how gross two, think couple forward? that that X%. kind you know Thanks the what business, of core one, you good more quarter. expectation morning. trying from, same-store basis, and Rite a like And just parse I maybe about that to margin; core gross flat your Aid; very in might think margins. much being I that

So I things. to square want two just those to try

Alexander Gourlay

saw with we partnerships loss of with terms preferred gains Aetna Prime And specifically the had quarter, and structured from to – start strategic moving growth. with had out that we from Hi, Lisa. we the X% business last by in It’s with share coming balanced grow continue I'll I on to at Alex think, United, are we far pharmacy, for share organic WBA quarter, as volume from of driven you season formed, script the prepared Rite XXXX in And selling have in okay XXX so to the next non-organic as in a James X.X, was D, albeit as of year, points said we With in the through we year, X% good this since underlying in so feeling about and in extra his feel remarks, so by Med here. all. Aid really the actually we record – pretty terms in and year non-preferred. first well. basis know, market the this an

of long-term. feel our about strategies and good we grow to consolidate key is volume volume one the So and over that

value expected, to feel pretty I and So grow drive confident underlying, and business forward we affected volume think than decline we outside the continue Aetna than of good partnerships to by going more partnership. continue to had script that but the rather is particular marketplace

of two acquired Aid business. Rite terms quarter, SG&A impact In the we the the the obviously specialty less. had along margin to and points Aid in XXX of or with think said was that’s and XXX, the situation before months which business, due of the to specialty business, basis about we bulk mix within cost I major to the margin, in more Remember, Rite due an cost, that through margin.

James Kehoe

James. is This

the growth organic the actually. U.S. in up confirm as quarter, Aid the plus which out And if business, business, basis XXX the profile sales quarter. Prime the margins basis due U.S., you points growth quite Rite look the to and to points the business, actual the down just margin impressive entirely in that, in the at specialty So is gross XXX the take were that's X% you were in

of the businesses the mix mix issue out came created the fine. on and The quarter the we the this growth in business, the of actual majority impact but margin, quarter. adverse are margins the this have a specific However, on the specialty is

Lisa Gill

great. Okay,

Stefano Pessina

if this In me, this changed that's last reality. the our you structure has reality, and with business year of difficult the the problem, And because is business allow to year, it's compare very the

try, we work, course, but to a toward structure. guide it's So the different of

we difficult first when happening. is to at understand sight so And compare, what it’s

Lisa Gill

to player And of a big to in small curious Stefano, a I just that said PillPack. or thoughts your initial lot Amazon announced I the have it morning called a company was this am is your impact you by buying as know be acquisition expect past them? don't around them this on business. small you

Stefano Pessina

was sale for knew of we It company for been had a Well, while. course, the sale. for

followed just things We prepare kind direction, working working see, my said I certain end of believe, more we of we to future. so, have not that of is have worried, believe, happens we to with one as be is companies, our honest but delivering of fact following even the I strongly of that from different we in declaration are And and in is particularly pills We we we role than a emotion it also of the Amazon, complex have mainly at fact, is work market. company course of today, We things have as you And direction, closing in hard yes, certain be very, particularly the our the on pharmacy this I we to the grown small let's packages. intent change of remarks but emotions that for not were we in the everything – much to services are doing in And our that of very these the we customers. worried the the say because quite because that since not and level but compare a physical pharmacies, to to the pharmacies, are it's day, not merger. and worried, continue is the there important know we a that lot course are have that or complacent. are are the customers, services the

earnings per in growth share. of more and XX% delivered have We

a We delivered flow. cash have strong

grow and our good have we We are substantially. increased Alex, say you in can to something? ready to future. health cash And in continue flow

Alexander Gourlay

company, service our locally obviously pharmacies. the offer this followed we’ve to Yes, and we fiscal

service we care. in continued patients as changes, that we to circumstances others to with and technologies that all plus have invest support these support We technology and in special many have – communities

So I more building think, can we honest community are Stefano confident compete said. basis course confident that we're services and Lisa, out additional local we of around our to than as be

Lisa Gill

Thank helpful. That's you.

Operator

from is Stanley. Our with next question Goldwasser Morgan Ricky

now Your line open. is

Ricky Goldwasser

so change it Amazon PillPack, your focused Does that about that here also kind of user timeline those, capital you the into or Yes. couple is perspective, know when chronic unveiling strategic convergence like about you the move Stefano, your population. move accelerate think A at as environment, the more Hi, the as your acquisition. initiative we population follow-up the on on patient capital? morning. does and is a firstly, a thoughts pace think good brick-and-mortar, the first M&A when we And of does and least kind from should of about that traditional the and deploy aspects – drug high obviously deploying of the questions in and digital of Amazon

Stefano Pessina

to that I any to have facts. separate we the be the worried. have We said emotions see don't reason from always

I We are not complacent. this. repeat

will the a plan. of our value. If at our believe that M&A we clear with emotion, discipline, without so pressure destroy the end we execution have of We under the respecting will financial did continue I just plan we and

– I pay we sooner And later would for it. or would pay

we believe will it. the If right I you we for return we do at what that, as are know, always as for we something buy, the M&A can buy that price. and open see said, have So we

do something our We we because We just strategy. have our plans something. that we will solid. to not quite feel do is what We know exactly that are know

We have company execute is the what strategy we in the this the abilities do. our to means and and

never see under You or acting will pressure us the panicking the of emotion.

Ricky Goldwasser

table other the the players though marketplace that mean in some now? more announcement think potential the might partners today's and you to Do might be of willing of to come you that

Stefano Pessina

What see. can I say? Let's

always are open. We

provided is that come who door open, are always Our people sensible. the through door

are to them. ready We always welcome

Ricky Goldwasser

on lastly, And follow-up specialty. to then Okay. just

in estimate do Prime, progression you the bit the you growth, purchasing, what Scripts, with one us are about the talked and little year-over-year biggest share you on a with just to contributors your You where with specialty color is can give as more the of market now? specialty Express

Alexander Gourlay

relationship Alex value Hi brand our customers better and major good. group us for the buying One, the together and working obviously, will very setup. been our marketplace peers. with The with in Ricky. bring to here. And a is confident It’s Express to has just we remain another that

days good. so so So it's early and far

models. and not because of develop our two continue specifically, you course, we can't but I to it's report market We have give we strategy, something specialty share,

Co-COO, us right will increased relationships important over And philosophy a relationship. manufacturers. our We LDDs grow marketplace we number in example, work specialty community years, with the in have global to community and for specialty, is continue very we very have a AllianceRx with to close the model do where model have many we to least, where not to Stefano and of as we built Ornella invest small live of patients pharmacies the the where but Barra, that central to we our continue relationships and be global we allow this the doctors the And for two there out has there that partnership last to local successful, and practice. part And of grow and very it together to strategy. proven has continue with we have these to continue a as with closely. And my think we result and of right then brick-and-mortar things us.

Ricky Goldwasser

Thank you.

Operator

next from Muken with Our question Evercore. Ross is

open. now is line Your

Elizabeth Anderson

with OpEx going that been management. able view sustainability you of of anything on could margin Ross. how far, been – on very is comment you was gross forward? about a have I Elizabeth you’re offset in so OpEx far if of and really questions degree so you management wondering but pressure This the good – sort for comment number to it there opportunities Was you if can there have Anderson of Hi. the

Alexander Gourlay

confident we remain We that Yes. very can remain very efficient.

as We we we're focus we of information market used for advance Alliance, said investment think are comments. improve said, we where I reimbursement And continue in to and to in competitive. importantly therefore, Boots plan important mean, it. since us, really for And scale. will processes, have to our is we efficiencies I as remain making European and most plan always scale we really us. we can Walgreens efficiencies, come of make this we to really The the and to we from pressure. sure And I that the prepared in in have continue investments beginning opportunities, technology

In stores of on gained addition on early the Rite on this both us Aid synergies, year also more but opportunity scale.

what of So that's part we job. again, our confident, remain That's And we do. Elizabeth.

Elizabeth Anderson

little the kind and Perfect. side And UK thoughts just your terms more consumer a wholesale you on reimbursement retail then challenges the give in businesses on color could speaking and market European terms of experience, in just of of seeing then your and both EU and of bit spend? you're us what on pressures

Alexander Gourlay

period Yes. no and available really is We Thanks. Again, the also pharmacy reduction which that reimbursement a prescribe health UK. normal see We a some are to for UK, secret outside of increasing the Pharmacy this UK. Boots is be years happening. X.X care was government directly reacting know two so the prescriptions impacted in in the not in things many conditions. – come well. of I'll and the pressure, doctors it's And about up as Particularly, known Brexit unusual see Brexit, an things the volume very government pick to through, costs business ago. to a has of through I encouraging

both in Clearly, also these things are closely are our looking terms the we do impacting with work more in volume of So phase. margin this the and how we wholesale business.

the work as we want manufacturers wholesale services efficiency team her and bring to I in position very to strong already very and work very, chain and to with continue really a Ornella closely, that UK, in make sure and supply said, have on the we We that marketplace.

as these we work usual conditions. So in

a it. which future. but our has We’re been we’re phase, strong a lot opportunity more business, challenged this than of And will sure, remain used usual, in have and for the to is we through, coming

Stefano Pessina

have that in And emerging portfolio on a we pressure the I would have add And in markets, pharmacies let's stability, like Europe, by market that business businesses government, difficult course, the is of in Romania. difficult said, predictable. the Germany in is the and in in wholesale On the other quite Continental the this that the good in very very in fact of business is on more that selling good France. us definition, particularly It's relatively – good gives course, the Turkey, the that, say, very very overall, difficult, past, course. good and of wholesaling we business, of certain Egypt, reflected

into of of less. has managed the quite purchasing are over of see a people You’ll And business business very, part of a they’re the the the WBAD importance – important. that account contribution course, wholesaling we more, you that but The group to substantially just stable this little the year, little another of not the have virtual take Alphega. by And to is this relationship certain generating a cash, see we but for the is And see our and of cash the cash-generating fact suppliers, Alphega that business a it's is with wholesaling us, volumes like the business, – see also, course, because the business function very also importance is is our substantial we relationship and our is that business the part the power. their wholesaling. pharmacy quite contributing for important of substantially is that the chain. that

Europe, of the chains Continental allowed. are most in pharmacy not As

many also that, low We our kind UK. is have business, because of we don't countries, our And Alphega, almost have in virtual and still own our X,XXX a we there very of the pharmacies have franchise, this X,XXX where course, business overall Alphega our of it pharmacies countries. improving a many strengthen across where we if we pharmacies, like have have chain, European partners. define can overall We own

for it which but not importance opportunities creates the the just services that and So is cash the on quite overall business for of the additional profit overall, it business the stable, not on group. significant, is is on delivers, different the which it – the just that delivers,

Elizabeth Anderson

Okay, you. thank

Stefano Pessina

Yes.

Operator

question next Our Sachs. with Jones from is Goldman Robert

Your open. line is now

Nathan Rich

current how Bob morning. that announced of of you're the industry today thinking positioning how strategic deal vertical thinking the for was as changing is you the start, of think need that deals This and to Stefano, this change about around And the assets the business future? you to appears way given are were that how with that Thanks. Nathan the type to you maybe on Company, to Rich you does might be in about that the longer-term add-on the some process? about

Stefano Pessina

we that changing. know well is very space Well, the

this said very have clearly. We

changes. many, We steer since We here. is and that this space toward we have times, we these try And businesses many those we to changing, the as are know said have we to have create done the ago. we years these the we build merger believe to business platform because And on changes could reorganize the three I have after it. which said we

this everything We in have business. practically reorganized

our seen flow cash substantially. have have our increased substantially, You profit that we

in can that remarks. have of we our I are what adopting So have strong we this business towards have working we we And said just created their a said, is business. you needs the market future to assure this

maybe believe have you were you our – to change is strategy exactly were are we and this can And so we don't Alex, something? is not what our where add saying, you towards. that because exactly strategy I working what

Alexander Gourlay

we prepared yes, Nathan, lot all spent taking last said, are and in really now, energies being looking spending doing as on the years Stefano our care and trials, all as the business, test and reorganizing monies that of few a said the forward right I've the Hi, now remarks. on we're efforts

the or in interesting, our really sure still to we of and really the making less is as all the show markets customers really, that and more are We’re looking today are change. really customer relevant doing we forward U.S. was what some effort

really going with enjoyable it's we’re So what it. on

Nathan Rich

the despite I quarter. looking a think were stores that SG&A of And quarter, this you the business were the I U.S. costs just in follow-up, Aid $XX those sequentially, most higher-cost Rite at mix. Okay, thanks. impact And million maybe of for having think almost said down, full

should drove about detail more maybe you we bit announced? can how more we – full stores Rite quarter, previously SG&A you’ve forward, on increases run just Aid and think rate, that a wage So about little the and give importantly, we also thinking the full what look for the having when us the about how decline in

Alexander Gourlay

consistently to central three said opportunities I've coming think I have we across on have two, I working on. stores, offices, many programs span, goes down we as resale years, efficiencies. Elizabeth, the are for mean Nathan, is costs working the now And on because And it. that we have and we're list consistently

James Kehoe

point. one-time is want actually this The we're benefit here. this through add one the curtailment I to just because period. result James quite Yes, is prior in cycling year more impressive

So quite said, are not we've only the were impressive, results, as but items. through we one-time cycling these

stores the overall. as efficient make the we also to and Aid I the said before, think, generally management Alex we have look as Rite forward, opportunity more

would would making nine I in they've actually managed. is always strong business tightly And that impressed on come I'm any I There in board, G&A done opportunity over As or there's quarters. the programs. by But say, the sure business. reflect I past, the folks continuing is eight quite work the extremely

to make job my sure that continues of well. is as So part

Nathan Rich

Thanks the for correction.

Operator

with is Hill George RBC. Our question next from

Your line is open.

George Hill

I morning, your guess, like maybe do to feel must bit guys. guys like the guess, optionality? up and And capital weak you deployment, given the how good capital you going to present you opportunity would Hey, And And I repo just wanted you I forward something this priorities also being would open Stefano, up does announcement, billion highlighted limit I Is little affect about do that is how an to timing. not emotional stock deployment share I you I timing and, guess an the today. announcement the wanted when to going feel the of work kind step talk deal itself? guess about – relates thinking but the it looks it repo recognize as repo the share about where ASR? the a $XX on to about ask you

James Kehoe

here. James Stefano. It’s Yes. Maybe on I'll pass it

want then is you on Don't deployment the relatively coming I’ll internal will I work over is next And assumption, board, dividend if I comes let expiry question can at if respond an the major be are the we're investment, the was program the think partnerships repurchase the that you flexibility and we an new, and think quite I It as the the M&A years. and directly repurchase. of date transaction share the and/or is lost yourself. because options your right M&A I capital One clear. two that pursue to the for is, and to have make share look same course it it do the time we program, absent we the on out think doesn't along. three at dividend I’m communicating

with impressive. though generation cash up year at in what $X.X last quarter convinced $X.X from to strong pretty We just are look the the and billion happened billion It's this pretty year.

We that expect continue. to

do be given Stefano think So returning has and that's prepared in need and I his deals to we to remarks. walk chew gum. and shareholders We that essential should cash able the to communication

George Hill

AllianceRx. Aetna been that is like, going this was I'd you script scripts don't out can going I sources walking like about Okay. the be say, optimal the And business like how of We I growing has give final any on boost what's helpful? us SilverScript I Alex. you if can talking with Alex, I door away, quarter kind anecdotally guess I can of if some of fall the about are the follow-up you relationship, imagine are where quick off on a can still and payers? seeing a the scripts talk color you from know that guess on we with from the preferred? would where trends know quick the larger – saw have tail for the

Alexander Gourlay

Sure. the good just in contracting, said before to Lisa, I feel Ricky for D season XXXX of on we terms closed to prepared about and we George, remarks. his James I said think, as Med the –

The issue We is these really we've Optimum to to to with be well from Aetna proven on successful. our all And and in non-preferred. do had continue also to have we grow business. United with things continue moving Prime, bigger preferred so

George Hill

you. Thank Okay.

Operator

with is Our Suisse. next from Wright Credit Erin question

open. now is line Your

Erin Wright

I the what Thanks. as some your Great. give of you are as Could an AmerisourceBergen And here? just relationship under with Amerisource you and with do structure? Thanks. to the what ownership opportunities well can more speak guess just us there? limitations current update

Stefano Pessina

We Amerisource With together have well. a we relationship. work good

don't We change the At that absolute being well. need an they situation. are time happy overall I believe see are and to as we the

we time, the course, Of for over could but being are happy time we change are. things as

Erin Wright

drug Okay. speak Thanks. update commentary to Secretary, And just of Thanks. from what the potential can blueprint changes you structure? are from general on some give us on pricing HSS and the an new implications initial or the drug the thoughts to potential and rebate pricing your

Alexander Gourlay

that's mean, that I think the I we We've consistent really, transparency. is day very with been one. Yes. what HSS support And from saying. price

the supportive remain too So be honest we and Capitol of impact, understand tell supportive, had Hill things that early giving but giving more and to system. visibility simpler on to to we rebates, pharmacy healthcare and pharmacies recommendations a them the easier the customers it’s and some

Stefano Pessina

at chain convinced a the we of pharmacy better the the off more that is we element distribution drugs reasonable making rate. service an in that I am add are overall, giving because be system, if an element their transparent – could a

fee-for-service but tell quite would our world, margin, believe it a could And where have be a one system cost side even similar more situation our on improve just a we would smaller the so by would that substantially. because or could probably be streamline us system paid transparent a to we margin I whatever in to streamline

are in transparency. very we a So favor full of

Erin Wright

End of Q&A Thank Great. you.

Operator

further the Gradwell would And no Gerald now I'm any showing back remarks. further like questions. turn to call to for I

Gerald Gradwell

Thank IR today, call. call the We, any anything are take have you fourth everyone again all and will you. Thank Thank questions and we we on to team but participating in very further you speak the much may in around to indeed. to the quarter. thank the you didn't get for you you

Operator

you in conference. thank for today's participating gentlemen, and Ladies

day. a You now Everyone may have great disconnect.

Walgreens Boots Alliance (WBA) 28 Jun 182018 Q3 Earnings call transcript