Earnings call transcript Q1 2023

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Operator

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Walgreens Boots Alliance First Quarter 2023 Earnings Conference Call. [Operator Instructions]

Tiffany Kanaga, Vice President of Global Investor Relations, you may begin your conference.

Tiffany Kanaga

morning. Good joining first Walgreens XXXX. quarter for Call Alliance for the for of us you Boots the Earnings Thank fiscal year Tiffany of President Kanaga, Relations. I'm Global Investor Vice

Executive call Officer; will Financial Gates, be Today's in Walgreens Senior Pharmacy hour Brewer, Joining will our of Rick are length, President approximately Healthcare on James Kehoe, X today's our me including call Chief and Officer; Vice participate and Chief Q&A. Roz Q&A. at in

headwind that include OTC note Let all tests the COVID-XX vaccines, references and U.S. me tests. to drive-thru

As and always, our during making the conference call, forward-looking current we anticipate projections on statements based expectations.

results assumptions the information, on to otherwise. this a Slide events, Securities result We undertake and actual and to our number listed those differ a of and new XX-K those in Exchange update after outlined Commission. including Our or statement materially obligation any forward-looking X latest presentation, in no could with of publicly as filed due whether future Forms factors, XX-Q changes

You this and Investors can the non-GAAP that call discuss The section Alliance information of Boots contain release find the further during slides we this on website. also measures Walgreens our today about in the slides call. press the referenced financial press in will release

over I to will the now turn call Roz.

Roz Brewer

good lapping and investments AllianceRx decline headwind Healthcare growth of XX% and labor. X% everyone. in reflects from U.S. the headwinds the currency and in segment EPS tailwinds strong COVID Thanks, we Tiffany. constant our healthcare very last our to adjusted excluding And XXXX execution new the and assets. year. and momentum, from fiscal comes from in grew Sales The year against anticipated morning, over delivered WBA start with good entered the a solid Walgreens or X%,

core business historic remains challenges. Our macro despite resilient

top on year driving record growth prior are healthy retail performances. comp of We

in majority substantial move November, volume our our restaffing tribes. by agreement made and better reaching This political over We more marketing matters is states, XX announcement us consumers opioid to approximately focus to are an pay on subdivisions on litigation important track our helping with brought health. as $X.X of in lives through and principle script plan gaining opioid-related forward legal Our joyful on resolve years growth initiatives traction. a an and our purpose, lead to allows billion

our are to We of VillageMD making by acquisition with same healthcare, and notably company the Health. portfolio. the great value quarter At progress in to accelerate the simplifying most transformation we're the Summit unlocking strengthening time, the

to EPS full execution $X.XX. in of adjusted Our to date year our our reinforces guidance achieving $X.XX for confidence

guidance, are results, visibility growth to the underpins raising and core our toward X% offsetting the We sales our of XX% that to greater XX%. headwind we COVID XX% have strong

scaling year. quickly profitability are U.S. defined to Healthcare this path achieve with We fiscal exiting a

local to create are reimagine we actions Our shareholder working and strategic value wellness sustainable healthcare for all. as

of XX% our We are last of priorities. were strategic comp excluding Boots tobacco, U.S., last over top making progress against up and year both each X% almost on strong, boots U.S. four the retail of top on and XX% up with X% sales year. UK

margin a backdrop. align to especially our am core value consumer offer performance driving The I the we this including our expansion. are and pickup. XX-minute channel Walgreens and initiatives resonating pleased the against traffic across launched XX that with around-the-clock This well, access, are good the tougher items and country. hours of of X-hour delivery broad same-day for and range delivery delivery, widest to range offering retail adds convenience

flu season. positioning on record year's our availability and and we're ahead campaigns XX and very price promotions online buying that through inventory visited The Boots.com most one versus Boots this holiday favorably And consumer maintaining delivering to was sales. of top Friday website of benefiting the proactive Black responded competitors UK's cold, day. from cough retail

efforts a X.X XXX members In COVID-XX industry goal million total the million year. to estimated savings XX.X in the study XX has prevented that and showing vaccination over quarter the response pharmacy, the from This to hospitalizations, U.S. prevented over trillion been national lives saved in with have patient million million our full COVID contributor the up million the Walgreens adds administered for Fund our through medical team $X cost of Commonwealth leading an vaccinations infections. program. against the X pandemic

most available. not prouder team's of being trusted be could the pharmacy resources I execution tireless our among health

been week operating leveraging to has and are level our continue communities local and customers. to personal platform our on to with nearly Pharmacy for focusing care we hours. pharmacy mid-July, to and every digital since ways We countless stores normal are positive staffing investments return a we

in resulting the excluding pace, on are efforts points immunizations X% over growth comp basis quarter, sequentially. script up Our XXX in

Importantly, seeing with are stores in growth we hours. mid-single-digit normal

pharmacy patient our micro total inventory We X,XXX script supporting and to path tasks team supporting facilities about give improve more stores. that health. services routine have center, pharmacists also adherence recovery. now and opened the drive time and excess ninth automated our They fulfillment the and for remove from These outreach

transaction Health, second leading provider This groups the one and to engine, next VillageMD's of our $X.X primary importance in of landmark U.S. highly Turning care markets. country. care care and delivery invested growth the creating scale independent urgent addressable priority. continuum. attractive multi-specialty a VillageMD's in of reinforces strategic care, density We the support our was to approach recognize segment. critical billion Healthcare the and build-out our accelerating across market in the expands strategic This acquisition of quarter We for the Summit value-based with

time. over profitability Healthcare. U.S. accelerates also We for see meaningful and is potential immediately accretive The deal EPS synergy

continue closed scheduled positive Health fiscal acquisition the to well, of accelerated EBITDA. and We to perform to to led Shields third CareCentrix in XX, adjusted the Shields with which Solutions 'XX quarter is close both fiscal 'XX. December and of entities. exit expect CareCentrix on

Walgreens, XXX the XXXX the in country, with care achieving with target. way year-end, calendar as XXX co-located leading is of VillageMD value-based the for clinics including

now across XX locations XXX operates week, of markets. the Following the earlier close Summit over transaction this VillageMD

our December. We for Corners also had the versus now Health the with we XXX XXX goal end expected by exceeded of

which life and pro forma to we our better of drove in all best-in-class quarter. take XX% assets, Our is simplify the This align continue through actions investment our through the business. combined healthcare portfolio to coming funded sales growth to a is growth strategy

In November of highs. and December, tight we unlocked the million XX-week executing shares sale in XX with near $X billion cash from proceeds AmerisourceBergen discounts and after-tax

stake approximately in in $XXX from of We million also GPC. the realized sale our proceeds

that have with strategy Lastly, strong Driscoll, leading we a structure Pharmacy John a and Healthcare. new fully our is Retail including for U.S. U.S. aligned team

We're people, we the is in retain experience. continuing to crucially, most includes to in team very and their investments a stated. role further talent, providing micro centers which environment. license, and best the are Perhaps to pharmacy pharmacists recruit and minimum creating also superior reinventing key at customer fulfillment wage, the of task-based while metrics, eliminating top a practice our 'XX through to our as the differentiated invest them of Fiscal further previously enabling work

the pharmacy value our leading continuum. foundation retail across deliver business the for Our to assets healthcare provides care full

physical landscape. We the are models able and to complex unite healthcare to guide through consumers digital

us of do. risk integrated an pursue health and and There lower We the outcomes allowing which to and plans to approach. will can as value-based for improve patients synergies, help Walgreens only are cost resources care the are significant value arrangements, opportunities scale and building demonstrate

value and to business integrated operational looking I'm more focused supporting We models, proposition care our our ahead. expanding expanding risk driving on with efficiencies. sharing are you pharmacy forward

James With hand outlook. to more results that, on I'll our over color it to provide our and

James Kehoe

full in the start summary, morning. Roz, maintaining had and very basis you, strong first we we to outlook. XX.X% with on the delivered prior line by and expected headwinds, solid were expectations, good lapping growth over a Adjusted we fiscal broadly our declined we year In $X.XX year results a our Despite EPS quarter the EPS constant Thank were EPS year. of are quarter a currency XX%. as of when

due mainly by XX% and the of headwind from International a retail partly in investments of performance a good offset and was decline favorable COVID-XX, year-over-year Healthcare growth labor investments segments X% U.S. rate. U.S. tax These were The and both X%. to

grew M&A, core a remained X.X% constant U.S. basis. Healthcare environment. and currency in AllianceRx resilient Excluding operating on business a challenging sales The

in International the in quarter And comp U.S. by X.X% a to year Germany. up our rapidly the despite XX% sales U.S., prior a X.X%. and strong were scale grew and UK continues the business led very on of sales Healthcare X.X% of sales billion Comparable basis. with growing lapping forma $X almost pro

to in constant percentage XX% quarter year With of points. X% core the broadly to of COVID-XX full by growth guidance XX our headwind EPS $X.XX line, a we offset with $X.XX first around currency are maintaining adjusted

our now dilution Our reduced the guidance and Health accretion ownership from Summit EPS from stake in AmerisourceBergen. includes

refreshed transaction, over raised the to $X good Summit the year reflect our Health a currency the full We by closing billion rates guidance year. have start of to and sales

more three X.X% basis. in billion look points currency at XX% Sales constant results on on now Let's due adverse from will XXX of Despite operating an detail. stop factors. a headwind basis impact AllianceRx. of at after decline $XX the a anticipated Adjusted December. This income currency declined the constant rose basis to

COVID-XX testing impact of XX%. much a Firstly, to approximately vaccinations lower contribution and from led negative a

quarter, was with loss percentage Healthcare the of higher points. $XXX adjusted U.S. in an the Secondly, impact million operating X

prior higher quarter of to full year days of Health compared a for and organic includes only X The Walgreens the current in results VillageMD investments quarter losses quarter.

rate release equivalent staffing labor X allowances income. despite minimum and decline are disclosed XX.X%, points favorable to growth. $XXX from This EPS was of of pharmacy related capital a Thirdly, valuation losses. headwind, percentage to of Adjusted tax a to our the was previously wage, investments entirely AOI million due in benefited currency constant $X.XX, operating which a

$X.X GAAP gain in charge a a quarter. included net billion The offset by $X.X to opioid-related year-ago on partly of losses, a the after-tax million of quarter billion earnings current compared earnings billion sale AmerisourceBergen $XXX shares. for after-tax of were the $X.X loss

to that a year gain quarter Additionally, a investments VillageMD prior comparing company's in we Shields. and on after-tax are billion the $X.X included

Pharmacy Now segment. let's Retail U.S. move to the

improve While U.S. lessens was traction. second performance script COVID-XX the gain as we to the the headwind headwinds, impacted year-on-year expect COVID the to in initiatives volume drive half performance anticipated do and by

tests prior X% if $X.X Adjusted comp decreased the offset in quarter, Transformational expectations. and operating vaccinations were of Management X%. and very labor PCR income X.X%. The billion Cost COVID-XX declined savings retail increased exclude of sales expansion of strong investments the Sales Alliance XX%, Headwinds gross X.X% and partly margin you fewer our by negative increased comp year but sales sales by from impact in Program. and lapping despite growth broadly Rx, a from increased the with line

inflation. U.S. Pharmacy. Comparable pharmacy testing. Pharmacy drug turn sales And branded lower from headwind a X%, last lapping a Let comp points. contributions of despite growth scripts point X.X%, by back comp sequential and up up was vaccinations sales declined were year. AllianceRx immunizations, now favorably by scripts were and X.X% percentage significantly me by were X.X a basis sales COVID-XX to Comp held flat. solid XXX The impacted from X.X% improvement over excluding

administered in were down flu higher We million X.X administered COVID-XX year incidences. prior X the prior to-date, have XX% versus flu year to quarter, the shots. up million quarter. Season we versus Flu over due vaccinations vaccinations first

As to expectations the shift with compared mix expected, and at-home was to level quarter to declined pharmacy-adjusted a and our a tests pressure due in of margin fewer year. line the lower gross Reimbursement and in of reimbursement procurement COVID-XX profit lower pressure gross savings. net prior margin ongoing represented COVID-XX broadly vaccinations,

sales with to strong We in year quarter. continued U.S. Retail increased quarter XX.X% margin. the prior our Retail lapping comp and retail saw comp a despite performance both very business. next Turning growth sales the in good X.X% in

on cough, Excluding basis was tobacco, comps point growth XXX sales We comp And were from stack cold, X-year a XX.X%. up benefited flu. X.X%. from tailwind a basis,

and of basis sales However, in from Comp by increase X.X% consumables general a lower this led test. a largely by was in merchandise. offset growth Beauty were at-home and sales COVID-XX XXX X.X% point headwind

pricing Both own effective another and We including offerings favorable categories invest margin optimization availability. reflecting benefited in margin decisions early strategic shrink promotional and trends. quarter gross from delivered management, performance, brand and of inventory to retail strong

to versus rental lower talk gross COVID-XX in expiration of business reductions adverse the were and was UK offset pharmacy X.X%, XX% currency temporary in up Strong demand Adjusted impact a prior across basis, had Turning markets. next the by points. On the NHS services in for funding Boots numbers. combined the retail UK, operating was with margin income wholesale grew Sales X.X%. sales I'll increased year. pharmacy down the good of and all impact international UK execution Germany these items operational around three percentage constant Germany the International to received year. prior XX of an segment, X.X% and $XXX wholesale and growth million,

growth do show boots along strong return had second OTC, expect extremely beauty cold segment Early International fragrance Christmas and around with indications in sales an a Looking season and to XX%. the quarter. growth profit strong to gifting, the including categories, performed with of we in immunity forward, that comp categories. Key well uptick

continues at a which Boots.com versus of XX% pre-COVID with Comparable performing its Let's this gain ago detail comp our UK grew robust demand X.X% Boots.com pharmacy sales flagship Comparable pre-COVID XX% market health our Approximately of online came growth lower personal performance by November growth doubling care than and to with retail on now look sales Black Boots with strong in X% locations again very services. biggest and COVID-XX is more of coming in quarter. equivalent with retail particularly X% improvement. ever led in performance. period. sales to sales quarter. declined X% UK advanced top from share was and the travel the year and Footfall the X.X% wellness strong Foods showing strong the well. continued more sales Friday continued UK. compares a roughly in event. month Boots was reflecting quarter, being retail for

to U.S. next Turning Healthcare.

had very Healthcare $X rapidly VillageMD $XXX continues advancing of million, scale. business quarter XX% only forma expansion the and ago a U.S. sales existing in compared of basis, by about are quarter, fourth segment million the the 'XX. combined driven XX% in excited in $XX year clinic fiscal as to Sales our almost billion growth forma quarter XX% were with on clinic sales growth the the pro growth of to compared pro in to of footprint. We developments

existing quarter, and XX%, Pro CareCentrix wins, forma was Shields and of of XX%. of adjusted This contract with quarter. ago further Segment delivered sequentially and again $XXX $XXX In sales to by its loss growth of operating a recent focus. growth $XX compares a pro in year million. million. over of was income strong million over showed sales very only full partnerships executional $XXX forma sales strong million driven flat growth loss of the was expansion first

year-over-year reflects Adjusted EBITDA $XXX million in the $XX of full in losses increase quarter was million a in year. loss to a compared largely of quarter loss prior a The the quarter headwinds X Shields the more in in VillageMD of days versus Walgreens profit contributions higher current Health year positive than These organic year and the offset investments. prior and from CareCentrix.

at some key U.S. the Let's now of look metrics for Healthcare.

goal as VillageMD co-located at We at X of end, had earlier, end, our quarter XXX up the was the Health fourth in mentioned X.X with original line the the year added organic XXX,XXX Roz quarter. of lives, million As lives. XXX,XXX our business of quarter VillageMD X.X including At from clinics million Walgreens of contracted business. XX% value-based calendar lines exceeded at existing end the new the payers year up million had XXX from clinics, This target. quarter patients prior Walgreens. with end ended with

key patient XXX,XXX the in performed and more year. we and the in We and we build well outcomes. positioned Since Walgreens will As objectives lives against continue future add Corners goal XXX. of quarter gaps role Corners coming improving Health ahead strongly Corners have are our XXX Health out to an Health the interactions. care than access facilitated our to new partners, our Corners. addressing with we Walgreens of patients, summary, program for was engaging health ended launched, Health we In play important success scale our

and the of accelerate The profitability. leading across drive meaningful assets synergy path our the continuum, addition to enhance portfolio will care Summit Health of opportunities further

almost to UK of negatively Turning holiday increased while million. availability cash cash secure was pays generated flow We Operating cash advance $XXX the in seasons. negative $X.X was first flow. quarter, U.S. and billion operating impacted the next free including product successful inventories, flow by to in flow cash

micro in and was expansion, to decline year-over-year expenditures lower digital to some The the working growth of and due centers rollout initiatives, increased footprint related capital of capital investments. including fulfillment phasing and cash the earnings, omnichannel VillageMD free flow

Turning Summit the our now recently dilution we reduced from year incorporates EPS guidance. confirming offsets EPS guidance The Health the closed are Overall, from to transaction stake ownership and our full now in guidance. this accretion AmerisourceBergen.

of has roughly percentage COVID-XX for year-on-year is lower EPS. the from currency expect testing had margin of to X%. demand and Our due at a headwind point favorable, headwind of total now from to has greater unchanged. impact number negative Currency home the this drive-thru are vaccinations from This projection we But to do a rates COVID-XX reduced slightly X testing somewhat X% a test. shift

Excluding growth core we of X% these business continue items, to XX%. project to

midpoint a of vaccinations cadence first our second into from half expectations. terms approximately second COVID-XX guidance, see the XX-XX $X.XX. of with half the versus shift and at phasing, quarter In our an of the balanced we original impact third between a the quarter assumes of This

adversely growth to labor tax COVID-XX, in headwind impacted higher Second will quarter continued be the investments ongoing by earnings rate. continue Healthcare and the and U.S. from

half In year, will the into around of the EPS the XX% second drivers. good key grow with visibility

and second U.S. we of in ongoing including procurement, expect trends Firstly, initiatives; continued net Pharmacy, levels favorable as we normalize lower script and marketing in store implement performance. reimbursement significant win-back recovery half Retail operations strong of momentum retail shrink

year, an XX% saw Additionally, be second impact will remain the half lot year. expect we what while is And that first of it the a less COVID-XX lower. in than half of of will the a the we headwind in

year. delivered we see Christmas performance has ongoing strong expect the to of period, the and a International balance trading Secondly, through strong

has UK, well the and for growth. in is emerged strengthened in positioned position particularly business, international competitively Our a

consistent guidance, is the being we year positive The to half segment to with And significant a mid-teens Finally, flip achieve adjusted in prior from the the EBITDA expect a for EPS year. peak segment period the of U.S. exiting the the investment Healthcare. overall will first half first headwind tailwind.

around me Let additional segment provide some our assumptions. sales detail and now profit

We $X.X to acquisition by VillageMD's by first $X.X is in the quarter. unchanged to currencies The at income $X.X Adjusted of operating sales WBA better-than-expected are billion. driven billion our $X sales Health, billion. guidance is increase raising refreshed Summit billion and

The contribution reduced is stake. offset ownership lower acquisition as by our we a Summit from of AmerisourceBergen

which The a to the shares million by For December. guidance U.S. Retail and raised of to lowered have broad-based XX% is range and AOI by reduced we strength. inflation have $XXX quarter, million sales AmerisourceBergen These retail our Pharmacy, to from due from first better-than-expected around brand $XXX the our XX%. stake sale benefited actions in reflect November

guidance billion raised a segment billion the prior to range. versus We $XXX $XX.X lower expect for up our reflect the sales have We to million of from currencies. International headwind now $XX.X

We our also million are AOI million. forecast raising $XXX $XXX to to

$X.X Healthcare range and For Health we of are the $X.X billion from November. sales we goals $XX to adjusted segment, U.S. was of the when transaction a in billion $XX provided million the to these with an of loss announced expect positive Both Summit EBITDA consistent million.

exit 'XX continue with expect adjusted to fiscal positive We Healthcare to the EBITDA segment. for U.S.

our expected Summit to be transaction. mostly of million an due unchanged Interest million is $XXX on increase XX%. $XX to at expense corporate rate this to to the is Moving million $XXX tax to and is $XX to year full guidance, compared The prior assumptions. around million,

investments our and of versus for equity by the Shields full guidance. method of range with and combined We prior Health our million reflects transaction interest and the acceleration acquisitions This Summit the nearly CareCentrix. $XXX forecast the raising non-controlling are increasing

year are WBA 'XX confirming are raising we In our sales year summary, fiscal our guidance and we full guidance. EPS for

remarks. now pass me for let it to that, back closing Roz With her

Roz Brewer

James. you, Thank

Before up heard. we sum off me Q&A, what you've kick let

reported line growth of well the quarter fiscal plans our XXXX our performed solid first in We year. record expectations. first against executing are quarter our against with We with today, broadly results levels in last

exiting well-defined resilient, and year. our to healthcare accelerating transformation business with core is this profitability Our we are path a

and execution acquisition, our Health guidance. EPS Summit the and adjusted first sales I'm quarter full guidance, raising reconfirming we Given are our comfortable year

ahead. progress today enabled and we our our through is our our shareholders. strategy in our remain value Our continued investments partners, create can growth potential, for that be sustainable relentless confident people working. bold the and driving I in customers, And WBA will future our long-term

the Now open I'd like questions. line to for Operator?

Operator

Charles first Instructions] from Rhyee [Operator the from of Cowen. comes your And question line

Unidentified Analyst

normal This wanted investments return is to to has recovery script those ask wanted how recovery hours. you've your stores it? the Charles. gone about Lucas into and trended have I going to expectations the for locations see to And I hours. on talk for normal versus to that script how and returned

to investment should in understand $XXX the of year. you of the to guys I impact on of be the $XXX guided QX, investment if expect the then million investments half? then to recovery that's in move in fiscal XX% million 'XX. close throughout we as come the rest script that And front-loaded will want that we how the And first that for timing

Roz Brewer

for He Okay. Rick question. joining in operations. I'll our pharmacy that Thanks is start from questions. and that us then off the will Gates today assist

So we need to. there we'll if add in James

script our with And start labor we on positions had to all, our saying our announced of first that in our the investment by that we've recovery. quarter last with really working we me were that It improve position. pharmacy. So let starts

offers our about got investments, these applications XX%, approaching accepted up and we've XX%. with about So are

remains working. pharmacists our in minds, brand and strong the in to our So stores, the regain intentionality it's

that digits. X you limited hours. including without tell comp percentage are operating the the QX I seeing immunization growth impacted Second, about points trends stores reduced And -- hours will on we're that excluding Rx mid-single versus better had stores in

direction So we're we the feel forward. moving good about

to continue the recruiting. progress We make on

getting better leveraging We've operations and that the the we pharmacists, micro we incentive policies, engagement. as capacity we're fulfillment the store got improve And for we're have. new

in about are that we're we're incremental these gains joined of XXX net pharmacists see continuing We're new of some to in the hired, really the pharmacists have markets. direction. being moving to seeing challenged extent more and So that strongly Walgreens our

a applying been now the incentives to basis the And to regain back those to imagine, can focusing those challenged we and you as one-to-one we're the marketing on store. consumer markets have so pharmacy first are reengage And incentives. on

in So we're right feeling that confident we're moving direction. the

investments labor versus forward. that is stores to maintenance scripts move we when this another the ongoing also scripts. happening been these performance I the at say terms see the the our the look will happening. us in necessary balance So we thing of direction that's in have of We like

tell And you some are I that we will there. seeing favorability

So but we feel a for the back reopening that strongly regaining this in long-term is issue stores us, are accordingly. the we not stores the pharmacists and

James Kehoe

just to the clarify Yes and the we wage of your timing question investment. investment. on and both the $XXX The minimum pharmacy spending includes of payroll million the quoted

million So communicated XX% was the previously year-on-year represents total full it of you, $XXX remind there also pharmacy $XXX I'll And for XX% -- the only investment about Is is okay? but year minimum $XXX investment the of a million. of was the that wage million just year.

Operator

next line from your from comes Credit And A.J. question Rice of the Suisse.

A.J. Rice

about closing Maybe laying discussion growth the Summit? thoughts, little comment see and just synergies, And with any little about VillageMD, of updated priorities? to priorities. talk bit objectives cash there's flow you there. any There's you updated thinking how obviously, and needs talked updated if bit just on you a out, sort if capital there's about a Can

James Kehoe

Yes.

of from to Just point anything of basically funding, the do think we've in announced the term. short we view I intend

a raised fairly comfortable in $X.X about rating our raised And that and So we with of we stake to We billion the us this place ABC, transaction. the partial in $X agencies. puts fund ABC disposed billion.

can't involved it, it's to until the you frankly, deal at some closes. get say early because, too Looking of

very, So on integration Village very will and and moving the Summit synergies. be quickly

XX%, pointed from there. migration That's The longer coming out we line to would her we over captured risk, [of] pretty $XXX not sight of and have There very cost good were about synergies, a items go Roz As time. of after about in some is of synergies. rapidly. be material, in XX% which will million period

we on stores assumptions made between Walgreens synergy locations. and example, haven't For any Summit

a of question? know, upside fair the to I does your amount that So $XXX answer A.J., don't million. there's probably

the type short taking We We're any focus not pause. way, By term. in M&A to a the activities. considering on we're integration need activity

A.J. Rice

you about time. that maybe leg Health other previously So had is one was Walgreens the the thing to another story over talked

on priority. That's we a all that's and clarity the with going VillageMD not So get short-term how thing once integration Summit. longer-term is a

James Kehoe

I short I is radar. it but on a acquisition even won't and trigger term, still priority the in the medium the think scale think of your

capabilities more with likely smaller we our need we're to organic call that So buy business. to it, advance companies specific,

and billion not going or targeted, and to tech $X we're be in will a go very in a billion company, likely millions, the acquisition to So hundreds out not on do $X billions. be we're of the health it

Operator

the of Deutsche Your line George comes from from next question Hill Bank.

George Hill

The and to question a maybe little of Street. the kind that points And know but the risk. points bit the most provide I which we had James, QX what you for good talk about on here think COVID Also, is would going don't half like back quarter expectations cadence forward little be we you of see into maybe as risk, bit portion below of maybe earnings biggest talk if about think about about biggest year? of guys focus a it's quarterly to guidance, And could COVID a pull the you this Fiscal it. like as inflects the of inflection, the seems

James Kehoe

it question. unexpected do there's you an a overly position. want quarter I was a That's our Yes. that like context tax of on would there out the dependent first I And give to rate. perception little on to first give bit because

$X.XX tax. look was against we from $X.XX in budget better and our only came actually we internally, As

quarter. year, in still the predicted the upside we So had this XX% full we of intact, the tax is tax and on rate the already type planned for

be all didn't said, the better. of like and I from it to timing about business, blow. $X.XX was what the planning operating going $X.XX We're a was As reimbursement bit carefully predict on it's be enough international. honest, a weaker the in To NHS. They

margin issue. a it So became short-term

to reassure want do return a see second in quarter. to segment the I growth very listeners, profit And we strong the the International in

market to on So in came our relying $X.XX -- expectations, we compared expectation tax. to

right? But tax, sorry, you of in won on We of the beat it Black prepared emphasize, execution. track. was XX% we was than make Thursday I it we the type more was December events front that of and can And -- on And only which in the the say and the the did to December. to So The $X.XX us growth core international the surprised is in in Thanksgiving UK the XX%. due put want the business was do in about was was planning thing all UK then store, XX% profit comments. it

the cadence question, the looked to quarter, was market for reason. a the So consensus bit. Vaccinations is half. which versus We the second and consensus little on a in slowed There real now now. down. I'll slowed into boosters going go a shift first have second between have that one The the that and is heavy right out felt down your the only

So QX, from QX to had the half just cost about our $X.XX. That's making There I very us we there's we're are and on the to the And be before. changes. that. a slight want budget shift other that first change only no into clear thinking versus

the compare know, very at we you performance XXXX SG&A versus this, at look do or it's be models When like, we just whether all consensus and gross We collect and and profit I and transparent. don't look I'll models, rest.

than and actual it $XX gross million. better in was million profit FactSet by absolute Our was better than quarter $XX the by consensus

there is into basis. are quarterly of labor. in And from some hypothesis a what the from we're enough And the on where communicated impacts it SG&A built you've there are outlooks my haven't is way on the the some disconnect impacts to that in dig There currency. have we some getting So are investments succinctly the we SG&A.

at We're were of here. feeling exiting track. on the the looking operationally we're most like But quarter businesses

business U.S. the budget. in stronger the than fact, came In

half, just let's We So second look at said the the to investments that second XX-XX a basically and and -- change now original implies doesn't down quarter, It's And first guidance. investments. half. EPS consistent it's the And driven the that story with in will round half XX% it's be it's numbers. first COVID, labor by roughly healthcare split. the XX%,

long-winded response. a is and for this a asked you've And bit of --

what half for the are drivers, key second asked versus You've first half.

in vaccinations to a is first percentage first half The XX one and of XX the headwind is points. testing

the be to the take will the tune you XX%. we of half of down if year, So first pulled

second half, XX%. goes you below the take If that

about business of the mid-teens, So the of improved the to XX%. single driver, of a XX The however, low that In percentage in And it you points. digit. is gives it the healthcare. first the prepared that's half said comments change on around in drag income an we profile the will biggest drive EPS negative call year, healthcare headwind, so XX the

first second you the you've call the XX and points coming coming between and healthcare. XX to half the from from XX got, half, XX So got change points COVID to it,

haven't numbers this the guidance provided reimbursement, The on other much and we in big are past.

would of and sight good of the expect, year line because the to will less closed, all a compared We we than I first are call of XX%. very the it, have in XX% reimbursement second contracts be half half

second the in approximately tailwind a of million this So $XXX the us year. half of gives

second take extremely high and line points get just So first to going reimbursement, XX timing sight percentage of I probably half due that growth, to have of of the to I'm if number. half, you versus

one as will in -- later in marketing the contribution points will probably the second The growth. the about the kick programs probably said, $XXX half pharmacy call in it was volume of million, will Xx what second it first in half worth X so That's year. be be we another is Volume volume. in the because

the trajectory in the going half. in change So versus the we're business to second the big half a pharmacy first see of

I'll going hit profit the had we anticipated than in some items of because timing probably of is, And goods $XXX on we lower million the the And margins million. cost sold, absolute that's $XXX the final in did with pharmacy to gross quarter, -- remainder while we to you we leave year. they're out another were one the wash

the really a million. the first sight majority we're in and line concentrated large coming at in Reimbursement, $XXX the These pharmacy. of is always another the And $XXX it. of in line million. volumes there. on Good sold Good numbers. are sight goods risk some said, the are items cost at I of So what of one of year to very quarter terms There's of difficult being have quarter half out as looking half. second costs the -- fairly are the programs

half. you're do growth business reiterate, So from I the to talking in going the the And the business. same U.S. about want in second we're to pretty explosive international see

I've don't know enough So that's insight, if I too probably it's too gone on long, for much, but…

Operator

question from of ISI. Anderson Elizabeth Next line comes from the Evercore

Elizabeth Anderson

Could of the shrink details out things on performance? and given cough about? that hearing expectations also are strong just there. to we've of then your called you some been thanks last of what shortages off specifically some in the retail comment you other product Maybe cold, terms of all flu question, for And for the the piggyback

James Kehoe

Yes.

much we is kind range Xs, year the We're shrink down we're the probably we X.X%, hitting maybe built the too in were think forecast. were call X.X% last of I And lower in now. stabilized. that the sales. numbers cried We're X.X% when mid of it, --

in and the spent So that are put a fair in quarter. put incremental we in -- and probably back law opposed in proven The could step putting companies. SG&A. in security more Actually, the amount, a disconnects security we've might in what companies of bit but we the be that. largely little too first stores We've one to is seeing ineffective. we're to security as from we're much be enforcement But

SG&A quite X.X% it's It's investing X.X%. where to to we're we we're lower -- around with So shrink. are. actually, more drive And happy the

programs the good So new that's we of have well sight year fairly below in. going And line to a levels. prior

at cough, our in result of from in flip boosted second it the part look question? in of, the the the think points. at cold, a The Yes, get did tune quarter, the were XXX cough, on the comps headwind as quarter. But XXX. Cough, tests a the But bounce the came you flu. basis where cold, I retail for OTC flu was of first we flu cold, side COVID business is

is, won I'd ex of in categories. we a actually extremely some the we we actually, weakness But did three X% we I see the you said was comp. roughly a share in We other flu well out guidance to business and actually first the little cough, quarter X% category. in of do to we've ago, the were we gained about if go of positioned think cold, encourage the built think COVID. these, we if to is back some doing levels, and quarter a the way where business X% on take retail you first you expect the fairly to So the noise months two And the of gave bit -- aggressive the inventory

happen We the a opportunity what's from XX% to in too say a on little of quarter. will cough we've X% seen second Honestly, It's few vaccinations think, year the going some are or weeks. Flu get in still early slowdown full the to cold prior flu. last versus year. up, bit I

talked cost in in second no out boost. a cough, there's was But of if pharmacy has said, it about, that first about bit by quarter, a of in given I So flu. these half. issue It they'll think the the flu the us cold, I items in as roll cold, you system cough, and offset

Operator

Lisa Gill next of JPMorgan. the your question line from And comes from

Lisa Gill

a strategic it I'm take from going standpoint. to more

VillageMD. them, Healthcare talk just So you you about about and as Can business integrating about as your when think a how together. and I and think maybe fitting well CityMD Summit, minute U.S. spend

today As I fee-for-service. understand it, both Summit and are primarily CityMD

they at reason loss that a VillageMD at-risk the that have lives. think was I is

that you over years, more Where I markets? single move know this try think see James to opportunities? the going to about think do how at in did So the you risk people viewing Summit understand forward? But you other platform of as an numbers is multispecialty synergies. perspective. conceptually, some goal of some next want I can is this replicate those Do you from the a and some few you're around market. just onto more the to you

James Kehoe

And I to I about. pieces think there's think think Yes. did two I -- you allude we it. And should

one the care. easier capabilities that One them and is have VillageMD is in of of them value-based The tougher. easier is one

So out roughly now, patients, they patients. XXX,XXX million on X.X roughly I'll arrangement of call have value-based a it right total

fully in evolution. are And they're So at risk. their that own XXX,XXX, of XXX,XXX

full insurance -- delegated the company. risk from that is So delegated

So in they really, patients. right? to markets. want Village’s is They And standalone and to grow effective local XXX and mind the want it's a really, But commercial very here, the to they they have percentage X.X. important pay allow as bear the a model in the the really total of XXX grow procurement really, negotiation bills,

is I is by is decision a CityMD very the that's And why Lisa, mean a locally think, there's year that ago fewer versus I acquisition. markets. get critically what Village difference And in to by bigger and important. Strategically, one was scale Summit attractive a

period into is into play Village game time and of the the population Health they transfer for Summit they'll businesses run that patient that risk. probably have somewhat management So at grow Health to in its sorry, will is, value-based a independently Summit City -- of care and

opportunity. the So that's million. That's $XX the

is they like, if bit And is are The have one and beauty care primary other between you business. -- physician which more between they other Summit little two. feeding, complex, referring each patients and have is model the of a a cross the a multi-specialty they business the

greater because care how will of of and on much total take when know care or they specialty cost. much proportion a risk, if So multispecialty cost manage they the you

risk-based incorporate question that looking multi-specialty practices at Village bigger able argue, Summit the how type And push more The a activities multispecialty So testing. instead the the be return which care. village, cost are know use care primary physician to practices? patients. do higher will of I its its providers the manage out is you to Village would to the firms and business own I into providers, much local directly have on of team

the the happen year. first I contract one, So in the take but first will -- the value-based move -- would second to care

it call would the year. contract in I So current

in Street I none we that's provided that does practices. the in The to between multispecialty, of back X-year quite projections In November. your a journey of But is of none structure think and Walgreens local I to the because the the built exciting change have of the that and think Summit you'll case and the synergy because it's multispecialty opportunity investment require

we a amount see opportunity. fair So of

Operator

from question from the next line Securities. Ann Hynes of Your comes Mizuho

Ann Hynes

the I of bringing tackling. scripts some back company's in XX pharmacies. million Summit hiring XX know people know have Walgreens COVID the know someone pharmacists guidance. And of The to maybe I that like that that feels of than of scripts been therapy market blocking to is a ability closed, is embedded But is debate due I share, to stores to just also an and you on easier to million during And and know me, left get of that that gain basic that like lot haven't regaining compliant back regaining there's just Street Walgreens.

would you negative. down, could what know come guidance compliant back cash that it of And break having great. be us your to versus Can give flow more year? maybe million to what much is was type us actually people for any versus Walgreens of That secondly, XX let flow therapy? how So is being free free you people cash the a

Roz Brewer

go the core flow? cash the James, why Rick, performance don't into just detail And the we around start free with then, script business. on the script

James Kehoe

the we're of Summit But some absolute see Yes, working Honestly, progress to implications acquisition. the on you'll think full an still some basis. give on I through going the year-on-year guidance of we're year. not

The first traditionally as start in a weak the quite quarter is company.

by wouldn't I So get it. very concerned

of rest that. start But year. optimize going the are guidance giving rest on the cash We the and to the in the looking flow investments we're of carefully at for not business to

Rick Gates

just -- Rick. this to And is

that adherence into invested script we've building of part and block part And building the we all blocks are think walk programs the goes of the key in. it of market is actually Just part then first which is to correct. that just a I the the are X% growth, growth that. have there's of into services, that you it are Part

the based get the one, right? it's that how is kind then cadence scripts as into to of hiring that off fourth I line has half and going of the of lot is to goes about is core of And to obviously, at scripts there, the a year, pieces, plans third talked would going hours the second -- of staffing huge the you there's the marketing -- into block. of reopening Roz a grow and part but store actually we're how say So staffing win-back building look a time grow to continue it

You to have hire.

stores ready, before appropriately, to will then then pharmacists have full that train our program. store our obviously, we have win-back and the hours reopen to we get We

there start growth So to and year. how will really in is the second to ramp the scripts the of up a timing element the half

Operator

of comes And from America. line question of from Bank the Michael final our Cherny

Michael Cherny

I guess one just one clean-up quick question one. and broader

us raising us a to on the you've the in had you I from OI on transactions the that understand sale-leaseback the the maybe have oriented the you holidays level for pieces all year apologize you But how Black there, the missed if the give couple be sense possible FX beyond segment And confidence contribution James. international the simply Black side, Friday, the UK. a adjusted I after-tax for on clean-up Thursday, from could got whether for if it's moving First, about think is of and the beyond then can proceeds the I for that, you different would the great. it quarter? success items the that side, give That holiday various

James Kehoe

Yes.

So the -- I'm the leaseback. sale just for looking and

much very because I But basis, tax tax around have think an capital have only did against we pre-tax. to UK, after-tax cash a this losses reflect update what we -- basically the number. was was it. don't pay capital don't technical currencies. it I we XXX on In we -- allowances a don't on

change that. we in would currencies the adjust if So future,

of confidence -- would I which given how the December. business. in as said, large a international that I in would the in XX% of was December came than the describe base And growth. is I it have suggest forecast as in, We better expected, we that XX% degree profit

-- derisks takes this So international the massively forecast.

never very is but number. you is -- the I So probably the anything to say in don't international think safe I bag, want

market the has comes on on points rate. think, bit plus from and little growth the a X% reopening comes very back percentage programs store script programs, very, cycle I to X.X just on the X.X growth -- rest. adherence all marketing been everybody, And focused from plus the

that risks in the the you for dimensionalize is of sorry, volume that is and is there but second the we programs -- that and overperform will So versus some is procurement the half then the some direction on, half of -- this XXX. change other possibility of the And the change $XXX first the million two labor and to compensate just on perceive. change

first and reimbursement, versus sight were you looking we the pharmacy terms volume And decent second of what's good then it's for have cost cost quarter we not reimbursement goods the I'm place it's line business. half, the have not going of impact but of on So half and versus changes programs to in sold important, sold, to it's of have script a in biggest if saying we the of to have very volumes. and goods the very, line sight first

just I So last close of kind to wanted on kind of your that, stealing question.

Operator

session. Q&A remarks. now final Ms. I over the will closing some back our Brewer ends to Roz call this And turn for

Roz Brewer

of I all, main that heard us you, recapping you us your Q&A briefly from want by and then for points the joining today again touch questions. thank of everyone, some but this on conclude First just quarter. our to We'll end

First of had a solid have all, to the year. we start

growth the we've despite Our our in. results environment are tough all and is broadly been over sales in line underlying with expectations X%

day we're it our that loyal brand customers that strong from the we value us. customers core surge. to and remains our us reminds resonate continue as offering cycle Secondly, is the and business are very to our convenience COVID resilient, And every

and a We've very fiscal adjusted showing committed but expected and grow to exit to EBITDA to in growth progress. this frame, time Thirdly, our so our great engine segment difficult strategy. positive is investing accelerated healthcare closed is with remain major acquisitions, we 'XX we're

optimizing we're Fourthly, portfolio. our

AmerisourceBergen in of fiscal highs, near long-term capital. cost, for to deliver XX-week value tight and the access continue you for were our and shares and maintaining on to guidance significant to year, discounts our And we're grow investing controlling lastly, we sold So with have sustainable this call. to while all

Thank you. Happy we a and all support, your you for Year. very again thanks New wish So

Operator

Thank participation. conference your for today's concludes you This call.

now may You disconnect.

Walgreens Boots Alliance (WBA) 5 Jan 232023 Q1 Earnings call transcript