WBA - Earnings call 1 2024 | Walgreens Boots Alliance, Inc.

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Operator

Good morning. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Walgreens Boots Alliance, Inc.

First Quarter 2024 Earnings Conference Call. [Operator Instructions]

you. Thank turn Investor to Relations. now President Kanaga, conference Global of the will Tiffany over Vice I Tiffany, may you begin your conference.

Tiffany Kanaga

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

call Tim our Interim Officer. Chief Chief me Global Officer; and Joining Financial are on Executive today's our Wentworth, Manmohan Mahajan,

Healthcare; and Rick Pharmacy In Brown, Gates, Vice addition, of John retail Chief Walgreens; Driscoll, President Officer, in Walgreens Officer of U.S. at Customer will Tracey President President and Chief Q&A. Senior and participate

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

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

our You in Walgreens and call referenced this of on section Investors the Alliance release can website. Boots press the slides find the

GAAP reconciliations reconciled press During will These measures, are non-GAAP directly discuss to release. are the financial comparable the financial this measures and set forth most the measures. certain we call, in

earnings of this refer measures during to slides may section comparable posted reconciliations measures the website to discussed for non-GAAP You of the also to the our Investors GAAP most call.

Tim. I turn will over now call the to

Timothy Wentworth

my CEO, I I believe WBA decision. with am October, tenure, for brand, certain once-in-a-lifetime my last good is Thanks, a I earnings weeks my everyone. you as that and call morning, presence. in but begun had yet a into Tiffany, neighborhood I Today, more the how legacy even leading opportunity When of XX joined I tremendous shared not and role

on our to health and outlook convictions partner to how strong our build across be sustainable and to pharmacy share care here around I value. we am broader my can foundation pleased today services our results, drive

aware, despite fiscal now by retail are results WBA you environment with on-plan XXXX weak started As in the U.S. a

$X.XX, International in adjusted cost U.S. in with in execution reflecting profitability and performance Retail quarter EPS Healthcare. in progress continued Pharmacy, First strong initiatives came discipline U.S. at and

adjusted We challenging against are credit maintaining full dedication give our hard guidance teams. I to must work a year the EPS of backdrop. here and

We from inflation Medicaid navigating and savings consumer are impacts volumes, in trends script a and respiratory from accumulating pressures slower-than-anticipated somewhat and pharmacy depleted season weaker the market including redetermination.

States own choices are and evidenced for to XX in discretionary while deliberate demand weak. and in basis value, the Retail customers stress under the quarter, making seasonal United remains seek our in brands categories up points

teams well of our building and despite year's the solid gross with International volume achieved the during pressures. share led further inflationary gains share by At U.S. including in quarter, last same delivered retail, cost in executed our overall Germany on Boots the gains. the on in services, a both profit pharmacy was while maintaining vaccines share pharmacy once retail and improvement growth. was again also delivering Upside time, U.K. spot quarter script bright

is In the profit rapidly with procurement year-on-year organization. several significant from is track realigning with cycle U.S. are executing VillageMD to The operating to operational management we Healthcare, improvement. sales. spanning on costs initiatives, team achieve revenue on actions

announced highest their the markets. density markets, opportunity to As in XX approximately previously plans and footprint remember on VillageMD clinics in their focuses increasing nonstrategic optimize exit

halfway exited there, having nearly As already they XX. of are today,

develop time leveraging targeted in touch as fee-for-service marketing expect underway volumes. benefits further and patient risk implement risk points, patient our VillageMD growth X% strategy. is Additionally, growth expertise driving we is to and and and achieved provider-based lives Walgreens' and efforts, over XX% full panel year-over-year in we Work learn growth

open are the structural and our the pains pharmacy headwinds So in business eyes Healthcare terms our I in of with difficult clear a the retailers, me. to macroeconomic core on table wide business acknowledge a conditions this in with the mandate to for everything surprise is growing act fully putting I to segment. and on track. came clearly WBA our None right of

In cost increase on remain billion that across savings costs actions context, and $X this to company. flow we year. are rightsize in toward We taking swift pace cash the

headquarter planned approximately Our U.S. organizational XX%. of in have reduction resulted efforts support workforce a office

past projects capital most. spend the matter we customer-facing to that on X Over and prioritized activities months, focus have the

lower million over $XXX the $XXX a million to CapEx reduction quarter for First year-over-year, on track year. was full

to schedule capital $XXX in on in remain also XXXX. million benefits working We deliver fiscal

debt. view overall in as strengthen down long-term action the will additional share the are our as quarterly today, to invest of many our sustainable to to sheet This and a we meaningful and yield continue WBA paying payment our attractiveness competitive growth necessary in dividend free deliver and capital position, cash to reduction will and Board of the component At announcing in we continue businesses, per balance care I time, starting critical as March. driving to health pharmacy a the to well step dividend XX% shareholders. dividend in a same up $X.XX as An to

others proceeds. stake by an supported monetized of strategic Our we underway already actions, million of In nearly portion some with and additional financial November, consideration. $XXX our flexibility under other is with also Cencora

XX,XXX commitments. buyout took eliminate plan, the environment the to obligations the higher members. the secure company's and legal interest We general with for rate in pension plan full a A will of ensure scheduled XXXX Boots of buy-in to and calendar also advantage benefits all

financial our to and on we Healthcare Cencora, strategic Retail focus our providing investments U.S. evaluate interests minority and flexibility. Pharmacy our in the portfolio, Furthermore, continue existing sharpening with other remaining BrightSpring

Let be me clear.

there blocks care place strategy, we've a us a work ahead our WBA, in actions us And long-term are sharper momentum We profitable of to early journey well and health taken. strengthen building good positioning but hard in important for simplify have of for also growth. number with that already

have Walgreens a is care market choice a ability dependable, and partner valued frankly, services. local health independent patients, be the we and, for convenient to the trusted in of and health mandate care destination

detailed and John our of quarter, their Driscoll the is prospects, objectives them across our with our I we excited from achieve a providers and meetings you thousands assets across of there lot partners local my about days through and to help at stores patients to leveraging care are and on with presence our can tell scale. team with from payors, pharma last engage be early to As behalf the continuum here.

advantage our neighborhood convenience online at every us and not in just footprint customers million with day. Walgreens XX competitive But is our visiting or store

specifically, are drive communities. the access who ability we corners over through on in stores Walgreens in presence people our teams brand unique trusted, our And for have are America. meaningful and best the engage Our connections. more XX,XXX has well-established iconic directly providers with physical their patients people points on to trusted and our

enabling spend diagnostic providing less time treatment. tasks pharmacists to health to are to more and testing time and and on on We screenings immunizations from essential meaningful care, interactions

to patients capacity fulfillment reduce workflow to to micro of hours, most our partners. stabilize points up and and that pharmacy matter network free pain drive and helping centers the outcomes staffing is Our

in optimize October pause mentioned in You'll remember the a we rollout productivity. to

overall and importance strategy. progress continued of our our with centers in happy the these are We

also piloting further our patient are virtual reach. connected flexibility, and enhance access, increase workplace care, redefine We to pharmacist extend pharmacy

pharmacists. generation Finally, specifically, workplace of academia, attract, schools for we pharmacy and to next dynamic of with explore a are the recruit partnering create key ways to and

so Our lines are pharmacy deans to look forward space. profession, we meeting the council help employer relationships with And for deans to forming efforts can the the integral advisory is with an in country. with want on our to to Walgreens working in tireless guide transformation. us ensure in and in strategy I thank this pharmacy are March and personally our of health our preferred their us delivery advance the pharmacy first care our to front teams I the

on example and and support offering. clinical can you a expand give our how patients capital-efficient me to partners: services Let established we assets of in way one build our trials

with short date, research. to of in drive We and a national and already robust participation have improving the leveraging engagement are diversity contracts, help signed over partnering pipeline patient a are opportunities double we clinical patient our To average. we companies and at community In with span, equity presence ahead. pharma greater XX

quarter, Shields driven at Sales signings. is by strong as of our first example growth delivered has XX% new strength of another serving systems contract consistently hospital meaningful ahead margin as results the partner in up well customers existing were and accretive plan.

hospital-owned the to growth We broader to programs. expect rapid and accelerating specialty the Shields intense specialty benefit focus from leverage in market and pharmacy our continue on

XX next specialty. by be anticipates of forward. And going Walgreens an gene are will with an Our the more from hear work steps specialty and and assets do, to therapy. we will approval opportunity cell and XXXX, than pharmacies. cell and pharmacy our this to with pleased on months, FDA The for us we initiatives therapies important focus gene for specialty coming exciting you conditions rare be patients while have In our more is in executing

and touch me dynamics. reimbursement let models on Finally,

discussions drivers We deliver. continue broad comprehensive to are that of the with can realizing benefits as WBA payors and responsive value set see more of they the

platform. our as adherence contracts capabilities and We entering into our beyond we are outcomes pay-for-performance committed within to pharmacy and dispensing advance core

that we and the work provide reimbursement. partners well reimburses unmatched will and welcome any we predictability value services, pharmacy model and pharmacies those as on in models addition, In recognizes more for including PBM and that transparency payor with as ensure can patients,

over results to our execution With and that, further review in it I'll detail. recent hand to financial Manmohan

Manmohan Mahajan

Sales Overall, increased Retail a with pro Tim, forma increased And on and delivered grew good U.S. everyone. at Pharmacy U.S. our X.X%. Thank expectations. were Healthcare morning, sales basis. in International results quarter line X.X% first X.X% currency constant growth. XX%. you,

XX international rate. profitability U.S. mainly by Adjusted a sales tax higher on constant in a impacted adjusted growth our percentage improved EPS. headwind retail Healthcare point lower and EPS XX% declined U.S. of effective adjusted and currency a Strong basis, positively driven from segment $X.XX

gain first for after-tax billion on we loss billion variable last fair Cencora quarter included net after-tax to derivatives in $XXX the first $X.X of claims on of a shares. and after-tax sale $X.X for for related year, the forward Cencora lawsuits recognized charge shares. opioid-related million charge value and adjustments prepaid GAAP a quarter Remember,

Now quarter, by Sales the brand contributions higher retail I pharmacy Retail cover business. was segment. in the growth X.X% Sales services. partially pharmacy Pharmacy by in and increased a X.X% from inflation prior versus decline will the U.S. driven year offset

AOI declined services pharmacy our AOI and lower including of volume mainly initiatives. sales shrink. margin, was on execution levels progress positively retail higher savings in XX.X% by by and year-on-year, driven impacted cost

driven prescription by in now contribution mainly now inflation with a me grew X.X%, U.S. COVID-XX services. XX.X%, and Comp pharmacy Pharmacy Pharmacy. commercial vaccines brand other higher vaccinations. market. line shifted comp the with immunizations, consistent overall excluding have Let turn to to increased sales scripts from model

The of overall weaker redeterminations ongoing impact a season flu and continued respiratory Medicaid market growth. negatively impact to and

the down data was activity flu, quarter. cold XX.X% respiratory compared showed Third-party and to year prior

Services, declined with slightly in COVID, and Within vaccines the impacts. savings Pharmacy by mix well of net performed which adjusted impacted brand includes in flu, the routine and RSV quarter, negatively portfolio, profit quarter. our Pharmacy margin reimbursement other pressure,, procurement vaccinations, gross

in U.S. start weaker cough, X% season anticipated business. an slow retail flu Retail conditions Challenging performance Turning our a sales next cold, and the macroeconomic year-on-year. to the declined Comparable contributed quarter. to to

drivers. main There X are

a First, flu through category. serves respiratory approximately Cough, season trip a as the impact cold, primary points XXX had and weaker health wellness an of driver. basis

As also points sales experienced basis a season, lower the which weaker XXX to we incremental attachment are the impact. to due result,

pull to back opportunities. continue actively out on spending, seek customers Second, promotional discretionary and

As points a approximately an impact weaker result, seasonal holiday we XX from sales. basis saw

to store decision most headwind XX our of stores members a to team basis year our Thanksgiving our led Lastly, this points. close of on about to support further

merchandise sales in categories, wellness. factors these in resulted experienced health more in all While consumables we and lower general across and and pronounced declines

across to be margin impacted by negatively higher Retail systemic to issue shrink shrink. the points a gross retail continues basis industry. Retail XXX due was

Total International I always, X.X%, in quarter. as up than International Turning And increased pressures. Adjusted numbers. wholesale currency U.K. with our sales better segment. talk X.X% growth. grew sales the the profit impact from Germany Boots gross constant expectations U.K. The segment cost with to X%, strong performed next will X.X%. the Boots Segment outpacing retail by XX%, and adjusted increased driving income including growth, operating growing in inflationary

by now Let's beauty across X.X%, and and sales U.K. Boots led detail. retail pharmacy cover Comp grew wellness. health in sales Comp with categories, X.X%. all growth increased

year-on-year performing for and quarter, particularly market increased sales the growth XXth our share Boots.com increased a represented saw by led XX.X% across all Boots travel locations We store of also and beauty. consecutive flagship U.K. sales. formats, retail with XX.X% well. retail year-on-year

were EBITDA compared U.S. to our second is Healthcare. next with consecutive Turning improvement in U.S. the This significant Healthcare and adjusted of expectations. quarter in segment to results prior year. AOI line

sales of all of year-on-year a by billion growth lives, productivity performance, in $X.X multi-specialty the increase across Health forma billion segment same VillageMD in were full quarter by pro prior First the VillageMD up compared sales XX% Summit XX%. better the basis, Summit on reflecting On Health acquisition The of increased a $X.X sales risk was business. by XX% and driven clinic basis. businesses. pro to increased and growth forma year, increased

existing health increase quarter versus service to XX% Shields the year. as of partnerships of prior the increased the sales in led patients number expansion system on contracts XX% and a in by new

was VillageMD, with growth EBITDA reflecting EBITDA CareCentrix. million, investment across offset all of increased improvement to by loss partly Adjusted Shields businesses. compared at Adjusted $XX and a last $XX year, in million profitable

are profit from and contributed growth VillageMD, We accelerate quarter. positively profitability businesses the at other in to progress making all

to expectations. and by impacted quarter of Turning in $XXX the free cash negatively seasonal build were timing flow. cash quarter fiscal reimbursement. million by inventory in of our Overall, flow with first cash the flows Capital next 'XX. line payor declined versus expenditures was anticipated Operating

versus and was earnings, phasing by expenditures. year, partially by the flow lower driven the capital offset million Free working capital cash of lower down $XXX prior

expenditures we and million. to Tim to mentioned, approximately of $XXX improvement by deliver are As capital on million reduce track year-over-year capital working $XXX

I will now turn to guidance.

EPS adjusted We are 'XX maintaining fiscal guidance. our

headwinds incremental a prior environment in certain our and expect compared outlook. We challenging tailwinds to

with to of to tailwinds, deliver we the date, ahead expect execution pharmacy initial now plan. On strong our services

XX%, an effective prior We in the XX% as XX% our to range rate of outlook improvement of result tax compared adjusted revised tax of year initiatives, also to a anticipate planning full a with XX%. to

the On headwinds.

behaviors sales impact in pullback decline expect the half. expect for will prior shifting continue We outlook our the we the First, in while of flat. term, retail in short and to to U.S. single fiscal improving low in the the comp now spending consumer retail second digits sales compared to 'XX

prior outlook. sale Second, and leaseback we versus expect in million gains approximately reduced $XXX our

anticipated As last is October, this leaseback we sale explained the in of year transactions.

lower previous overall expectations. volume Lastly, our prescriptions we to growth also forecast for slightly market compared

as continue the range. Healthcare, Importantly, actions million build mainly over by The accelerate discipline. Shields, $XXX at million progress robust increase we be fiscal EBITDA quarter $XXX and adjusted at to VillageMD, the an of first This midpoint on cost profitability driven to at U.S. in growth we improvement to expect 'XX. to is guidance represents the taken segment of breakeven

of discuss will adjusted year the quarter. EPS in in $X.XX half quarter I phasing lapping quarter, the we earnings of prior Next, will factors second versus of fiscal impacting In the second the year. be second the

year-over-year on outsized Three are to impact an expected comparison. the have factors

leaseback lower and anticipate from we contributions activity. First, sale

Second, incorporating pressures our spending consumer on and of higher retail on we're business. shrink sentiment, impacts and

a to quarter Lastly, phasing offset partly we tax planning expect in headwinds of the lower tax due to second these be the initiatives. rate by

Looking our ahead earnings X are half for 'XX, improving profile. of to second key fiscal there the drivers

continue cost to actions ramp as expect have First, year. previously we the will lower our to base we discussed, over

growth over VillageMD, balance by footprint, expect we optimizing profitability of U.S. businesses. panels patient realigning Second, across all and scale and year, clinic mainly segment the the at Healthcare from will cost the benefits driven growing the of

comparison. growth easier expect half second cautiously of retail modest an we market against level Third,

in Finally, elevated our the rate first quarter. tax was

the the year. of remainder in We expect favorability

With Tim let back pass now remarks. for it his to closing me that,

Timothy Wentworth

heard everything table value. our despite care The there To is summarize you require the of quarter you've headline recognize this done. health plenty thinking. to to of executed environment, the we on deliver still us what shareholder be to both and of challenging today, on in from My future plans that new also is greater and company the innovative first we work is

changes business deeply and make strength by legacy business, trusted position and brand, to with significant members and care our We the the us encouraged health spent experience. our have time our the our and examine experience going the well team forward. Having opportunity to build pharmacy to and license evolve the on that our I'm customer

goals. help had I discussions, are We neighborhood from pivoting their redefining payors, pharma are we achieve premier retail I The we are just away not even reasons validated our in do as and these position more to pharmacy, true joined the can than anticipated. WBA they weren't but instead what providers

execution a In months, together forward transitions. for while coming sustainable value. have create to as customers, look drive you, are I teammates strong team to engaging stakeholders to quickly and of we leadership working I shareholders deliver our several our fellow to weeks effectively all through listening, are in and moving learning we with place who our work the our and

the line would for to I Now open questions. like

Operator

[Operator the of Lisa Instructions] Gill JPMorgan. question first Your comes line from from

Lisa Gill

want your model. reimbursement I to go comments back the around to

about in about the sustainable years, over you retail pay-for-performance, Walgreens that we retail much Walgreens the a of putting unmatched business? margin happened be think new And in transparency, margins can about be talked a talked and the place? think what You as just about number what's a drug do when think value do predictability. you drug driven you How think model of by with we can

Timothy Wentworth

value sort help will how as their they a and that health think drive in the to player of retail are partner -- PBMs relates all, to look can much certainly, different Walgreens bring determine a first major marketplaces. at and plans, and to Lisa, win in position I of we it them ways as shift, to in table market

significant in of play we fairly interact in can we write the with the patients those will risk we I value the we behalf we of the the that of a so store that have, back know contracts with the can payors. that we willing on take the actually And we're relationships role way terms and to at create think

I in to of value that fact in speedy retail the will going clear very, and reimbursement distributing the to not create the purchasing quite a drugs now unit simply marketplace others made -- there's you very be the us the that lowering is from strong and cost change. that So we're where as a But in model and cost change think years that because, the don't way think, point I the payors know, isn't of messaging would next XX that any the pharmacies for can for patients. be real frankly, gains is largely

standpoint, And from work proven, We we're now. it. models can our of, of inside transparent we've we're at drive inside models so hard going now, cost-plus and to

we others marketplace And we're market. partner have that the We a pushing a they that more that in terrific with think and robust program. win are want into very about they have these to cash models the to talked innovative

feel So super I good.

think do seen well, not of for per Now and evolve, to in that provide. on the we've We've patients that -- based is of to kind that we're likely to seen, at that's drug in the looks pharmacy what how to I'm against models provide that are drugs, compensated as such most what when not if say the likely to like. where the, you things we be services going like we it's look you for it. disconnects, you margin on in those as guidance it looks on to like And service going the in specialty. give working than the way -- terms we're other margins largely innovation receiving much evolve also And a expect, would of reimbursement it I that's

paying the evolve to we And what stay the use but for, leader. patients we pharmacy payors get a well call sure the help super they're those take we're as what services, benefits that are and confident value and the we drugs that pretty make them and safely are on getting also of build models to can in our pharmacists positioned our

Lisa Gill

congrats And quarter. on first your

Operator

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

George Hill

you spend everything echo at little But you I'll Tim, guess, I guess, the about business, Tim. of kind is core you Yes. said is about business, stand might you're core kind ancillary? of business think look Lisa's what where now. the sentiment, a to your as is most right important your I bit strategic that of Walgreens and talk time you've is spending be spent WBA right and you now, be part could on talking what table. from welcome the think And kind the maybe where focus aboard, of you how

Timothy Wentworth

That's though. to XX on to be standpoint, the answer clear, Thanks, But table. I let a I group terrific the what's me from have are question. me appreciate George. ask assets be, Because I'm Sure. of that great your we days a that going critical. in. let way think And on a again, basis, question go-forward

cash flows, We lot able to get working work with our have growth to We're invest being grow. of sheet, of models all financial our to in -- our balance a aligned our company to to do.

our The is stores. most first easy and answer

the we we model with away what committed a a with the what pivot for what to table. on a engagement And community-based them both that so think was our to do lest is we of from do forward, create element have great to in that patients, will anyone central, and pharmacy is we headed central store, experience and being were a not that front where meaningful in going

and we're the to that. already what's by on stores. the our for that, right this announced example, footprint stores on table is in going roughly do year, we're track footprint we've to is XXX And optimize what Now

the long what to be question what do and look there's to we and value and human is lens point we going I be, through how be of beings, of no the we is country which health patients me with continually sort touching creating will are do for need destroying that But not at neighborhood, for where term beings in where is model is major the We to value. this a need believe community-based, engagement evolve. to care human of going

of hopefully, much and X very simple. the were get the pharmacy me. my the we with -- sitting obtain. did come worst you that you've during called I CEO chair? able with get had into -- asked, couch real the though, that, seen It on I why to Besides off was you back family pandemic, services I in our experience and Walgreens years business, life that the of vaccines were to my part

And public so to meaningful, Walgreens that a a for with as viewed that basis. go-forward services businesses. something much the me, I has as and pandemic, our on fundamental business, not a we as health And be have in utility proven pharmacy literally but potential a just

we own but clearly certain using and free programs to using around LabCorp, we be investing forth including can with being patients. they to up so do do testing, then adherence other activities our expand pharmacists, So the and to also that -- able counsel store, things centralize vaccines things employees, that working be are technology, both they and in we

marketplace Besides value real looking in and the to another risk that, for with retail where where are, and and areas businesses model. cluster my And and value those where with payors in a terrific synergy CareCentrix of our Shields we pharmacy though, have they're in potential providing partnership. one glance, taking really we're to in first they're have assets adding

a prepared capital with lots detail I really out leverages are in there good interesting, I way that again, zoom we that's mentioned things We've the that I that leave you have. my just got of every though, trials And efficient. asset remarks, think super other up of thought there. way I'll the some of all want clinical here says, our to stuff. The business the and number don't assets, backing again, So

have like managing. also that We investments VillageMD in things actively we're

that to to the would for what on invest for And things get the going meaningfully of patients, return if we lot health fair capital we a a payors, say they it. is, is us I to answer they we're create systems, get PBMs? business. in the sustained we're a these can't in do return, But return we're going that them? if a this, do can for value And we capital do, put on investments high so lens opportunities see is fair charity, won't But create the services not I

our care the health that's is which I I evolve health going basis services, strategy, PBM thought retail our services standpoint there I a a strategy, a the to -- I from for think And think was to a a we services headline health that. out business. terrific build that are to put pharmacy basis

I to base services from a of retail build fabulous health pharmacy is think business base a engagement. a because the

George Hill

in Okay. And if care I business way to I follow-up. you could have do the the kind the aspect? of think guess, you core the as of a quick frame business delivery person-to-person

Timothy Wentworth

When you -- would you define when you say care delivery?

George Hill

The some assets? the of Village and

Timothy Wentworth

his on be that a and working prepared put And profitable. Manmohan a as no question they to remarks, themselves they're to and their them. path, growing meaningfully in place both We're terms investment. closely where good costs there's that like their we mentioned getting in footprint, with So of have going

an So that we as like investment.

us the committed a I to, in investing village very beyond expect I area of assets not primary additional for growth care would we're investment, in our to portfolio which think as us that future investments. see

Operator

Your Cowen. next question comes from TD of the Charles line from Rhyee

Charles Rhyee

given Yes. on sort Tim, back. And this. specialty. Obviously, roles, in your your you're love of to from comments wanted specialty about hear would I little to around more bit welcome, prior Tim, a touch

a to segment. player bigger potentially it the You for this about and little a in be Walgreens bit path talked significantly extensively

If the the all distribution access is market. to I'm not Shields think of limited specialty I almost sort few drugs of one in mistaken, specialty has pharmacies that the

channel Walgreens and dynamics sort of I what the Shields next particularly given think with, ongoing scrutiny could the this shifting do regulatory few kind you in of -- for over of say, sort particular? years, And this space, this in in some create would opportunities market

Timothy Wentworth

to start, actually just then a business, great management been has been let has terrific to and little because systems. partner a and I'll John great health Shields close very team I'll the which speak John bit more, a

-- let is First, thing, the to us. specialty have that we drugs Shields clarify distribution one has access actually which access limited to me and Walgreens

so the health networks to health work And really what to Shields are programs to is and to actually able important systems build manage systems. on do that behalf patients is and of the these pharmacy the

If can quite actually that times be economics, a often, they're you underlying the place look earning at that only their profit. many

a become And so important we partner. very, very

Our that Walgreens speak assets to mix, second. just specialty for inside I'll a

We a community, central have fill.

interest pharma in a cell because building are therapy, We essentially strong that indicated space. with in has gene and working us

core think we great we've got so assets. And

one that the Shield participant. underway, assets focused we've sure a wins network got that Cross making of Rick I the into where together, think since on large got pointedly those John been number market. regional payor we has we've very, of were Blue here, And very things of put and a had the under Blue really I plans that's been working as

from than we access we're not we those sitting, out do where to the can through That's need though. fair of figure more And share provide, to that models our got our We've sort deliver. cost to service enhance to I'm the able we win to to sufficient be patients. working based of our on patients what

to enabler said, potential there? to want though, key is component any And John, if That as a strategy Shields you give color these a for being a pharmacies. specialty just additional

John Driscoll

you think Tim. I nailed it,

we're leveraging clinical what Shields delivers I is think a other and is Blues more job not pharmacy add growing -- it plans, outcomes. payors. and with in And an a market we're growing beyond does good better which only adherence and with exceptionally growing I'd just payors, model, thing the

which I still a runway the of in based complicated, drug there's obviously, to and think and involved it's America. really larger that's Walgreens and and the I hospital But great franchise building a where so lot to think strengths. execution, there's being get of on only systems a and Shields terms we're for which that a a growing both Walgreens system perspective, hospital large from performance, detail very and health going of with small systems of especially paid example, around underlying And -- from is lot more on payor the market it's plays

Charles Rhyee

George's in question. partnerships access kind are more of entities to on of to as care? we like a kind expand assets, to up Tim, care continued more with of but follow VillageMD, just invest of way looking Pearl could expect that you I if said And like could delivery you kind Great. probably type

Timothy Wentworth

starting those geographies partner for are any in ways choice to being all. to know, you We similar and, is the and build point City, growing. represent them recognize sandbox and in a a help theirs. not our in putting very them, for while that of to at a position of the way, that And opportunities deep And for fabulous importantly, VillageMD are -- us represents, perform same large but Village their has objectives, number from there they're help provider they're and at time in our grow of marketplaces the certain they us there perspective, to demonstrate partner short geographies as answer. a Yes that in, us them is test achieve services, business by grow

Operator

Percher Your next from the question of comes Eric from Nephron Research. line

Eric Percher

Walgreens it needed we've level has PBM your pressure reimbursement lower. 'XX have hearing years. we're view seeing that looks hit peer that we've unit that pharmacy, it are hit to a pressure perhaps better several can't you leverage And you given or to pharmacy 'XX? And have does cost on the new floor and been reimbursement more And a reimbursement more fair that driving in Walgreens and On Do a are go share you've reached like in past Independents saying floor offsets. vaccines the models? same the reimbursement go broader today, important, the saying services can't experience, drive key a for or you the from continues.

Timothy Wentworth

lower, years PBM, or just So for frankly, floor acquisition kept moving the but et just cetera. be for retailers, all XX not my system, at in that right, listen, players rebates whether in the costs, the

let's there And we we don't very that accept -- that little so in that it is tank. think left, way, put the

my itself, be there. to levers retailer beyond of design. economically marketplace, if include left have point retailer, In that is I deliver terms the and And a I'm PBM the I'm for there I the by much value to sensible -- isn't squeezing my what network would retail where of sort it's trying

on win to costs. win that doesn't enough that on more effective the produce way, PBM to certainty do for to way value more It's creation so basis. beyond And value unit go of around

I'm negotiations but a we of end So -- over through say and the transition model, patients. the way very successful not done some can 'XX which going I this had frankly help a to various are to have are being show close we're for close the time in a we XXXX will -- floor, and to indications and we And value-based -- we more -- along we're think to good PBMs and the to in marketplace are well we've users with the the drive again, believe 'XX. XX% for

standpoint, a changes. And And still compete not I'll to because my reimbursement said we as floor. to our compete. I've guess what, get declare to team, there's We so never just have model the from don't

can I things years, can compete, X helps that next X in will a win. good forward that role in think very on PBMs or we We we're actually and we And control. in leadership that though, I play at look way that as a that the

clear. Let me be

patient the therefore, to what the do Our configure that's job by listening going to to, through payors is And happen in our focused. partner. the being be more to and by being simply and PBMs win. It coming are understand carefully we're order a And that we not we place want are trying experience. I does payor a stores, value. happens great to create that prescriptions places great help trying

pull either And pass-through these responding, really to I and relates can may more it's that and experienced as we out marketplace have to at historically the -- putting or the therefore, we you've that to it transparent very seen, they're interesting marketplace models, than in announcing they're in. have think X programs me, as large said play from effectively very, very PBMs least

only our sense do what creation more of the out our A, team paid there be for that B, with. value marketplace be already and there for, me So to that can, fact can a we've we may presents and payers for urgency go pull win that done and accelerate additional

Rick, do want to... you

Rick Gates

is Yes, Charles, Rick. this

Timothy Wentworth

color. some add Rick

Rick Gates

Yes.

add, one been one making negotiating and are is sure is straight we add that very value The and at we've rate. Eric. dispensing a core that separate rate thing Sorry, I'll as anything successful else,

about separate you are contracts or getting. you services any vaccinations pay-for-performance our when like think of completely and that about treat, reimbursements think So or those test, test we're

very look of on that been our scripts sharp unit economics on we've laser specific we contract be we at we how how So can the dispensing. so

Eric Percher

going. was I where That's

Operator

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

Ann Hynes

the for Thanks question.

reimbursement So just Tim, for the investors. a follow-up it's a because, on obviously, model big focus

time. take a I you in have it Lisa's to long Do guesstimate take would you think question mentioned some on it you think that how you would implement?

payor since would your What the such And that for you change? why hat longer And them for Walgreen benefit benefit be payers be would the would open was And your the what longer what main maybe a do think them? of career, putting on be for the drivers to majority maybe would be term. term?

Timothy Wentworth

short. selling health know, you not and cycles how to PBM As plan So are implement? long

and for X. the material think sales that see And -- potential see uptake year midyear for for change a churns that to I looking regularly, is you'd but more is fairly small new this. so market what could to probably you I groups would extent or And a stuff expect see the within also quick

wrote were them. in doing transparent -- risk collaborative because we've deals and as I joined seen we shifted by market the again, And say -- I PBM. we actually think, XXXX, alongside -- to a of that the within months remember held being risk the traditional Towers didn't X with it before cautiously the I the PBM, because Watson I the transparent want wanted was They the

experience designs to paying the market an they drug cash actually the are the largely pass-through that were think counter of odd give if they I don't when have the though, so creating evolved case they underlying demand cost have go than the this plus the patients that they surprise for plan this to payor. of in a to pharmacy that more would So

my do office experience themselves -- And their this that's is think I causing how programs. don't the these good my as to at questions Again, employers pharmacy they've that, benefits, demand. asking coming like I'd let counter. why launched into suspect piece fact that's benefits that a if, PBM in employees some the So the are I it. of would speak the But for about

of to appropriately is that concerns exist evolve. environment I I regulatory the that there. continues think as think And well, it some the to very responsive

implementation. is X-month So going a not I don't think -- it's this be to

and We a we sat are have had conversations to these support overnight. and models, convert model prepared already to down could cost-plus and

a terms are patients and what win cost-plus to do we in compete to basis. of a we So willing player would need on

of fairly a -- it? Why comes providing down payers competitive-wise think to would are tough I for do I've in I've Again, in answered that just you that's a terms that valued. folks labor it market benefit to

want it benefit, the want they they And to valued. and understood it pharmacy don't be so to they -- want the And the benefits, be be to most want they it benefit used confusing.

achieve And think to so I that. offer pathway a models these

we're for us. subsidizing the not getting products in patients that in large-scale paid the services store, at of and the way way economic providing for being it a not back in that's a for is us What's fairly the are the

And I an of back, think you if of was there for dispense and lots good amount incentive to the there, big go obvious change created reasons. generics, being in appropriate system the

didn't to If dispense convince years were was in dispense. happen. and wave you to sampling people physicians back that they okay PBM the XX go generic would industry the easy to do had ago, generic to We -- believe even

different so now. And that's

for to for force anymore on the in generic places. high the the out, exchange the XX-plus in the with the most patients just frankly, for profit new plans. work the essentially coming doesn't are particularly subsidy a deductible And in cross-subsidize brand, generic dispensing or, brands on rates and need You've side to pharmacies that percent got

And a to time reimbursement force around this changes well that so I those may will stick. align set powers of think

Operator

Kevin from Caliendo Your comes from line next UBS. the of question

Kevin Caliendo

what meant lower clarity any then prepared on secondly, your guidance, the little love In be remarks what Tim. pharmacy, in question I And mentioned and being more around your a around that market might were, expectations a that driving bit you strategic that. for now. just growth maybe

think Given Walgreens actually to about it everything benefit a you and pharmacy history services, your own PBM? else as does

Timothy Wentworth

then first your I'll of happy answer part. over Manmohan Well, to second be and to the part turn the question

Manmohan Mahajan

Sure.

market X As you we're think was by in market outlook our on And at growing October, a in the about continued with we've to is lower the growth, driven the is prescription factors. pace. see as first grow really shared that's the What the line going guidance in that quarter prescription market to we side.

First impact of is continued the weaker is the or respiratory season, and Medicaid redetermination. second the impact

we slow market So growth full thinking bps XX estimates. previous now overall versus roughly October, the expect down the to around as about we're versus year

Timothy Wentworth

favor and the work costs but PBMs for value economics delivering really scale. good across reasons. anything to trust. of create relates us, being a that's the frankly. you've ecosystem who PBM, it owning in that as past that by the being a lives, produce I doesn't me this love way and I service heard don't best quite say love think And of a PBM, really having love small a for And in They independent. -- large good -- someone can We path lot I I the really obvious

And for us so every sense. make much PBM with not I rather would PBM work own a second-tier small does than buying a one.

Kevin Caliendo

know announced you a to able something Lilly ask But that fulfillment be morning, a Lilly how the if some would at existing program something in work with help dispense. services of you might to talking guys I this? This going something -- existing Or a you're They're use terms of maybe pharmacies don't is see or like look online But that. impact having if and about Understood. Can had a you it. like I pharmacy to you've possible. Direct. about it offer even sounds don't that that Walgreens? this in. were quick to could third-party they're know I pharmacy follow-up, if called new able participate talking services,

Timothy Wentworth

program a we of and that about Rick, who inside evolve well said, relates of great it's be as is, patients speak as as may pharma. as to the can to reimbursement to model over see it No, work provider question, sort did any my others I service how a preface we I've With can morning. mentioned, toss in as payors And and little as that think market. it like almost bit a it we can and that this well it

Rick Gates

think, now. you talk I can hit Tim, what about right we I think

drug what think is would that cost and I anything that, consumers, thing. I is obviously, we think lowers to say transparency consumers good for a

partners, against And work so with We be programs. types to it of help obviously, supportive of those. all of partners our we are payor, in deliver or those PBM pharma order

opportunity? and would So that. Absolutely, and we is an it on certainly support Lilly work with

Kevin Caliendo

this details so call. for It's on the been great. all much Thanks

Operator

Your of next Anderson Elizabeth question comes the Evercore from line from ISI.

Elizabeth Anderson

with again, work to you Tim. Nice

sort some broader element signed Just Can maybe double-clicking think the focused contracts? about Rick, for and for you a where for is -- what we tell to sense has contracts really as you've and this those of that of going the on you've what do like far. maybe on sort Tim like like opportunity, of question of so opportunity you've focus and as about talked And forward? contracts about percent a done think terms maybe of contracts total the pay-for-performance that now sort you in of that then have have we of that those improve on the

Timothy Wentworth

of week Medicare look with actually last with Yes, we sit teams say to I XXXX, wanted will particularly to conversation large had very to Advantage, at and let very, them. together, I down Rick on answer, how a who other payor may our work CEO than a the

of other then dynamics some that of to in conversations to are and creatively the macro we kind there of contracting lot through marketplace come are process table bubble going that our can the now with. is the a -- so the And back

you want the of current to terms in play, Rick, state of that? address

Rick Gates

sit within And obviously, still I that, of pay-for-performance the Medicare say Part space. D would just the most Yes. contracts

the ecosystem. the not ones going So how value can sense contract against operationally within only we that specific but that we're make obviously, we on deliver deliverables, deliver so on plan to obviously we

would space. We contracts to have And commercial are move are obviously, starting it then to see in the Medicaid through. starting the come space generally that they into

I more are we just to going our in conversations think what these Tim gives said, credibility deliver ability on reiterate and, contracts having more pay-for-performance to forward. us I enter think obviously, actually

Operator

today Tanquilut Brian Jefferies. Our from will last be question from

Brian, your line open. is

the from Stephanie comes question from next Davis Barclays. line of Your

Stephanie Davis

share line those Or attractiveness one plus opportunities or and Tim, of of curious it's last a on just this relative the as is given your market on I've payor of be gain structure your way in quo world. status given perspective to your there cost got well? one share PBM kind model, it a one I'd background in increase some Is to model. about peers?

Timothy Wentworth

is opportunity that something we with What Sure. I straightforward competing gain again exercise, that. underlying to do a cost appreciate do it. deliver share on how we live the is question. The is view that and to the on Competing like price every with. fairly we unit service we way is continue the and I basic understand

Hard to differentiate on those X.

to And trusted a allow that it patients you that be That's we in respect, respond head how I other always are brand and will relates have. of XXX-year what We to. the business. differentiation and think out assets well and low-cost the have will our that goals you as being some in what got we've on market, pharmacy that on are discussed start But really provider. evaluated, is I being the into the pulled models toward and we building driving will assets one like leverage folks

out that I'm Walgreens patient of in Medicare to to a business, perhaps Advantage flu for get would patient, brand idea To pharmacists me our unit cost. them, when contracts these that do anybody we will good that better on payors to with shows test a and Cologuard us challenging the that even XX% plus shot broaden have a and we can kind use that completing be rates, and of showing store a test. as can one behalf are on the able pure and we really coming we kind by call of thing Cologuard compelled a example, -- for suggest getting a with our Health it complete response plans, response of that as our payors, behalf the that and get of from our as or actually than differentiate something

patients about really, therefore, where And gain and, I ability really to an share. sit feel as that so to access do we to gain good

Operator

turn call Thank the over you. I Chief Executive now remarks. for Wentworth, Officer, to will closing Tim

Timothy Wentworth

Great. you. Thank

summary, in in. So dialing and for thanks

pleased lot are we market for have is to We of continues to be, but recognize our results, work It particularly we do. quarter a with still retailers, early. The first challenging.

I a we're we responding supportive think really very And well. have very Board.

things You've that we seen do. to have the we've to supported make, we already are changes additional looking and been

and on today the of powerful can path, to excellent but that call company halfway we believe we of health kind build asset are term retail an pharmacy. back the nowhere the we we long are even do We services that leveraging of really the near things point a a on a community

far the that challenging path decisions. so the not would only very, And and is difficult hoped so having that exciting that results been from what for are that me thing some for we to standpoint, despite have very and very on being make have we

marketplace, we we very quarters, future, find in and But in I talk get and we we excited after home our interest a Walgreens doing they the of that. like And being to greater talk and every what talk you as need to the to it that's to much. look and me, the to to day relates think to payors over we to go clarity and thing give will able be is, coming we that the forward going about preferred look Thanks out pharma, have partner. level I

Operator

disconnect. your This now conference Thank participation, for you today's concludes and call. you may

Walgreens Boots Alliance (WBA) 4 Jan 242024 Q1 Earnings call transcript