WBA - Earnings call transcript Q2 2024 | Walgreens Boots Alliance, Inc.

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Unknown Executive

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

You may also refer to the slides posted to the Investors section of our website for reconciliations of non-GAAP measures to the most comparable GAAP measures discussed during this earnings call. We encourage you to review the comparable GAAP measures and reconciliation to non-GAAP values and the other earnings materials we provided. I will now turn the call over to Tim.

Timothy Wentworth

morning, good and Chris, everyone. Thanks, operational WBA's our in with were despite second continued quarter expectations challenges line U.S. results in the retail environment. of execution good U.S. $X.XX discipline EPS our and in Adjusted cost reflects EBITDA in Retail segment, first positive continued performance in Pharmacy international U.S. strong quarter our of adjusted health impacts positive and tax planning care benefits. from

earnings $X.X our we is investment goodwill in measures. This after-tax charge impairment adjusted related charge, During the billion interest our quarter, net from to of any excluded non-GAAP recognized a noncash of noncontrolling VillageMD.

full narrowing guidance a are EPS We year to range adjusted $X.XX. to of $X.XX

reflects This a sell in U.S. down additional to challenging the guidance our wind reporting. Cencora of further a the effort retail environment both to shares and to in sale-leaseback simplify and program financial decisions our

be services partially in to execution impacts and favorability. by pharmacy offset these expect tax We

Minix have who who Corporate rounding announced and to leadership our solidified and Financial again, Officer; to as which best has and future. Human Chief believe our WBA welcome Healthcare. Elizabeth our newest I'm Executive commitment Leonard, of Resources U.S. I our our named were Once Mahajan, the into Mary joined in confirmed Officer; Chief Officer; Moen Lanesha President They Chief who Beth this Langowski, leaders its Affairs quarter. was capabilities lead Berger Legal Officer as Chief excited was as recently as Committee. We team, WBA out

an together of to established urgency collaboration Together, our in acting drive record bring to all comprised results. executive working and track that drive is excellence individuals Chicago and committee operational of are based with

that contributes aspire our portfolio health services will continue effort to we the and creates and relationships intense the that pharmacy of to our to retail next strategy drives deliver of deep an we X go-forward to leading review the months, partner Over trust. growth assets and in each be ensure the

a challenging multiyear on the inflationary boost U.S. at date. retail pathways innovative rise. business, U.S. backdrop to profitability Within navigating on to further In the our across growth. and happening with share depleted pharmacy and record me and retail, we our delinquency U.S. debt detail trends considerable from levels exploring rates and are Let household progress our businesses pressure savings customers confronting household

choices capabilities is shopper key resulting customers to to We're value with deliberate market intelligent, making making in items shifting to dynamics in engage seek and Our targeted responding channel by our focusing value in these investments way. an behavior.

front-end Additionally, we have to improve performance. implemented initiatives

opportunity own basis We penetration are XX leaning timely into and now up and points massive year-over-year. brand to increase at XX.X% the standing

shop. when customers orders means for in experience they meeting also enhancing and of experience where, received store further XX% customer an hour. brands. our want can ordering margin expand set to a with over of our work own we're we we that focused online Operationally, suppliers. brands. only less the not with on and with That alongside advantage same-day who pickup to than the expect intensely carefully where national in how reduced deepen over delivery, in-store meaningful -- We partnership are national and selecting We a plan but

weight effort do leaders in to most are on that we stores growth share their performance. and an their our Additionally, their in increase store place store and anticipated to areas matter much to empowering realigning individual field customers. and our impact we ability managers to To are incentives company's this, greater

of services We outperformance our another with pharmacy. in led quarter portfolio. execution delivered strong by Moving vaccines to pharmacy

While was maintained we market growth share. slower anticipated, than market originally

on core model centers our activities to the to which time half support X,XXX time currently that the centers more ability optimize technicians work as of pharmacists our rollout customer-facing gives this fulfillment pausing dispensing. footprint. stores, micro the on XX is talked we Earlier micro-fulfillment spend year, Our over about and additional and less we

as trained such seeing to patient, the well retention more retention they are do. it talent NPS improved team activities improves patient so acquisition the that as adherence. member perform We're only and this Not benefits for better they and scores, of is clinical

are choice for of focused that the creating an makes environment practice on us We pharmacists. setting

off industry In definition Dean's fact, earlier community Advisory and this labor demand reenergizing mission as pronounced services pharmacy with month, increases a pharmacy the we meeting evolving our while kicked first of the shortage. Council of for the faces

clearly are highlighted for a our pandemic. their which was on status to achieve pharmacists provider during mission We given influence the so

them diseases. These miles Americans, beyond would X point-of-care testing or practice to most and infectious reimbursed care immunizations, patients. be whose for well for services allow for scope providing of medications select patient includes counseling less clinical highly to just goes This are professionals health trained dispensing and

the of example an throughout first U.K., the in ways lighten advise treatment the service, role XX, on to the pharmacy on pharmacists possible and what deploy health serves launched which case NHS the to system. Boots health is new for England broader of to capabilities This X use pharmacists prescribe As January common expands care ultimately of conditions. as of the burden fully a model

cost the is reimbursement very opportunity patients. successfully models we and that model and already pressures the in other slow wallets. and drug Speaking patient's inflationary unmatched welcome plus models there change help provide value, for on operate us for real and value We prices any to of reimbursement alternative the number reimburses transparency our in of

are of PBMs theme. a stages, share having active still We and early they around are and constructive in other these cost-plus discussions general but Many more models. with payers conversations

value a an there worked out, as expect the rationally to from don't the to need that of patients is be all especially to predictable PBMs and it's to open models. We drug. shift of to counter dynamics happen encouraging is number a to overnight industry model transparent, the are where payers these but cost see what There pay tied at

U.S. health to turning Now care.

has deliver have strong and model as to ever optimizing driving and footprint partners, system continues recent top adjusted several actions of growing quarter which another delivering their are performance recent first quarter patient extensions. differentiated adjusted health is growth. resulted bottom panels important an milestone accelerate clinic year-on-year significant in in to including line VillageMD's profitability, their and reached EBITDA. significant long-term cost We driving for Shield positive of improvement our rightsizing of their value EBITDA structure,

in second Full XX% grew quarter. lives by the year-on-year risk

prioritizes that density highest in they communicated. January As opportunity clinics markets, total Village been their a of XXX decided XX in previously approximately of the exit to inclusive had

XXX Boots growth and of recent U.K. Shifting Mamohan successive meaningful share by The consistent As have strong of business demonstrating our discuss of in execution detail market once VillageMD. they XXth highlighted more exited to today, and quarter locations. performed investment a reevaluation our in well, again already will at gains. retail comp international.

increase me cash offer let progress actions across Finally, the to structure swift the of further detail cost company. the WBA flow our on rightsize and

majority a organizational account to driving and visibility into significant improvements. model very and segment for degree a billion initiatives, U.S. date have as savings the in high retail operating the Pharmacy total. in already $X workforce taken this including We're office support will We pharmacy primarily additional in cost X of savings ways: actions of year optimization, reductions, Retail our location

to the by half, CapEx lower capital cash working first In prior also $XXX than flow and are was million prioritizing the projects period. We improve year spend.

million million the and We year deliver reduction $XXX a full are capital $XXX working on track in fiscal benefits for to XXXX. in

financial hand to a over it detail. in our Langowski, Mary few introduce then to She to will like say words. review to Mamohan further results I'd Next,

Unknown Executive

government Tim. new discipline. retail in you, to join I'm Thank growth all I'm and financial unlock the XX thrilled company. everyone. care, of new is be of Good and to and areas sectors. on accelerate care commercialize iconic execution to excited health this products services through health years and today, teams you part morning, spent a career focused My I've leading

most Fortune CVS was companies Aetna. a with of I CVS' that a to and including economic health expand transformation lines, strategy support health Health, led XX acquisition business, system. and of to some sought technology of of Health, sustained a a care company leading I where platform the growth. model I've Solera Most the have to and employers, health condition embrace have of company's the growth product new technology and successful assets, recently, payers and a led I care new CEO services, aspects been to improve At launching drive the fortunate health worked to leveraging core executed change serving leading new care digital

and expectations have an and the others of still My payers drive vantage Health are pharma, Walgreens. and clear. working one companies the have retail across health better partner that, made be with our the health opportunity pharmacists system. role the value reach for care position has we the need know few changing announcement, and In and to community is Walgreens plans convenient consumer point can point access platform presence, engagement of Walgreens. is our see face and providers, systems care higher lower-cost heard the the from who best Very outcomes. They health entry thing of believe health to the of to touch, Since more changing. I frequent the most into play

with as position will partner true health is our able capitalize And plan an independent any PBM a work strength on. to we or that

now U.S. on drive Board health shareholders, Thanks team to and a build Tim the patients. want turn will to value in quarter. we this our and progress adjusted significant achieving milestone, this Finally, for and it congratulate to I'll opportunity. EBITDA care to I on this positive the for continue customers It's Mamohan. to

Manmohan Mahajan

a and XX%. offset reflecting and tax U.S. increased in you, lower adjusted segment Sales Thank the sales year-over-year International in basis, results of retail our lower with by care on Overall, retail second Adjusted profitability and operational X.X% basis. our U.S. performance health EPS impact pharmacy X.X% constant cost line delivered Healthcare everyone. U.S. U.S. increased rate grew expectations. on $X.XX effective morning, and savings, up of pro sale gains. leaseback currency by X.X% and X.X% forma lower good Mary, improved was of a growth constant currency quarter were a

GAAP effective adjusted $X.X tax MD for deferred international related rate quarter Village second impairment tax goodwill. The loss a of the certain in a included initial net the charge to noncash jurisdictions. lower reflects asset billion recognition

value During fiscal that MD disclosed quarter of our its margin. Village for resulted narrow goodwill carrying we unit impairment reporting our a annual by its the 'XX, value fourth in exceeding fair test

a the multi-specialty impacts in slower-than-expected downward have and we of impact structure. of taken closing productivity of monitoring February, result, changes in patient the attempt rightsize offset and in trends XXX revised panel an from longer-term Management actions business we Village In the XX to recent received These inclusive a As the potential including growth communicated clinics, for by Medicare models. indicators forecast partly reimbursement approximately closely MD of previously impairment. performance been the cost were

Accordingly, attribution of value. to performed forecast, interim carrying of we charge billion On resulted in test billion we $X.X excluded of impairment fair in VillageMD a the that non-GAAP interests. a net of This revised loss $XX.X resulted goodwill recognized goodwill from to below is quarter. this XX% noncontrolling noncontrolling value loss in earnings this prior charge the after-tax unit and Given an noncash reporting basis measures. an net a interest, its

The financial decline performance multiples expectations, a discount the fair was and to and value market peer impairment of continued due income MD's previously the approaches. lower challenged using is market the have to Village of longer-term combination business than which for charge rates. group, determined increased The expected

majority Village of $X the quarter recognized of equity included As also a fiscal company the net VillageMD's value immediately a our by the in carrying the on share equity first reminder, 'XX. of prior during owned gain acquisition MD to interest interest billion assets

and goodwill invest will across businesses on or it is write-off do position we not going impact ability our a have forward. noncash, financial significant to believe This our

we We management have well positive growth. rightsizing the provide the performance in seen 'XX, the Village cost will accelerate recent by believe MD markets During the approach from structure to on as actions platform impacts core of profitability. first VillageMD a focused financial taken future half fiscal for improving as team

million Retail second included quarter also long-lived assets U.S. segment. Pharmacy $XXX The the impairment charge certain noncash a in related to

agile platform U.S., to build be deep-dive concluded system the the disruption manner over it that a new instead time with several last pharmacy capital-efficient much technology of lower capabilities new would exercise As an to in with over operations for modernize a of continuing quarter we months, better the our in and risk. part existing during

the assets. and the result, we charge recognized software against underlying a development As

charge on similar Finally, gain Cencora last $XXX million Cencora value partly the forward adjustments $XXX derivatives a a noncash quarter, shares, by related shares. after-tax of sale to to variable prepaid offset recognized fair we million for on

improved to XX.X% currency on EPS declined and softer a tax on of on adjusted basis U.S. Now care billion $X partly health lower GAAP lower to highlights. U.S. let's the move to billion effective leaseback constant of increased currency compared half in first loss and loss retail Sales offset sale was due fiscal $X rate. a a net X.X% basis. Adjusted constant the 'XX. half a by profitability first in gains, performance

As earlier, offset shares. impairment included billion period gain the noncash sale and first certain for 'XX after-tax included prior partly lawsuits by opioid-related explained on fiscal of a after-tax I year the half charges. of claims billion Cencora charge a $X.X The $X.X

Now let segment. me all basis are cover on figures U.S. leap year for Note comparable Retail a Pharmacy that all adjusted segments.

due sale levels by on lower elevated driven shrink business. year-on-year volume partly partially was services, which declined savings prescription initiatives. gains, higher versus grew and of progress quarter in sales by to brand retail offset AOI lower X.X% contribution Sales prior leaseback the pharmacy from cost and volume, in inflation X.X% retail continued offset XX.X% by a year pharmacy the a decline

Looking ahead, approximately quarter. material we the gains, Sale leaseback we million not headwind in sale net $XXX AOI expense anticipate winding do leaseback going to rent benefit are down forward. and were of an the program, incremental any

mix grew pharmacy. volume ongoing overall growth continued turn prescription brand the driven scripts Pharmacy of year driven better and profit contribution from and line increased to pressure Pharmacy procurement impacted negatively the X.X%, in with now negatively U.S. market to services. impact X.X%, me sales portfolio. Pharmacy overall our mainly Let net quarter than gross impact with redeterminations by pharmacy down reimbursement ionization The market. inflation, excluding Services Medicaid comp savings. by brand Comm vaccines impacts slightly growth. versus performed margin of expectations, prior was adjusted by

retail our Turning next to U.S. business.

a were from quarter, drivers. in declined away Comparable We shift sales consumers continue main with to discretionary channel in see there drug spend as seek X.X% a the environment challenging retail retail X value. the

merchandise to we continue pull impact and back holiday an consumers XXX approximately saw categories. spending, in basis seasonal discretionary from as general sales First, points on of weaker

Second, than as impacted weaker XX season, by respiratory sales a which approximately directly expected, normal we saw points. comparable basis

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

an as as primary serves attachment cough addition, driver, In was flu there sales. the impact lower trip incremental from a cold also

basis led category to points quarter. January the higher headwind declined margin in conditions partly benefits weather from Lastly, performance impacted XX in improvement by year-on-year, Retail a by of approximately program. shrink gross offset

numbers. X.X%. due real segment. currency Germany talk Total wholesale entirely up again International the operating quarter. X.X%. always, Segment adjusted expectations XX%, grew to period with gross inflationary profit down the as in income I lapping the offsetting and segment our increasing next underlying Turning Boots will growth X.X% estate in pressures. sales increased Adjusted ago with the to by constant And gains exceeded in X% was The International U.K. year

performed Personal showing retail well. sales. increased Let's XX.X% U.K. particularly were and now and across of Care, and cover year-on-year locations and in U.K. beauty, Beauty sales destination Comp XX% over Boots sales travel flagship Comp our X.X% pharmacy X.X%. all formats, up sales retail with categories detail. represented and led increased health by growth, Boots.com

Turning to quarter third The positive Healthcare care. U.S. its health EBITDA. of in adjusted first year-on-year was adjusted of improvement next EBITDA. quarter delivered U.S. the significant This consecutive segment

of basis, Second $X.X basis. The on MD quarter a of was prior forma driven Summit billion aided compared XX% increased same $X.X Village full performance a pro billion Health. XX%, growth lives. XX% to sales and of by in pro increased On and risk sales sales increase by acquisition the segment forma clinic grew year the year-on-year quarter,

prior its last year driven year, period. to system Adjusted service of make the quarter million, profitability growth up over compared adjusted by growing $XXX Shields. were on an patients million to cost led as an and was believe and to Village mainly in saw rightsizing panel. of structure number patient partnerships the prior accelerate existing improvement its to the contracts MD year. We Shield EBITDA XX% of versus and EBITDA progress continues robust $XX compared VillageMD increase by XX% health Shield expansion sales the in to new

$XXX flows Turning 'XX. entity by [indiscernible] the first next versus in seasonality. expenditures to Boots to half in fiscal $XXX million related Operating to declined of by $XXX legal matters, fiscal was underlying payments Capital premium impacted roughly cash flow. 'XX plan cash contributions half of million negatively million first and the related

As billion was result, by a $X approximately versus flow down free cash prior year. the

We expect first cash second several the half factors. free half flow compared improvement driven to by

First, 'XX. fiscal we second expect to related the of lower legal half matters in payments

$XXX capital by Second, year-over-year. we reduce remain approximately to expenditure on track million

Third, expect fiscal to working $XXX million we 'XX. improvement deliver capital of during

of during impact benefit majority While we will half. see first benefits of half we some the the the these these initiatives did expect of second

years, prior the in Pharmacy seasonality favorable capital the segments International to U.S. to similar year of the the on the impact second compared Lastly, a working half. underlying and first have believe half we Retail will

now turn guidance. to I will

to in We range updated U.S. Cencora incorporates 'XX and are our adjusted environment, lower fiscal pharmacy offset services and execution the reduced narrowing guidance income, equity The by leaseback rate. $X.XX a adjusted lower a gains retail sale tax EPS challenging to effective $X.XX.

tailwinds, the strong date. pharmacy of in business, services to has delivered execution see results which our we On to initial plan continue our ahead

now we addition, effective our X%. be tax to adjusted under In rate expect

expect challenging in sales continue impact the U.S. we short On backdrop negatively our term. the retail retail to will headwinds, the

expect now sales 'XX fiscal comp We to retail down X%. be approximately

down wind sale-leaseback future. the of no material gains early are the with Second, in the program, expected

shares reduce in Third, the will equity sale block forward. going earnings Cencora February of

our U.S. results, lower pharmacy we in forecast Lastly, compared as market business slightly discussed to initial quarter with the growth first guidance.

guidance the range. an Healthcare the 'XX. the EBITDA half, through to midpoint $XXX progress at be Importantly, segment of adjusted made first over we fiscal million This $XXX U.S. expect to to million continue of increase the segment, based on the in breakeven represents

earnings will we factors half, half. prior in of in additional In second second Next, EPS I the be period. $X.XX provide details on the will lapping adjusted impacting year the

We year-over-year impact expect several factors to comparison. the key

the to the significant is headwind second in wind the First, a half. be program down sale-leaseback of expected

Second, we will and fourth the quarter third lap incentive of fiscal accruals reduction 'XX. in

our of a on segment remains remainder in range. EBITDA on improvement million the guidance the year. midpoint based rate second track of half adjusted year-over-year guidance Healthcare Third, over implies tax achieve higher the The U.S. the updated $XXX to the of

back his year-on-year pass And half within cost pharmacy by we With me U.S. Tim in to retail for finally, driven second let it expect the business, savings initiatives. our that, improvement closing remarks. now

Timothy Wentworth

To to WBA, but our ahead team of encouraged hard with This are table strengthen we wrap our clear journey business simplify work everything a on have us the to the right on put our and has up, in act we by progress. track. mandate to

drive to growth positioned We for for partners. deliver value out and strategy pharmacy asset-light in communities capital-efficient to retail health our are rooted create services and build well footprint an care

off work. strategic our kicked We've planning

necessary Over this in-depth the we X team analysis will achieve to next on to potential generating flow. X and undergoing is determine optimal what to actions portfolio with a an growth believe the be focus the cash months, maximizing

business strategic every complementary and on longer-term focused synergy a financial through capabilities. reviewing fit, lens potential, are upside or new We

our to a sustainable sense months validate That to me taking and most future. to it's long-term approach urgency my create of to is also value have a fueled and by confidence with get thoughtful In XXX,XXX our that. pride That I execute are X dedication my our foundational to shareholder our We value. very commitment team consistently or in to future team hard our impressed great gives WBA, growth, members' In with unlock finding company. pathways. been existing opportunities ability experience,

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

Operator

Thank you.

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

Lisa Gill

I your start I boosting growth. about profit want just where multipart you talked and really a question. to with have comments

reimbursement models. You talked new about

talked provider status. You about

you you would be your can lot So you and that line first things different Can about get play. talk about think a maybe to come just of sight timing talked part? into of the there

you capitation Mary. today made closed. then guidance think secondly, capitation? a not maybe strategic I going think of profitability want about in And the Village closings just I talk the Can commitment just I you understand coming. to really then Mary, And how welcome now you what have of I the and into XXX see all about to we together, were know and know about number that future big want about ready review you're comments to locations say putting as of around on XX%. capitated markets, the to progression the we give the 'XX. the to think Tim, as

of building are blocks 'XX? of But think think 'XX into the some half of there about we about to kind progression when the going back

Timothy Wentworth

Thanks, Lisa. A lot there.

part and little think that Mary the in talk cetera, take into it we're ahead Mohan structured terms I'll particularly about Rick new question, in then have your year XX half are et as reimbursement. as a first said to probably go reimbursement last more the I models, of of et coming take back Gates color. have So We'll and the now cetera. relates we PBMs growth, Clearly, quarter, with conversations payers, just the --

believe And prepared that which have and conversations multiple what say in the to it let us remarks ways pressures acknowledgment, say, for I've lead our in conversations that we that continue on payers way. a me me are as team to clear there constructive as there's are reimbursement hoc is well ad is to which that for well, with said confidence as value create to my payers having I would certain very what

to XX want the in that transparency really aligns not higher their I That you actually the obviously take know, everyone we've in to we if add marketplaces them. conversations. win your color to any those -- going to those don't very I so help and way well to this conversations, years team close last how more friendliness acknowledges member the quite forth, is been for the in PBMs playing Rick, us is work. And think drive just with playing of conversation

Unknown Executive

the add, we say up expanded negotiations. just Rick. will calendar starting are services. But in year I'll I is this the earnest And Lisa, some also about of just you 'XX talked

continue we're programs contracts only been adherence of part those based have and very have going get to We forward. not our what gotten against to on strong our doing. performance a adherence Vaccines more based traction

But testing his status, we're until test treat well, those right which a there's closely remarks. opportunities the state-by-state selling working comes in in across process it country and that federal we're very when to really expand we cycle and now Tim through talked the going that's a as as provider about

Timothy Wentworth

-- Rick. and And thanks, then

work Lisa, bottom take reconfigure realistic. we're occur with this we longer-term be. them that that as through likely question. with us also well I'll we're to just area, ensure -- as are Lisa's to the way is making to comment it let we're and in value that sure we changes We know line, So us that the again, on our that what are, multiple years, Mary, second will flows to distributor that the structural prepared very should briefly you working

Unknown Executive

Thanks, what systems said are are to that opening that reach with very something savings. in approaching given my interested the Lisa. our reiterate MedEx say marketplace and remarks, help traditional health in I unmatched working us and I'll got and with have. health just payers in lot of consumers, assets in don't that's drive the them a players system We've the Walgreens

working in and them conversations coming having So we'll be months. with the

Timothy Wentworth

time some remarks, not of as arrival. is this his me role also look in with an And I Mary. time had by different Driscoll. underway. an to And him those them Mary's continuing work adviser recruit find my and did with year. I for the forward We accelerate the thank helped prepared during meaningfully way, John course, expect In of do here that. appropriate me John a to WBA. a I actually at work terrific through to lot to the John did end of of

it I'm John. one finally, the Lisa not Mamohan, to to the only second you half. the question with as then And thank is So sure relates

you take so that. And

Manmohan Mahajan

Sure, Tim.

Lisa, this So Manon. is

As for blocks providing you building let guidance on 'XX, 'XX the by saying, this think we're call. about FY me not start

in we in X-year through the and team with working now Tim's detailed a a review strategic As place plan. prepared heard you remarks, executive are

we will share next so X months. to the over that X And input

of some the is I a the do out as about One think understand. meaningful point obvious me contributions in -- about think of are we half. think me you themes things ] 'XX couple let leaseback second any you share from half, and to that sale terms as half let But in [ -- expect not and second you second

pretty it's sale terms leaseback clean so And in gains perspective. from that not of any including

us tax And second effective is of the second for the that rate, in the timing lower quarter. out adjusted played

And the half. much normalized tax expect more do a so rate we in second

think into Now a things bridging about as couple you 'XX, of to consider.

health that growth, maintaining midpoint in adjusted year-over-year U.S. $XXX guidance million First, the care on we're 'XX. our see is fiscal of you the at increase which range, EBITDA

ahead this focus the we see, growth drive we do to that into And continue Village, through as so in continue as we well year. 'XX, we look as core see growth they on going do their continuing to expect care. health markets as on actions cost are they

part. one that's So

we do grow to continues year, expect into continue fiscal throughout grow 'XX. them the to and to obviously Shields

we first taken in yet. a the have savings, effect have half cost the the done Second, second will in half. We're actions not ramp-up

WBA. our decisions We rightsize to at continue cost make to structure here

do of fiscal we that expect into so 'XX. And wraparound a effect

prepared we longer remarks, half our lowered have expected a 'XX fiscal or than for business I U.S. my we in the full in U.S., in seen persisting negative comp. headwinds for retail Third, as for And shared expectation retail have the the X% the to second environment. year

the time improvement. the slight will a in do team of level half Tracey as Now second drive within over take and that, and improvement certain taking hold will the that we are expect actions

is be our then 'XX. on this the And think So going that seasonality. to what how is business piece last maybe into about some to does have

the more a and the well year. half U.S. basis normalized our as first have out half. in second Cough/cold contributions business U.S. the play in half performed really services does generate on that the first in which the business, does does in on pharmacy first higher half. the flu strong so business season in impact both more And on timing the the to as pharmacy throughout than That significantly of the has compared the second retail of half

seasonality piece, another does holiday have example half. the the on And lastly, contributions Boots, first seasons in higher in just which is

those So I to you make have factor those. want to sure just got you themes.

Operator

Our Cowen. Charles TD next question Rhyee comes from with

Charles Rhyee

bit as as brands, I can talk would of retail can in right, process number drill how about the fewer around around be well. how particularly about like brand those of here. segment wanted a long realign down more own to on a Maybe trying of retail national think implemented increase a that things, some national realigning take? brands to quickly little U.S. about you here you you number Tim, talked

vaccines the mentioned end you a sense qualitatively pharmacy how let's give been traditional leading you services not at contribution you Is then maybe look pharma quantitatively, we us part that sense retail and U.S. would business. way on say, split services, but AOI when there of the of a to between, has front any can pharmacy. the And in

Timothy Wentworth

of Thanks, today Charles. prepared over you not to reimbursements that is Obviously, growth. time, we of model What vaccine some out. you forth I of the our treat help build think visibility would out. give we're so I to and to and from meaningful test looking the in that incremental store tell metrics very To and your to back terms our second is operating can break going that overall And portfolio you that. key and question, we're be

A us quite ago large-scale moved and it a If pharma pretty actually abandoned of a had as not Today, had you let's much amazing. those one industry years get ability areas strong lot and demand. that vaccines the strong, away. that was years to companies. do what ago, core to to XX to look to being we in the go their think basis. inside And of see There what is patients pharma incremental the as exciting part leverage underappreciated case, of XX about it's Walgreens innovation companies we at able for every on it, does. companies key X is our

future me is with we that that where our needs, model have CEOs at these of not paid we driving unique fairly only pharma the the conversations that model the back innovations a the And for position I to it's are in do a reward but work of the shareholders. the major store to we're companies have that going suggest

over relates a of to say areas rationalization retail, label. for other the it private that is growing of us, idea Tracy to SKU to key I'll of alongside one U.S. -- of turn it As than number

we at those rapidly look a to of are on things both got things. you've and of think lot moving I

store a announced in the XXXX our to Initially, last week done until now 'XX get and need unleash we our was field-based so found of be leadership thoughts stores. manager we in it way a and to right, that We could get key on change compensation it to for energy that

aren't for going has since in to joined our been partners, what so a and by the surprised our value execute clear lately, and partner ability ability pleasantly ability company. to when it during And Tracy meetings saw And terms we seen be -- to is saying myself we brands few I've when that goal, terrorized along with been I've leading got national got -- everybody. something to create we've looking a a I've -- I've COVID, we're the a is we've a actually few of quickly that in

we than want everyone. -- us somebody are is for that going rather everything to We be to something

with the you color that, on give strategy? Tracey, to little want So whole a brand national do

Unknown Executive

Yes. Charles. Yes. morning, Good

some indicated, can this are you've our to been at So Tim quickly things -- have growing quickly. brand rapid if your we penetration And been tracking own pace. our -- question expansion, a own as brand nicely. it do To been as has how quite there very that around relates has we accelerating

those, team mentioned own showcase really and brand market. their Tim frontline products their incentivizing of what to One in is important and members embracing the consumers again, our around to

shelf continue new of this to out lean QX. brand own to give those nicely can actually then terms looking color, And willing consumers' quickly. we is at bit behavior takes and quite But just is on reach area third part as us we a little brand, longer. own on into move store second in being XX for is is, And in and depth, The the you product value bit means this finding launched the little quite new for that is working a products focus what of around us. innovation. and to the And this

the level depth quite of with own good are We brands. feeling can that we about go

Operator

Percher Eric comes from Nephron question Our with next Research.

Eric Percher

on the appreciate I commentary reimbursement pharmacy services model. and

there to out Tim on love this you direct contracts? be Lilly payer to PBM Any core retail, hear sense call to you Direct. I'd And appreciated. updated and beyond to perspective and it if the goal It's the patients. PBM do So relationships interesting it get Rick. view view looking a given is have and manufacturers make to follow-up to to your expand would include for get ability access, possible to does

Timothy Wentworth

over and it start to Thanks. Sure. Rick. I'll turn

lot about I First every point all Lilly literally may into come funded their cases, talk out Dave that their being a it team first in in be a And the prefer stores relationship have of of other not we for of they things. all, But said, I'd strategy. American. direct with that our but would benefit all, and

programs to And product pharma particular we where patients where looking for love a where go the so when direct want et I model, isn't reimbursement to effectively. comes start at may chain cetera, it normal to working supply companies

Not if think time what the would the that's reasonable that anybody product of for paid-for hope at period extent on certainly for. a look the the you GLP-Xs, the not example, I over drugs payers those patients, believe not I a and the not to is adherence innovators.

to another have to one It's I which retain way there anybody profile. issues a downstream, safely help aligned Otherwise, so their the be partner to that to believe ensure a thing partner. that be clinically actually distribution because will would safety that through It's And partner. are high made uniquely are patient other we they also work positioned a companies a want. not a can thing products what these want have

are we direct our from And other again, by of work things. there, pharma natural relationships. to perspective, ability for think with you those a any -- we a any product our on unencumbered color partner add our basis, So is Rick, let but I'll

Unknown Executive

them we company. provider. our We think add fit pharma store, is every trying I said solve really that's thing is a place partner. help think you for with solve what that have roll they I'd we And sleeves. what we we natural The see only to relationship us our they're natural a a because Yes. I are have And us in relationships We with with every for. are independent to an up was

If integrated. you think about it that assets way, we other don't have vertically any

I them market. think we're drive partner programs And help for in And us to I as the a so partner think see them. really a willing they natural

Eric Percher

the profile your what on drove relationship this Was changing? distributor comment

Timothy Wentworth

to the we've And long-standing with add. is we to I relationship always relationship because a it's No, with might life. working, at prior And not really relationship mean to had and another well, where look has important changes. into market got long-term a Cencora in did it dynamic which I is nothing we Cencora. only better. that organic while as but bit operate, down great as and sit a do context it work that a be where

relates as good a a partner. sure next years, relates competitive to the receive we retain And as likely it that manifest. that more marketplace provide relates the can the as the situation it to we it we that how changes and importantly, a over to And things as make the contemporary X are cost to structure in we services do our where

those the all table. on things So throw that of are things we

congratulate had a a you forward going just there does me terrific was working run to. in my still, look of Bob sit with how new over great not his again, I lot a who we're to can't And for team with and years. Steve, partner role, I But and

Operator

next question from Caliendo with comes Kevin Our UBS.

Kevin Caliendo

implies wanted headwinds think sort and about tailwinds of that I from the we into guidance 'XX. half to about the second and it what as talk base fiscal

tax there. would from leasebacks asking I guess be headwind? core of is -- be of maybe a going and to midpoint what whether be $X.XX, we I'm sort So that take Or sort understand some base, that tax, would if it it's headwinds there's XXXB. no a like tailwinds presumably, probably we headwind sale

at the impact question change the rate fees the PBM cadence all is, away, then was taking above reimbursement have retail because there like cash any did meaning going second effect segment And changes beyond in or that flows from all? of for the and DIR the I it at timing run the that

Manmohan Mahajan

Yes.

the first, here then take Rick about and Let bit guidance can little more. talk me a

out half. recognized So in the we that perspective, did significant calculating second have for we 'XX, from thinking We range the second tax first, think about and the fairly here. of a guidance second midpoint normalized rate half of and as the expect on you're tax benefit quarter side, about in timing the you played a rate the that the

headwind -- from taxes I more that, there fiscal point your think, 'XX. that's starting So no is if is for

think as a things to I couple said, yes, then, And consider. I of

growth a Shields guidance First in growth, out, business. growth is to U.S. as do care health their village we in the look We're fiscal as cost drive see at significant on the maintaining down continue we as and continuing, 'XX. expected. core markets concentrate as And well both they

we're Our half. take We've on the year, And the that we'll initiatives. to in continue savings track in own talked $X second savings are billion to cost and cost actions of there about achieve that.

the cost that side. see as will benefit will wraparound well so you as efficiency And a 'XX initiatives on new into continue

the X% half guidance as half for about I year expected second we guidance. second talked the implied comp about retail thought negative or

we do however, over it And see, slightly. improving time so

And about then so we well. the talked some think they is going hold. that take will in for into expect team that I and And think taking to 'XX, seasonality, got factor do improvement actions Tracy you And as in just I that. 'XX

there Boots there there's in seasonality You about there's cold is call cough flu, vaccines portfolio. the there, and Obviously, there. seasonality seasonality talked earlier around

consider. the themes So those want are you to that of maybe some

Unknown Executive

signing seeing we're historically. either contracting we're a on on year. aren't if performing and really seeing contracts to the negative cash on reimbursement. there were outside and just that on. that By we impact throughout there ability have of, obviously to that its defies be we even is out seeing obviously, flow, And what the which large, the against negative we way We Yes. might impacts reimbursement, overperform that pay-for-performance -- answer rates and/or impact for we're a was works the the

look been it really to perspective. has reimbursement us that a neutral say when from would fee So I at you

Operator

Next question George comes Deutsche Hill Bank. from with

George Hill

potential discussions. on I little guess, bit kind I on you could of just between -- changes to a earnings I Rick, for fiscal when comment QX. first, Mean, questions. you couple which, And push pull a could would and the touched the those about brief if ask this, you cadence have ask I quick of reimbursement I talk would a and guess about QX quick I make think local kind we on model, of hit guess

that the I'm free, update know getting assets, of the the on how an made of and given I core throwing to Tim, how look in be company And the you with unlock thinking us do here the some analysis -- parts an there's know A at of portfolio strategy. argument lot a us you're U.S. for lot other about value. business the want you're value portfolio of to kind of just and kind

Timothy Wentworth

I'll and then have I'll the have I'll take of third. take your Rick Mamoan and the Thanks. question, the part Great. first second, take

Unknown Executive

to push understand And obviously model. are for PBMs looking reimbursement in and in what with the obviously, we looking for the eco it would work model they're standard-based marketplace in say some for thanks George, a reimbursement model the payers pull to when an question. the is of the I changes, comes hand AWP-based

models it. cost-plus may go they sure reimbursement solutions make have payers to be for them that or models. We with types to for looking but those We looking they're have to with them, work those other of

So types put market models try move uptake I for us forward. right the different as and then to opportunity now, see really to models we think advance and of really looks what like it's those to payer an then continue in

Manmohan Mahajan

then is Yes. From third quarter. in at finally, and fourth fairly what a And the looking balanced we're cadence here I think here portfolio... perspective,

Timothy Wentworth

business have don't well big portfolio. piece But brand deeply so as as are our they think and of every forth. are because months, footprint. I Let the real but looking several at our core been, what clear, it their store you Obviously, over ambiguous, what we was me know be into chunks digging names the also the last and

at design as as our our automation. at, with manager heard well you and at as looking looking suppliers at compensation, deans and assortment, before, workflow Looking looking working and our pharmacies

to either the large the back your we need to step the to we're They sum And obviously, that to need -- things a have to need about a very of fit. half dozen parts fact of synergize. conscious but question, place themselves when you offer They to be or piece or for that unlock growth, need for long-term need not upside better in either find capabilities would combined with other perhaps otherwise we we by unlocked to runway They to a else things. able a have them.

the for you Boots know collection from so the in own U.S. independent you can assets from Shields tell that and on side, Mary I that, And which of CareCentrix health example, our care perspective, has businesses we that and its have.

it we're of it clear, in and and going support Board -- we sit that Do companies, message steps either pharma some patients, for there's where market Mary our the we're that the looking to -- serve, April, the when both, clear people end recommendations does give both has Is growth? some look the of is at the context down of over I very growth don't going with care part. -- next But be make to really in in down that send consumers, that headed how health or staffed about them outside to We're And bang forces to Board the we the are me a been impact big this then the strip one we to want is coming. X in doing the a series let going of systems, so at is the businesses every those health years. right? and next then culminate the going a payers, complete to things. built at XX that

a going we as underway get not part some point markets I'm fully things do go super it say, detailed committee to me. Chicago so to already again, have have as this across to company, testing We about things it's of this here that from at alongside forth. it than and examining staffed executive is in other and based to to excited the dynamic, I'm

Operator

Michael with from Trading question next comes Partners. Our Larin

Unknown Analyst

lines push between So previous along guidance of updated versus the pull and the your guidance. maybe the

of couple a Just things.

same-store dynamics basis I the know in you're same-store the retail economics expecting behind First, seeing any year? half are what on the but in talked you changes growth, the on back on about decline, of script a you

And closures of might year-to-date care the about a we care the as the expectations that -- second any half that see with AOI better I your leads health VillageMD business performance. the strong of think takes accelerated there should performance? pace highlighted have other EBITDA then would on well. you the current dynamics puts I just health thought ramp know to is and within you versus

Timothy Wentworth

take Mamohan I'll have that.

Manmohan Mahajan

Yes, sure.

through look, a the couple biggest consider. implied to the in order think you half factors guide, from to second as half And second go about retail a I'll factor So of perspective.

have challenging to environment for the expected. continues persist longer seen We than

And so we are lowering our expectation.

at we're we low I single were now expecting think digits, negative X% comp.

that going So is into it.

sale-leaseback to sell forward as block early prepaid Our our structure, decision the Cencora creating well a decision using VPS headwinds. additional program, wind variable structure down to versus shares through [indiscernible] as is

guidance we the about think I quarter. provided As last

that in have full X So from the rate the we one And those year. to tax is year the the favorable offset obviously a of factors perspective is are headwinds.

Now has of the timing second out in that the played quarter.

of holding year, where we're market -- our growth year. this continue us second think we in line script specific the think fairly the you do and our and as expect grow was with second the about hold we share. to that? the half commscript If And to examinization think of Now questions some about the you on X.X%, how market with consistent had we about quarter,

kind side. the So we expectation script that's of on the have

to about with to half. clinical to approach first -- take exit the we To think they very decision On more structure Village their their prudent quarter in adjusted to cost of take continues be want health pleased we positive rightsize certain and us, care, We locations. for to footprint the and a EBITDA did segment. make want reaching are next the the decisions

to And we so guidance have. therefore, we the maintain just continue

Operator

to turn to over the conference. does Tim of conclude portion Thank you. Q&A Ladies for back like today's closing this any call gentlemen, I'd remarks. the and

Timothy Wentworth

your thank your you, today. questions And you Thank time for and operator.

just I close, today. quickly what remind you to we As want you've just heard

Our the retail second were quarter challenges environment. operational with results continued despite in expectations in U.S. our line

our We segment care. proud execution. of we strong discipline very, drove our quarter cost with continued had in Retail in and of health EBITDA solid first the performance adjusted and U.S. I'm in very Pharmacy U.S. international, positive team

Now actually I the all there driven starting around solidified in remind team you would by team, that of of is recently our -- the X we're one member basically, But leadership weeks. all table. now

in We the coming in that are our health the to of be the hard each that's ensure asset care. intense -- we to to expansion committed work portfolio an into come months have going areas review fastest-growing and our advances to together

everything a I that difficult as bang, we to into And as And as again, as basis to We is table forward future. that and unlock value, validate lead second to make willing act. obvious before, are at becomes things that to thank and the you and saw revalue And said on you keep updated a not that this going we do on quarter, progress. our we one situation-by-situation take look WBA it can opportunities decisions, existing but we're to us look on a successful in pathways we continuing you. identify big

Operator

gentlemen, and this does presentation. conclude Ladies today's

now have disconnect, may and wonderful You a day.

Walgreens Boots Alliance (WBA) 28 Mar 242024 Q2 Earnings call transcript