RAD - Earnings call transcript Q4 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Michelle and I'll be your conference operator today. At this time, I would like to welcome everyone to the Rite Aid Fourth Quarter Fiscal 2018 Earnings Release. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. now turn would to call I Mr. Instructions] like the to over [Operator Schroeder. Matt Please go ahead.

Matt Schroeder

and everyone. good to Michelle, you, Thank evening, Quarter Conference our We Earnings Call. Fourth you welcome

our provide provide Crawford, our John On will and with business, is update me our On Darren Officer today's an and President our fourth the Chief Chief Chief Darren the Kermit John call, Financial Chief call and Standley, update on Officer; on Executive Chairman results will an and today will Karst, then and Operating Kermit take and Officer. Administrative questions. quarter we

As Relations will are providing be information tab. we www.riteaid.com provided slides we These release, today. website, material are slides the mentioned in discussing on our Investor related the we our to under

in of points the helpful but to not you hope referring them key some We will call. as be summarize the our remarks, they on them made find

you specific those are EBITDA their GAAP and related definition and statements like we in are uncertainties adjusted the call forward-looking These measure gross The risks cause measures certain Also, remind adjusted EBITDA start, that our these includes I'd to statements. of non-GAAP and press and to we can SG&A GAAP that actual Before release. are context release. we'll today's These to of recent Form uncertainties our results forward-looking Exchange Annual of conference our to Also of and the non-GAAP the on Commission. presented with described measure documents Securities press profit reconciliations included release, be the in non-GAAP risks furnish in our Item using measure. Report slides differ. described to in certain along XX-K other in most file in reconciliation measures our financial or XA that of are in the and measures certain

now John. I'd turn it these With like remarks, to over to

John Standley

the us thanks this everyone call for morning. And to joining Matt. on Thanks

made progress of significant areas. we fourth the in number quarter, During a

Our year. Segment delivered results with strong the in prior an Retail increase over Pharmacy adjusted EBITDA

is commercial selling season a Our our start of we Services the to Walgreens. completed in Segment sale strong to Pharmacy off X,XXX and after ended, stores quarter shortly the new

into was most to differentiated our and significant wellness. we development in agreement entered Albertsons that food, definitive leader create with merger a truly However, health

We It sense will are us merger by and The transform solidifying increasing financial strength. excited really geographic Rite and about Aid the new adding makes merger. for presence, for financially. growth our levers strategically

and has result, potential shareholders. a to create for the the our As merger compelling customers value

company the available management value and is this alternative Board believe for enhancing shareholders. best merger Our the and our

I get about into fourth minutes spend Before talking merger, few our the more about a results. me quarter let specifics

the forma was Our a extra year pro EBITDA the have operations is takes the today. EBITDA Pro fiscal fourth our It on sold out adjusted forma period, results compared metric were entire week new the and million, stores TSA, the adjusted under in adjusted ad respective and continuing $XXX.X Walgreens EBITDA period. for fees would supported being if operations all in prior million $XXX.X quarter Walgreens we TSA earned the continuing from that to to from backs introducing are for XXXX. we

EBITDA due in to Services in Segment changes decreased adjusted decline membership. a Adjusted the Pharmacy Part our results, of to control commercial of large Retail the in primarily key expense due which was good business Medicare EBITDA in D the year our highlight was to a and these margin prior part of terms improvement Segment the gross In compared and Pharmacy stronger composition

of plan revaluation from businesses income million A Fourth prior the year to to the this was assets As Act. commercial our $XX.X connection quarter I deferred in key success tax tax mentioned factor was our $XXX earlier, in a expense loss period. XXXX the million season. net compared with relating Tax $XXX.X we are in early operations health continuing seeing million, selling and

performance loss a factor key EnvisionRXOptions was our when Fourth the charge the of Services share will quarter amount $XXX to moments. Segment adjusted non-cash we in Pharmacy goodwill acquired items adjust of impairment paid or quarter. value few Darren XXXX. operations year's Another our to $X.XX million net net per share provide of from of information was continuing regarding a we it diluted a last book of diluted million were income adjusted in tax charges. fourth to compared in $XX.X financial these just per net additional for Both $X.XX

Our at stronger we to were majority critical team assets stores of related Walgreens. and also a transferring when achieving tremendous X,XXX job did results areas in of a a time the

of position heading forward. As This the $X.X our exchange proceeds completed transfer for nearly in successfully financial a store process of put in XXth, March cash we much organization billion. better

Overall, we of and well stores as process example, approximately supporting the For billion. from operations very March net debt are TSA. was went Xrd, $X.X continuing of through these the transfer cash our currently

In addition, Xst. transfer begin inventory previously expected September and centers to is distribution related three the of after announced

in a discussed Rite-Aid markets. network be positioning stores we've even financially calls, to step key previous the As a on of stronger an organization better significant asset sale was and attractive with in positions

also building strategy of Albertsons. accelerate our focused continue the momentum, making on we through most our highly with on merger As to transformational to opportunity focus the we're

over $X.X be the including and pro-forma cost expected million combined full week whole, run pro clinics serving company stores than XX a of including is and pharmacies a over revenues more expected EBITDA to $XX synergies. Adjusted rate operate generating approximately billion customers is combined XXX to X,XXX X,XXX health billion. As forma approximately

transform the to approximately front to $XXX Rite and we analytics existing when, through and formats, costs delivery want both can be our with approval of loyalty We own be -Aid store also million. including growth stronger sales omni-channel realized shop an by class Albertsons to that remains stronger and opportunity completing to further merger The leverage portfolio us Albertsons a customary that customers February the and store networks, management of food shareholders took Hart-Scott-Rodino increases store subject we with potential other We under XX, important they approximately We And Rite-Aid and along customers have food Albertsons Act. $X.X manufacturing with one-time waiting the merger realized counters, with period the and recently food programs expiration revenue the be options, approximately also can world and The will toward in we provide associated companies by opportunities million Albertsons’ providing markets our most rate management combined one-time levers million. closing grocery prescription of of the leverage and both us and where relationships attract additional X,XXX of in coming $XXX Subject February merger their pharmacies can time step and and best-in-class these expect pharmacy high-value As most also we re-branded that have use close the merger $XXX pharmacy that a how setting for also the create almost shareholder months. special potential of second finally, access for in the be early identified new will meeting We a enhanced expertise to we in meets who approximately use expertise various identified margins. improves XXXX. approvals, in believe XXXX create Aid announced, of our RediClinics, XXXX can cost part brand presence cost customers as to synergies markets will believe to a and to associated capabilities run customers. annual currently the Rite previously end more Through to XX, half with EnvisionRxOptions consumables, are of billion date mobile our operate. our create in the Aid calendar Rite new with in capabilities. valuable of that the can retail. can online like where we a and the conditions platform stores.

showed growth see Albertsons comparable We fourth pleased and results yesterday the EBITDA that in sales adjusted which quarter. strong are to for also released the

to of to have we pharmacy, for look we business COO, time, initiatives of to Kermit strengthen this our form make on powerful most with businesses. President As to over Kermit? Crawford lot underway end, At an turn this also it I'd like front key opportunity developments Albertsons, Rite-Aid. a to exciting and a and at update the our healthcare combination our at

Kermit Crawford

And today. for to joining John. you, Thank thanks everyone us

key quarter our delivered we new fourth in made performance and of for stronger in in deploying important our John Rite-Aid. progress the business areas As strategy said, the

with plus for its increased been better our member customer our powerful pricing, Plus mix Wellness first our growth rewards and rewards in One card it's customers. our replaced Customers has of we best this proposition expectations the a cards. more on issuance our the has responded based that key have January, which to customers. introduced a engagement XXXX. robust launch our helped Overall, most highly to compelling game new wellness of and bonus in from positively benefit cash on our a program. use simplified value is program, In since product driver now decisions us cardholder in of promotions business changer new reward, program in which credit weekly member best resulted has database has And our make promotional offerings

stronger. ways new this highly be to program focused continue to We popular even finding make on

integrated and and technology our customers' new in tools learning personalized to enables programs. addition sophisticated which have offers multi-channel, to machine We promotional hyper us our offer incorporates weekly

include script the and we to same In supplier program wellness and our partners stores best-looking pharmacy stores only make our engaged of continue to footprint. the We're in continue we both we benefit chain enhancements marketing also they business format, our wellness in are front-end to same from also to terms and of As and and benefiting new really customer reach our evolution see is not customers. these profitably now sales more are strategic will our mix more store outperform but the by front-end, and these retention marketing, moving our efficient results our our of our nearly store as continue businesses. XX retail ways time, years these count. offering excited helping two-thirds up my the our one-on-one to enhance industry by positive At rest targeted forward, how of us plus how both evolving rewards experience, about grow

converting will drive additional ourselves format stores. wellness constantly the these innovation stores in We while challenging to continue to

brands. priority Another number. label growing basis compared In our in six working stores by the that prior forward And our points is brand XX.XX%, increased the aggressively network private key to quarter, period. we're own to fourth own year grow for go to penetration

like opportunity Albertsons. with is to, fiscal immunization. profitability shingles, In to cough. area administered combination this with programs set these team our healthy and loyalty the clinical adherence. the critical immunizations pharmacy, non-immunizations excited about had like in for the emphasize company shots of customer all-time protect outstanding both offering, Food which million discussed, grow health terms We business expertise such value key end. we year restores progress front we a differentiate an really tremendous leverage choices general the and in Albertsons' offer, our total our we for big with alluded for of a than health are that In whooping X.X providing continue on plays we in vaccinations. and a including an John of wellness the we pneumonia medication against continue have As XXXX, total an food flu X.X role win a we make This million that conditions more initiatives immunization we to record and to and our in goal drives potential is and and and

time app, is highlights immunizations in the Rite filling personalized for supporting signed and mobile time, we most objective for our goal, more have with priorities trusted easier program health. patients, fiscal to have continue services serve all immediate only better truly improving this Aid, help our becoming At our with advisor medication At role with play ensure one-on-one like pharmacy we trusted as prescriptions. our and to our to it their pharmacist the technology These operate report of therapy, also contracts been counseling highly trip patients additional our and for freeing consultation, enhanced make stay medication to managing on to and help major with comply has to progress payer I'm to not for their pharmacist partners, sustainable focused success achieve up Our capabilities for economics To been our education that same they advisor. prescriptions. pleased the help on the and like one provide year in filling us primary beyond important like remain engaging to alerts. efficiently, refilled text we the patients messaging make adherence XXXX. leveraging one redesigned track

and We We've quarter-over-quarter. Part have and rates potentially better process plan managing sponsors XXXX. more conversations drug begun options long-term best calendar preferred with additional also the predictability We've the in importantly networks effectively having Medicare our finding access for margin on improved reimbursement our in pharmacy costs. purchasing also participate initiated to for D

networks. the by we groom focused further our integrating highly remain pharmacy, particularly our in businesses to momentum buyers build and on continue we file script into healthcare retail As through

quarter cycle discussed be of in expect and we As fully fiscal the will quarter enrollment by XXX,XXX year-over-year the half our our we back efforts, prescription with a counts options. to new significant Medicare for year. end D the exclusions second lives January. the call, On store significant same third of PBM, stronger we Through therefore Part added plan reminder, of our EnvisionRX progress as these also approximately

for period growth month date anticipate the lock-in Xst, through the to remainder month- the through We XXXX of see strong over- to and continue April year. steady enrollment

increased see preferred We continue pharmacy to Envision's in Network. as script volume a Medicare

season integrated plan capitalize sales already and this momentum with XXXX. are growth RFP to seeing To period leverage compared year key the pharmacy successes on year. selling an PBM, in same volume important anticipate health data And progresses the to seen the the in XX% continue XXX,XXX the as for as launching in have marketing loyalty we commercial and revenue lives fourth businesses Envision's this PBM new Our up secured. same to by also growth the Envision data early XX% strong members continues increased is driving our aimed are business. We campaigns that this period our wellness go Specialty our Envision of last forward plus to opportunity in at be stores. we quarter our to area specialty strategy. compared over

proposition networks. leveraging identify patients our adherence improve are clinic medication health best outcomes, finally, to and deliver enhances provide quality also convenient ready positive value settings. We and which care analytic dialogues to continues opportunity for payer health performance capabilities And the to in predictive retail driven

we potential this Albertsons. see historically to our in have grocery proposed Our through best performing stores been locations with and expand tremendous business combination

As a quarter, operational of confidence combining both health made time, potential for and strategy important with accelerate leader excited your the to markets, position fourth strategy. our food, of go- key At our earlier, our the we network in in attractive terms the truly I a progress time. for we differentiated said performance Albertsons same in the Thank by in during With of to stores new areas about tremendous have create and you key we're wellness. stronger and execution the continued in forward this strategy Rite-Aid.

over to financial Karst on Darren? result. it turn our Darren information we'll Now for more

Darren Karst

our sale related walk financial our on I results our review and will on Kermit, morning, the termination use will as progress the touch Today, good well recap plan. fourth-quarter I and preservation guidance. recent as through fiscal everyone. benefits and of XXXX tax of our WBA the also asset proceeds, Thanks

This of agreement purchase today million to the of used totaling restated of all sale to XXXX. does proceeds be pay about loans. sometime the distribution $XXX XXth, September under amount $X.X have off WBA term been received The $XXX of after million the that would sell three all and As our nearly transfer after we include and X, received X,XXX centers asset WBA to amended proceeds cash March and completed we not received billion.

aggregate excess to bonds a That of which due up approximately notes remaining offer We call today. notes. us which $XX also and million allow XXXX an off resulted XXXX our $XXX million proceeds completed our expect our X.XX% in notes, is on repayment under proceeds the to cash we XXXX freed to principal pay XXXX our

borrowing debt $X as fourth cash balance leverage of receipt down billion reduced and year-end of reduced proceeds The $X.X a billion permanently net billion about $X.X the of of revolver pay in X.Xx. forma pro from from reflect our needs. a gave also operations us continuing commitments quarter ratio our to debt and of We to borrowing of

of the WBA, purpose. of of Board plan served terminated the completion Xrd, preservation the has With sale it our originally Directors effectively to because adopted tax stores its benefits on had been January that XXXX

Rite-Aid's Revenues of results we quarter result the $X.X billion stores of our operating quarter. approximately $X.X operations. a of of continuing a losses. plan, now million remain part fourth protected which billion the was fourth I'll As reflect $XXX for fourth-quarter of turn the year a as which were that from prior decrease to net the review

last were for per loss Excluding or net impairment X.X%. which of services revenues non-cash of million total in the million quarter. was to related charges. $XXX or in the $XXX share revenues $XX.X from date year's the per value basis And a the or the $XX.X last loss was million $XXX quarter of XXXX $X.X or in prior the relating of versus loss Tax fourth million $X.XX current net effect loss million to million $XXX.X decreased of quarter, a company share at year's net Net the to $X.XX of continuing The drivers current to primary the of share pharmacy included versus the charge deferred income year's EBITDA was in a as these Adjusted $X.XX difference million compared of $X.XX operations extra our in the was income acquisition. the prior million billion goodwill year. quarter. week is share was equal per net the of Both in the the book in adjusted of $XXX million of income to The or net a quarter. million year, fourth charge charges Net $XXX.X a loss tax. segment Act. the goodwill $XX.X in total tax $XXX.X charge impairment of $XX.X result of were versus million of asset loss $XXX.X an prior tax per adjust revaluation this million Adjusted to segment

fourth-quarter or store was This are Pharmacy year's administer store improved due operations. same burdened and decrease from Segment, while week store decreased is EBITDA results. $XXX.X by continuing in in Pharmacy new billion EBITDA in margins, adjusted due to Our $XXX.X impact services decrease This revenue extra to than to X.X% TSA where regard pharmacy from we certain a last fourth-quarter, Fiscal to inclusion of quarter, results million last were results adjusted Retail our providing $X transition respective front-end both fiscal continuing entire results. as the in networks same pharmacy the was impact million part EBITDA deduct we $X.X pharmacy by will $XXX.X Retail to for a lower million year, quarterly without compared on metric both a decreased of year-over-year that maintaining able adjusted higher $XX.X being week but XX were Pro payments being the to a $XXX experienced costs X.X%. prior have EBITDA to to our script was adjusted lower costs. stabilization adjusted the last prior the that and in fees In we on year's million for that corporate Segment for the decline been in was Segment of million period. sold year's costs. continuing are to in do Pharmacy results. quarter primarily is not and store X.X% pharmacy receive of of under of from PBM. to revenues, year margin Pharmacy percent sales adjusted last sales was Retail The XXXX operations X.X% fully the the include and provide The year. periods would was decreased or our control profit discontinued the a respectively by our fourth is in EBITDA in Total day extra WBA the forma was a basis, under while X.X% Retail or full $XX which our Segment last the in were our our greater excluded a adjusted from and points higher XXXX same fees adjusted of year's corporate sales. results X.X% the agreement our a Front was in and comparability all quarter operations same support administration supported down million if lower the revenues. fact caused earned gross that portion TSA of the $XXX.X WBA million. cover operations stores million Overall, TSA participate quarter. as the which for count than in which a deduct we XXX than million of was gross quarter basis of dollars some sales Pharmacy $XX.X

million Retail in by but last million The SG&A Segment million. $XX.X last week year's margin year's million better profit by were for stabilization was of a fourth rates. and quarter $XX.X reimbursement basis compared sales points. a revenues. drug last Excluding was due quarter, improvement related SG&A to as percent Pharmacy percent unfavorable a to the XX of gross of gross improved XXX as generic increased fourth while by the basis expenses rate profit year, purchasing lower to points gross gross extra increased $XX.X of $X.X quarter a last due Adjusted to the EBITDA year, extra profit to week

Excluding leveraged was extra million this costs on In our in increasing resulting run, but did due to due decision lost We decline leverage year's of still our in commercial the million SG&A but billion overall million expect but The in related our which reduction Part shift was strategic from which certain last in our we to of reduced basis of the expense build of sales. better year term. and some prior future a business higher. in good business. think SG&A we related Services for strategic D the calendar a profitable a $XX.X million subsidy chooser was focus changes in of to primarily to job D short right and $XX.X decline membership. the mix operating Adjusted the the an $XX.X Medicare year, negative lower instead due regions is invest the control revenue $XX.X more D we participation The of year, this composition expense to or higher in million decrease reduce XXXX X.X% $X Medicare chooser growth. is for as members and investment expense points low-income our of market to Part move D our membership, due part our last in be business Pharmacy Part of longer the was worse XX long-term is adjusted week the SG&A Part primarily due in million. $XX.X we a to changes of within than book expense last the Medicare business Segment to Medicare EBITDA increased sales expenses extra million a EBITDA increase Services Pharmacy Segment The EBITDA lower is $X.X an base. to in fourth-quarter than as Adjusted to had SG&A for of $XX.X week revenues

January earnings now covering lives Medicare are we We As our we strong Part and enrollments since call, on of had an stated January. year-over-year successful added a continue D XXX,XXX over approximately XXXX very last and to XXX,XXX bid as lives. XXXX, see

We expect throughout calendar of grow XXXX. the we throughout lives the year of base add course of enrollments this covered as to the remainder

difference activities in flow to shows quarter. of fourth year's of quarter capital for timing of a last $XX $XX.X due for net as $XX.X quarter was in primarily source last The a versus reduced changes. operating cash cash $XX.X cash inventory the working million statement Net million use and activities Our the year. used compared million is to million other investing from

remodeled are quarter, and six XX base. store continuing stores. the relocated During XX% stores our which almost the within fourth wellness we stores X,XXX of the end we operated operations of quarter, the At

the points the And our same quarter, in basis that wellness XX higher months in higher. been stores non points front- past fourth script than stores. XXX approximatelyXXX these was our in For end, remodeled growth basis were have wellness sales store stores

of investing in the of shown During proceeds of received use WBA. the operations stores of as statement. cash a from as sale we quarter, shown source activities related in the flow discontinued are reduction These X,XXX $X.X our billion borrowings to proceeds approximately from The a from activities discontinued cash on revolver financing cash is in operations.

is X.Xx. As I leverage mentioned earlier, our ratio forma pro

XXXX our let's fiscal guidance. Now turn to

rate generic Kermit to well wellness efficiencies continued anticipated reimbursement covered Our as purchasing operational program, and remodel our for drive benefits sales of and reflects benefits, grow continued earlier. and as pressure expectations that our initiatives guidance the other

to Albertsons. effect Additionally, our our guidance does not merger give pending with

Same to X% EBITDA to and million increase be $XX.X script second for fiscal an the between the at in in $XXX X%. a half the total clinical to from initiatives expect and file exclusions billion of sales that items billion in of plan include we store the sales be XXXX. adjusted to expected of cycling and drive million comp buys. year, Key improvement $XXX expect range store be to $XX.X We staying and flat sales between are

to first we somewhat stronger. and of half result, these year be expect to back the the half ranges As a the lag year of the

a share a $XX per to per of and to $X.XX range for income to We to adjusted net in income $XX expect million XXXX. of be adjusted fiscal range net $X.XX be share million in

is buys. Our spend file $XXX capital to million includes expenditure script fiscal XXXX $XX million approximately for plan which

relocations planning stores, to remodel open We and complete are two in fiscal XXX three XXXX. stores wellness new

also during turn it stores would John? to presentation. plan portion to the now We back on closing XX John. I That my And completes like the year. of

John Standley

Thanks Darren.

organization Aid Rite job team fourth meet strategic begin we've of to was taking associates, our our Before The to customer for thank during focused fiscal our and their quarter, busy leadership our a and as from questions, for customers. we the to begin priorities staying time done our experience quarter new a a deliver frontline year. efforts extraordinary I'd a to tremendous consistently outstanding our we like and

our time, year this the prepared exceeding this during morning. satisfaction customer remarks to testament the dedicated for customers. fact, this of our In to which teams to is overall increased busy previous, our just a expectations how has That compared are concludes

open now the your up will for phone questions. We lines

Operator

Your [Operator from first Sachs. question comes Robert Jones Instructions] from Goldman

Your is open. line

Nathan Rich

Thanks Nathan now This guys to with your morning. I'd locked store hear wanted rates, major in is questions. post fiscal a XXXX. Walgreens. rates footprint reimbursement definitely on start have to new I for the you just the those the assume that for fully Hi. PBM for taking contracts divestiture encouraging to are Bob Rich asset reflective this of

the just store as to those contracts larger the the think divestiture? your pharmacy look a get about then to first have you have like footprint wanted engage compare that prior And following you'll of payers kind Albertsons, reimbursement following and close started the the type how So going sense to new of of the about with rates of we deal? rates rates what will in forward combination PBMs to with

John Standley

about And it any close any with have is answer can rates of the the question no. the can reimbursement answer the last part first can't I partners deal. until which So we after conversations -- I

about something So there, we not want you the can get Kermit XXXX but do we till contracts? to talk that's

Kermit Crawford

Sure.

we two reimbursement So would as about better did footprint, that last before. Nathan new tell I stabilized quarter-over-quarter, results or especially as having quarters. when has we the good we’re you our think And the

If three and about you where And old we markets Rite were payer needs. of four the kind that number didn't market that certain Aid, share. were in really us think we coverage number in the a give

Albertsons reimbursement and feel when stores the footprint, we new and ability well So place enhanced think contracts we the have concentration be very have forward. continue that you to could acquisition, the manage in very good going our about our to the in our with we about therefore

Nathan Rich

on same one guidance the store just Okay, for that's sales helpful. And XXXX. then maybe

by from just You in of I wondering a how a that volumes sense mentioned, if impacted fiscal that return cycling of positive does was script actually year I in guess of a you guess drag XXXX? fiscal I for volumes the script back volumes, guidance year? XXXX. us certain much the And the to was give the networks half contemplate could to exclusion next

John Standley

of a So back where kind of currently piece in are Kermit? to I the script it's in terms us half. in impact, we terms is big of piece network that's think count. biggest that decline of the exclusions, the It's got of decline our

Kermit Crawford

half and business. we those back at tell end anticipate I the cycle our do back growth prescription second positive we the Yes, the will of would the of in that quarter, exclusions you half

Operator

Your Guggenheim. next question Heinbockel from line John comes from the of

open. is line Your

John Heinbockel

footprint, think is dialogue right the this normalization, mindset different aside to term? it, their these significant been now that reimbursement with been generics. me some your for So, right John, that you. your relationship, a your the on Do pretty in here different on longer has some think let I from and such contracts stabilization know environment particularly start because there change a you're Is want there call getting had done. past in the whatever part or pressure partner's a approach on there kind you exerted change, I having of with frustration you pressure them in had about

John Standley

to thoughts answer. of mean question Tough I think a I John. couple

last at years, information. the sort couple on ourselves expect at mean, and I we think of has public should probably my one I of based suffered looked benchmark kind their others if as looked over it in I space margin well.

I think we didn't same results, of the going to customers, the be some additional our to our lost that's opportunities gain and networks eroded, in merger to term way overhang itself, that that fact think here. couple think that to of is cycle really margin think where is in great frustrations we stable side have our or whatever. I on environment around access reimbursement don't rate of I as one the a we manifested or I that Walgreens really the got long in the probably

we continues in on contracted rate our job to know, saw been challenge. in have up. to fiscal rate marketplace fiscal rate have in to done erosion it's same things of enough XXXX team that Can great talk but think what's match value erosion? side XXXX And we get a and you the the purchasing also side. loss, find those margins for of rate I Kermit we at always always XXXX. and terms in the on when some offset the two So pharmacy we And happening terms challenge but not and as purchasing now what's about right that stabilizing, reimbursement is a try

more into really purchasing sense year some side. good found in year going So it's and last value helping the us that we generic on late stable this that's

a of I with look forward, whim see I to close a lot still marketplace as XX% kind our are influence who at us. business it can of exert of who competitive over still re-payers very As their

a our terms I kind clearer Kermit been store I base where remains it little what refocused So have of the as before. just of a do conversations is think challenging a it bit but versus think value still talked in the little networks may to environment muddled about their makes

So conversations little a are in bit sense I think the that better.

John Heinbockel

PBM the Albertson's or think than They right, going think years. the lot of And as be we're five the two are just those that even but has is to last to driven part forecast line rates a actually by as retail year high-level SX That's can you long-range pretty which segway there view growth then as kind robust. to soon back has almost of as right, faster just know when a your in core core top maybe particularly grow growing opposed retail. not out about already maybe that it of you

John Standley

Yes.

some but we the opportunity retail think I driver. there's core the for think growth PBM is bigger

Operator

question Charles next from Cowen. comes Your from Rhyee

is Your open. line

Charles Rhyee

for questions. taking thanks Yes,

was discuss and quarter. maybe your at a a relationship maybe deal? now that quick how moment? sort more had the have purchasing on generic elaborate around discussions -- those McKesson generic you mentioned with And bit Albertson's perhaps in question Can little you positive that purchase the changed of Just with with how

John Standley

provide the quarter. think some Yes. generic on purchasing in Well, I Kermit can color

as McKesson, with about In we where how them are with you'd are forward. expect we we can conversation terms a in go of

Albertson's transaction McKesson kind to time our perspective, of which probably from ask a over go do our perspective does we You'd have But that. give view it going stirs their best into us as how forward. purchasing leverage on we're to the more from to scale

Kermit Crawford

having and if -- we're way think add with from And our was going gotten now a our deal. we've an be option today, you did that part understanding I'd I have in, do of about we the Charles as working Walgreens Aid McKesson to the enhance back thing Rite point constructive the they around only purchasing. And to conversations, of what [Indescernible] think view, McKesson the to know

find forward, us to best, looking most source and going for we're economic drugs to buy So both brand our generic.

Charles Rhyee

-- that's am ahead. I sorry, Okay, go

John Standley

would And just the to potential can there's think get here we when to Albertsons comment related I a it. we do purchasing down synergy line

Charles Rhyee

for -- you've opportunities with many relocated remind there. resources talked change does the sort That as about Right, and how stores ones us mix? and relocation you okay, thanks. see what's question, the opened. you you sort of you into kind coming that Albertsons of how new of now And just another strategy your what Can

John Standley

my we to still some dramatically. Wellness and stores don't a I have need some format. haven't have-- to it us. I think need know, exact number good relocate. the still have opportunity for but to changes it stores don't still I We get We It's head on top still we

We are way the story our through working base.

to combined as are opportunities, left, some but of be it some therefore So both what's make. remodel some made, group to returns a we at there is of opportunities relocation with look still good investments good

Darren Karst

add of probably by our get thing we're that year, fiscal existing base store wellness to we've we the got would the about fiscal --the current is stores time I XX%. mean I closer probably Yes. the XX% through

So a still There relocation opportunities. opportunities. some are piece of that additional XX% is our remodel

think in that get due I we'll that time. to So

John Standley

want on move drug to think I out maybe stores and forward. as get if of some but that what think markets layer to Albertsons we and Right top comes of to some new it opportunity is I you the freestanding of kind

geography some there markets into get Texas. we we pretty for to new in invest. in some us exciting about of where There pretty So terms compelling think Chicago. want Arizona, to are

Charles Rhyee

that's and Okay all.

stores? to same think of say those still relevant sales you you can you my again wellness those terms question from sort how remind we the or the metrics used in the you stores. store last in of give you in around metrics us shift about performance are I the I remember improvement as can relocate improvement new still format would format -- think Are

Darren Karst

Yes.

growth quarter-over-quarter. mentioned versus the relevant. XXX comments about I XXX I think been it And the front- pretty actually still the think think was some that's I my I basis the non in basis those consistent stores. are end, than points was like in and wellness points stores script higher wellness

Operator

comes Evercore. from Your Ross from next question Muken

is line open. Your

Elizabeth Anderson

terms is sort Ross. could commentary Q stabilized script over I side. in XXXX. the your understand Q for to of of some of in on but this was I wanted that saw Elizabeth giving helpful if wondering for that it's Hi, obviously of in commentary I Anderson you on the fiscal that elaborate front- sort just end outlook

John Standley

of from to Well, you I benefit Kermit, exciting continue wellness we your things in stores. going plus to think we're think And investments into development additional wellness the we mentioned terms talks in in have.

Kermit Crawford

that like well and number talked season program. pneumonia So hugely about and talk also other last our think plans programs, We're a on non doing We We excluded a successful had immunization programs shingles whooping there been things. I like cough. are year. clinical flu very about from. things We flu other our of cycling we've immunization

to ability in it. the states vaccinations the that XX all allow have CDC provide approved We

overall our done that in technology working health to app. helps refill business also trip closely We've our very better to medication adherence. and with mobile predictive grow one dialogue our with So like our using adherence. drive things We're some analytics improvements

in So all better retention script our of are business, of these our things and comp driving overall growth.

John Standley

those pharmacy are it a and as in So the that been, we've customer pretty front loss headwind that to the the had front of on good I of kind end piece bridged some front customers. the end has end,

a a headwind of we've So little had bit there.

that comps again, got But impact achieve a efforts. plus, to continuing in as half some year we're store. and come wellness better think the got of position program merchandising work show, So to We're the that wellness that launching. around we the puts it's positive there. back us to on We've the I cash cycle bonus we

So we've on that got I things working think store. the front of also exciting the a we're of end number

Elizabeth Anderson

are that a how levels SG&A sales of then you thinking And basis bit of now? to as sale per make true store helpful. about little a changed sort really Obviously you're as store it's on that's retail how forward? the up percentage with Okay, are going happy steady looking of to is you're of something changes it's sort or -- basis, things per or remains crept

John Standley

couple; a I'll I challenges. a One ourselves Yes. I the with comments give think couple little is deleveraged you here top-line mean of we a bit there.

of that'll So percent. get help little --as as in we some half the in get year and a into the back back terms sales, of the growth a bit

We've that always for stores, done through operationally terms side, various wage And rates. structure facing field of cost the some of some built dollar on things we've supervision the the We've terms that year in and our looking increases like into and some on work business that to to benefit we got provide this But wage markets, think will ways got efficiently. to we'll plan fiscal initiatives and things more see things some in I this we're year. how we've across for that we're so as got our some run also side. headwinds well.

Elizabeth Anderson

Okay

Darren Karst

system. the definitely of There's ordinary opportunities out we've, nothing take of past consistent to continue with we've got costs some the fairly but the out yes, to

Operator

line comes Your J.P. Gill from Lisa from of Morgan. question next the

is Your open. line

Mike

in Lisa. check questions. in the for for Mike actually It's Thanks

point the regards to tailwind economics your through reached is relates does you to back in drug timing going be efficiencies network XXXX. XXXX any with color fiscal of a And will fiscal that Just that XXXX can generic a a at provide assumed are flowing at purchasing first fiscal just So contract you XXXX? decision more the it being From helpful. purchasing fiscal some that that as this to standpoint opportunity? there or

John Standley

we Can operating PBM fiscal pretty seemed of a opportunity, away significantly runway Q can - or should the more down is was the That's there Just was side it like there? it and XXXX versus over you go It talk of profit expectations? OpEx Got year-over-year. driver forward main going yes. anticipate in that those new more of some about sort time? cost then our

John Standley

Yes.

we dynamics last tough think the were So I year. year talked we I there's we this there. PBM as had hanging to a new put kind little think selling into One kind the of two season bit that Walgreens a about work around of on deal; lives

were just the people future understand waiting of think was. I of kind to the PBM what

have come our into we very moments activity. talk seeing here we're few pipeline where out selling mentioned As a of robust some I that overhang as on ago we this think year's we're season,

terms of encouraging Envision number selling infrastructure of things improve are coming very out, Obviously, in growth of season. to wins start early a are some we and very that and asset. are the And but out the in the finish season also will off a service a of And in we've assurances no how strong customer there invested to at additional selling built as have compliance and lot accordingly, we the for gate.

of level to think but business, some service carrying SG&A marketplace. there differentiate SG&A to we and going are the important its the us grow we So help us the in help provide that's

to if basis, drive that bit think through year. lives that of year-over-year revenue we the we're will fiscal in following pressure year hope under way work a getting on show we will the So PBM this I a but be our little

it's for investment an next year. So really

Darren Karst

that built all that overall we And into guidance. our

Operator

comes from RBC. Hill George Next question from

line is open. Your

George Hill

guys. Hey, good morning,

we're vertical last thinking I of are the and think how guess given about industry a I've quick play dynamic are of clinics ups months how about, on guess the lot John, the follow-up going several been been ask in housekeeping wanted got the answered. to forward I to going kind guys the that PBM. tie that seeing? Then company combined a role I questions my I markets has the the you how

John Standley

and industry. very big lot focus of a the it life. of time the somewhere for of the marketplace. create a definitely interact terms on patients risk think It's me That of this is value there's lot A how lives Yes. is of we of I a this a on day. the a with that down with I mentioned in value based Clearly, the that dynamic and taking takeaway before in we I on consolidation lot in customers from I've of think lot realization the itself just access to the we every line period create manifests think a whoever

payers have not we're great so important who And own move and it's a partner that but only I think important lives. we it's as for others forward we also here PBM,

think I clinics in so a pharmacies. play critical role And our with that in do combination

or access able customers business, I lever be that go an important important have gain an actually transaction We outstanding really quickly. There's that's the opportunity on in our various have so already discussions and do with we'll in clinic out bring a to a grow opportunity we clinic Albertsons. clinics get discussions in to work at have are but to going open close, forward. we to fairly partners space lot of We'll new we built of Albertson's space, capability think and have the little an some as and as bit

George Hill

niches seeing you given PBM feel guess I deals you it are you I take as seeing Envision of we becomes Then think chance government what business a market PBM market? like say specific where helpful. the niche a share guess in or do for of do more do side the is that that's market and you that or the commercial kind the we're got there given explain to PBM can think company's -- the business facing on Okay, come in the about And the close business? the the think we we if to I assume

John Standley

Yes.

think commercial today still that going the that space. for markets And be really win say available I So primarily of very is health much to plans very We us. our effectively in and market. to niche kind compete in I'd more business mid-sized and

lot don't I of clients to necessarily be bundled pharmacy same healthcare who a insurance going have there's want have think plan. to the in and coverage

aggregated going from to of how And I'd number market. say of entities. a rather think them big I well So plans there's potentially look I health to go think these will in be independent who terms at be I

to of us in the I very fact of lots spots ourselves that terms competitive be So the freestanding, you differentiate and unaffiliated to capable, here going be PBM we're the will there's for in think marketplace. of in marketplace, if kind fully

Operator

from of Bank America. Reuter comes question Next from William

Your line is open.

William Reuter

Good I year-over-year. services guidance of And wondering at side a the it's I little and expect between bit I business? relatively maybe you takes which versus if declines morning. adjusted and the about for flattest puts EBITDA, could When XXXX we the was might talk your one pharmacy side guess the look in? growth retail

Darren Karst

bit. is up a little retail guess services little a down in business And is business I and Yes pharmacy the general the bit.

So of between those of bit side that's two into probably retail little We've the sales mix business. things. the a built the growth obviously got

So in business. profitability helpful of that's in driving terms of part the that

John Standley

as year guidance I it's I year an we only perspective take us get earnings that's show growth. but stability this back some from the That's thing to in not really an important to sure think half for the critical. to

Darren Karst

a is pharmacy a building Right year. business of bit and services the little to some extent

John Standley

Exactly.

Darren Karst

pretty And we're talked start off selling in about to good how season. we've a the

the year. a probably of we're beyond to growth. year over and So significant that into Right, we grow it's following really expect looking kind that of the kind

John Standley

from itself we get XXXX done And this it set what year.

William Reuter

as term and you believe Yes, where like that's is opportunity it in long right. sounds No, certainly XXXX even guys the well.

thoughts then $XXX the this the of fall DCs Do be of what proceeds that you using which year. and sale will Okay the be million in have for? from terms might on in you

Darren Karst

to to repay mean the continue was Well, I original debt. just intent

So I different a have at point. we think viewpoint this that on don't

William Reuter

don't XXXX as pressures you're just much rate mentioned at Okay you XXXX XXXX what going was earlier and not for as we're of will be it terms experience then I that that XXXX. about. to expect this and talking Is what or you can sense of a all have and reimbursement year type of in what lastly, that provide anything for in there quantification just XXXX? you the

John Standley

that's year, I way guess environment what where substantial see best is it. the declines margin I last the this we just a can saw mean would years we go two you I you probably tell at stable more look

William Reuter

of guys you to Okay that about could provide nothing numbers, you in terms but there's that talked have us? or

John Standley

by declines I just driven that would our say seen. just last you No. the I couple the in was we've EBITDA very reimbursement rate looked years, if decline it's at much

So if EBITDA. single you that's to driver want on quantify impact the we've the the pressure biggest seen of

Operator

comes question from from Investment. Stauff next Your Joe Susquehanna

is open. line Your

Joe Stauff

investors. pro Thanks that to difficulty is very the benefits guys stock think stock? the to the is your or respect and obviously with there since value try much, of the to but company. make a the how into organization your I there is to good I wanted around the Rite how the was gears accrues Aid this when you pro announcement really what as basically case some getting has just wondering to stock sort that do to morning. And earnings hands your specifically result or of and And geared plan of company entire some behaved is I difficulty to forma certainly call realized that the just is ask looking an forma I as

John Standley

Sure.

I company it. information we're we're mean included investor our lot our in I on some combined I information file got website. is thoughts. on think great we one has you about great have an a which a through know way got here of So working process SX mean as We've the couple a think I so

be and shareholders. our that. why this Now on doing And get do the to so for our in out of marketplace, that here of couple work with we of we believe kind value of earnings this makes work creates in side the Investor next all the be the release story have we'll some kind information this and Relations kind the to doing terms over we'll months tell sense our here

Joe Stauff

to know summer, late expected to closed mid Okay end expect you the illustration planned said then you September for or shareholder would occur July say earlier? first, for historically say would I of let's be and the the the vote I in guess it's transaction that effectively

John Standley

I terms file. on review through we've SX So got It of here goes in a process mean an process.

will We have update our as to that numbers get stale. document

stale. were Some already probably

Some stale. getting they're

in the the everybody update We'll SEC and to which we weeks. done get can and get review a then here next out we've we've going re-file a file clear got will move And XX-K sent to we're chance the So to proxy couple by with numbers. waiting what proxy get, printed has and phase, SX for got that get and proxy once a of not. period to those

probably shareholder just out sort when the you in is July thing somewhere out, yes, things sort play time out. the how done. vote so whole just shareholder of roughly close depending of And that's votes on once We can

Joe Stauff

Okay, much. very thank you

John Standley

-- we So didn't okay.

Operator

from Carla come will Casella today J.P. question Morgan. final your from And

Your line open. is

Carla Casella

me right? you all Hi, Okay, hear great. can

sale all more with be color we're the refinanced notes the close? notes asset those or even give if down Albertsons of us and pay not too the XXXX XXXX proceeds. any feel debt about would XXXX talked of You whether Can on you or timing

Darren Karst

Yes.

probably asset we some will proceeds. be So offer sale because with in still proceeds future not-too-distant asset sale out the going have another we

something securities. on terms off other in those what paying but you think we're that's really that beyond doing suspect So we're that don't commenting I I can expect of two

Carla Casella

that and if takes that great typically? that is that you months? Or then a is six How the DC Xst, transfer, process something is that month? like long start Okay, September

Darren Karst

take those they're XXXX we of is up WBA it's September to Well, that that expect what after to prepared said we've when DC's. really

happen somebody may It's fall. And publicly it to fall. not in said what so referred occurring technically it or could September. It we may just after have I in think is

So it have that. as I think could to one. be go several months don't even all than they longer or And it

Carla Casella

Right.

Darren Karst

a at time. One

Carla Casella

I'm And assuming the are least weighted half the of more or the period. store year? And they're closures renewal back at to those all end front

Darren Karst

of combination closures opportunistic a and the period portfolio. I maybe of the front some And in year, the in it's more renewal They're think Carla.

Carla Casella

you forward? your gave a gave forma, you in expect that a guidance estimate pro did a then give and Okay you tax you going but rate tax

Darren Karst

Carla, be a minimal from very going taxes Well, I cash the think forward, rate standpoint.

I rate. think standard it's kind probably a something closer of to marginal

John Standley

get can It bounced around.

Darren Karst

you bounced I around am definitely the $XX can but But little an item discrete million. I $XX hesitant item are Yes. relevant in taxes mean rate our cash of the to exact get range to it because right million -XX% it probably around, which give our about think number. more is and are of I can XX% is bounce probably

Carla Casella

great. Okay,

Darren Karst

all sales. the And still we have an NOL after we even left think

Carla Casella

one then And helpful. that's Okay, clarification. just

the a some the renegotiating network on timing to got use with on what's already or pharmacy Walgreens You've the questions decision purchasing either McKesson? and

John Standley

so through March agreement McKesson going unless won't after McKesson While expires. to of our the we McKesson re-up we're be making change probably with of until XXXX a goes contract

Carla Casella

Okay, after great. you've Walgreen? stores And then one pro the or to estimate approximately sold an rent last housekeeping forma of expense all do have you

John Standley

the there have that top with-- file we'll be my recast mean a and from honestly we XX-K will head I has a out weeks Yes. don't it continuing ourXX-K when we have actually rent put of with those that we along in SX that couple operations. have in I

give decent you a think if that footnote that pretty go you number idea. I

Carla Casella

All right, okay, sorry that. I missed

John Standley

want I to don't interrupt. Sorry,

joining it. for everybody morning. this Thanks Thank you. appreciate great. We us Okay,

Operator

conclude Thank you today's conference everyone. This will call.

now You disconnect. may

New Rite Aid (RADCQ) 12 Apr 182018 Q4 Earnings call transcript