RAD - Earnings call transcript Q4 2022

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Operator

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rite Aid Corporation Fourth Quarter Fiscal Year 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ presentation, there will be a question-and-answer session. Investor may Purcell, your Byron Instructions] Relations, begin you conference. [Operator

Byron Purcell

session. Donigan, everyone. Rob, quarter you Heyward and Executive Chief and Vice you, Schroeder, We and earnings Persaud, during will and and Officer, Matt Officer; good Chief Chris will call. Andre Financial fourth Operating begin the also and President Officer with Thank call Vice President the XXXX morning, Elixir, join welcome DuPaul, Executive call the Chief Chief question-and-answer remarks. of fiscal to prepared conference President Executive Retail Officer; our

providing As discussing related we mentioned provided in our slides These the release, on be we're we'll website, investors.riteaid.com. slides materials are our to today.

review will to and speaking directly results not a slides to the be management used are document be the facilitate call. of following the as company's these While your reference slides, meant to

GAAP non-GAAP SEC. the we over you risks like certain measures, of or presented that The turn in described start, Heyward? along are the and to let certain documents I'd uncertainties slides. forward-looking Before to me on of actual measures are the in other measure, in With that release in Item our release report differ. These described release of and call be These in furnish and with Also, to to results file XA using the we'll our to non-GAAP in Form forward-looking our slides. related statements. that, the recent certain the Heyward. definition includes press reconciliation risks most in we accompanying today's are and and cause can statements annual remind press XX-K conference the our call context uncertainties the that

Heyward Donigan

Elixir, strides strong our a who second some joining of that business Pharmacy morning. excited you for good us, 'XX team at the year in the proud to briefly We strategy our despite 'XX good fourth for our front exceeded successfully corner beyond a the on before really for positioning about was turned Thanks pandemic. to the short-term fiscal year managed talk I'd growth. to and and for But beyond. Byron, like plan 'XX, I'm earnings as of outline future talk expectations. ourselves our our I and business end so call. growth we pandemic. today Retail height challenges Thanks, our I'm Fiscal about quarter fiscal of made welcome the expectations our to the and move for through

we're tailwind. COVID move to unprecedented, help know, to and part of all and a shift pandemic had to as It's business now, this energy we to was note our lives. and everyday focus And not As new the companies a solely X have been that like years our becomes ours COVID's to past fight the eager normal. on impact life forward important save

and While pandemic-related also continued shifting we business. to impacting which tightening saw brought impacts especially our pressures and traffic services we provided, areas, COVID work labor Those due included benefits home, a from chain the headwinds store from to inventory urban supply sales, our significant market.

these were we impacts. able to mitigate So

did factors the on All of put these a business. strain

Now Aid. we're Rite seeing and following expecting to positively trends reopening, a the we're impact

and last also super seeing spreaders cough, cold masking We're children back to in flu. related completely [technical year the increase or and remain their go to in scripts. maintenance QX, X seeing maintenance kids. we're reduce consumers scripts unmask difficulty] scripts demand As products for an and school, versus ago. increase years are over-the-counter and In an The

We are on vaccine. our revising focus ancillary

ancillary vaccines. COVID So also remember couldn't when people were they vaccines, their getting get

now X.X critical and time, continue the have other on within after in vaccines business the tests we on test to that consumers many the healthcare pandemic. of already move really members willing their pharmacist XXXX new are important [technical as and to And we doses up course, pandemic XX.X the difficulty] vaccines for with are U.S. vaccinate So X to and back catching an consumers, business in the ecosystem, use pipeline. their seeing million just Elixir administered It's million and Overall, a new pharmacists. 'XX. another FY to COVID to first we we're back like underscored And from our help in with tool vaccine role to teams pharmacy close antiviral companies PBM getting able customers. We partners, for PCR can also has This to at and COVID prescriptions the that COVID. the Paxlovid. million our becomes uptick

our we many the in Now passing represents in and point learned, us. for And advantage inflection we're a are we the positioned to states our really we nimble take expanding to as business. positive the customer see peak be what excited deepen we continue growth opportunities well to leverage available of relations. to summary, COVID pharmacists' of of clinical In which operate, scope

let strategy. about talk So me growth our

We on of the are focused squarely pharmacy. business

of We are market, that The maturity size life-saving total year. medication trillion is for there addressable revenue of pharmacy market with markets administration, yet, and adherence are clinical services. is and and a life-enhancing by $X drugs. them the And today this growing our $XX parts to help annual in prescription business pharmacy and service billion we're access despite engages benefits a The for in full company needs met. medications consumers include in failed supporting the costs. We X the underutilization still very of that avoidable XX% price these the of billion-plus low. drives from systemic Americans $XXX cost. us pharmacy. X live And of than us, medications prescribed in miles because opportunity a their is One needs entry take and nearest that year of unmet more to as for Americans aren't being presents tremendous medical believe dispensing

the management, assets, the to meet market consumer Looking emerging trillion pharmacy. But benefit by from shifting needs innovation of this at landscape pharmacy many full Services of is coming largest needs. addressing pharmacy the portion greatest while retail scale the And these on lack customers entered have focused today, are who marketplace. and start-ups the of start-ups the the is Pharmacy followed $X yet amount business,

prescription from meet these chains. have specialty healthcare flexibility XX needs the mention proven over a have claim customers of delivery market, the a pharmacists, and this national a convenient services relationships to expertise, and Dialog, with X,XXX a national scale, million-plus assets with adherence not already a share a adjudication platform, $X the We best-in-class and value capabilities, retail platform, scale, and clinical card and medication retail and we services trillion Health the order across discount home greater win PBM X,XXX full-service pharmacy including at over pharmacy, to locations mail pharmacy,

broad So we and drive given existing to and of scale capabilities, growth. our assets vectors range see X

current with also adherence vector Our mission and communities through analytics-backed engaging allow Improving while digital to product customers fulfills and experiences businesses. market will is our achieve channels. incremental this? unique our deepening tools and improve rates. scripts a It's identify pharmacists delivering and rates our target to tailor services this, and proprietary growing How share tools programs our To this we first meaningful vaccination improve pharmacies. provide growth our and but and telephonic to immunization our proven mission developed we programs of to through adherence that the These health the portfolio in-store and do focused needs. to engagement have of advice and our on their wellness best meet

million for grow testing actually $XX by adherence e-commerce growth tools fiscal demand X% up this adherence. to pharmacy a delivering we and sales, the and in important offerings. just provides 'XX XX% riteaid.com is will benefit. our As in our online, in a delivery heightened on grew and to channels programs we in since our teams improve third-party unprecedented experience, vaccines an marketplace buy expect and and With leverage of over gross similar Revenues fiscal focus expect our expect XXXX. abates, digital enable to rates these This improvement from store pick profit

roll out Rewards, which rewards scale our program, we our Aid showed we newly will locations, own of We pilot our launched Elixir. incremental will customers, XX% new new sales. and in Rite activate We will grow growth designed to assortment, loyalty beauty products and grow year-over-year brand portfolio our our and

sell to target XXX,XXX members new X/X/XXXX. on are We for

excited XX% client Advantage of our share that selling to the losses very we're I'm have. recently on business due we Medicare After to step track known contract. for So consolidation, plan achieving retain to business competitive renewed health as for a previously in retaining to we and three season is the accounting year growth already largest XXXX our know, the with situation, a net you first

our the next We're to of network have first pricing to win doing step price new competitive That's So new aggregator. do and price. entry. strong that and business the be we rebate on through is that to

where basis regular value we're to a getting on and presenting a the unique proposition. compelling position finalist are Now we

are finalist that selling results once are new sales us early XX% XX,XXX the to we winning already. Well with focus to Our deals shown segments we pricing sell on a in of team season, our very restructured better a newly have market target and has the led get we time. members

current stage X/X/XX, members of and for current We have growing. finalist XXX,XXX lives in a pipeline nearly the million and X

And grow I'm to Elixir and we Specialty, refocusing EBITDA savings now time are business revenue. spending our more discount Elixir cash very in specialty both excited pharmacy. Our continues on that

volume clients distribution meaningful drugs and parties. more by PBM EBITDA opportunities limited improving our other gaining have identified contracts, We access growing to and from

are we to reposition business burden. Part As approach MLR want we manage D this the of reported reduce past, the the our insurance continuing We Elixir better to the have cash in to business. and

business Therefore, in calendar membership, for of shrinkage EBITDA bid that pressure. also to government of We our and under will a want the loss revenue. year significant of a reimbursement purposeful XXXX stabilize is therefore, result

a of segment client noted As this -- competency growing is XXXX. has Medicare core success health Medicare apart. largest just that we new been sets our number renewed have plans in I healthcare of for Much and our won us plans as Advantage Advantage a Elixir and earlier,

business and expertise those continue knowledge committed to positioned in and insurance managing has we as managing of focused supporting And plans. be from leader Advantage own the a us Elixir to Medicare Our our clients. growth

our vector a markets, extending growth strategically new into limited pharmacy communities. on in our offerings focus second this our access Later we underserved located is pharmacy, to launch markets stores including, not pharmacy footprint So to, small-format where access but in with to will is limited. improve year, expanding

these and resonating contracts analytics, plan avenue growth service on finally, Collaborating In help We store-within-a-store exciting with creating leverage IRR this Dialog customer achieve outcomes growing pipeline. and currently including adding that innovators third scale of new clients. Health stores. with scaled our services medication offerings develop XX% is to clients in our plan market. partnerships. Revitalizing with our service by our platform another X customers we've And will of then the better serve XXX,XXX pharmacists in-store over other focused improve products have healthcare difficulty] partnerships More expect health to of our We space our with an new working the is of has management plans million manner. organizations, the via few leverage capital our that to them X on provide are to robust new on changing provide lives. access needs And business work. that leading XX dozen evolving in current with creative offerings adherence our to needs retailers customers to strategic -- come over these base. continuing These Health engage consumer-oriented to to the and won to to claim access serve with Dialog Also, portfolio #X. will adjudication of assets health efficient [technical health to a our to the members. and and to meet leveraging offerings establishing alone, exciting contracts last months to their in brands new partnerships therapeutic and

to addition are to our maximum we business efficiency. growth, drive evaluating to continuously ensure expense our we're in So optimizing structure

our closures reducing investing SG&A optimization Our supply executing million in improvements $XXX key by in on initiatives and store chain. include this additional year,

the over various closing, we us expect years. X next grow our to in to these enable So company initiatives

ahead business excited, fiscal to I of in we're potential and project am XX% to sense so The As from becoming can of Rite full-service what to pharmacy our from decrease of fiscal to XX% a growth leverage Aid X.X the ready ratio preeminent levels, we hope is X.X. a our XXXX, and look really really company. EBITDA we by entire it. you XXXX seeing realize energized and team I

numbers I'll Matt 'XX. on more it Now over turn for to some commentary for the FY

Matt Schroeder

segments, continued XX% cash business the Thanks, Heyward, the everyone. We to revenue, this flow, grew the and was to as EBITDA strategies. and and usual adjusted 'XX new In midst the grow million, XXXX our free our pandemic EBITDA challenges as good environment, anything significantly prior generated executed stabilize of while we morning, all fiscal to we our Fiscal but steps bring as by over improved taking grew company. $XX year. on

our of Seattle lead amended a Our our we our off Elixir, gross fiscal position We capital availability facility driven million has using market. XXXX paid in completed aggregation We X.XXX% agreement competitive revolving XX% the comprehensive into steps solidifying XXXX facility. Drugs, Bartell more and rebate took August to entered of and improve revenue $XX bonds in credit remaining the We us increase our made a extended through expand the in integration by our sales. grew At XXXX. $XXX us pharmacy the million under enabled important we marketplace. And credit that structure. margin, to following of our

of we maturing until extension, of no have a debt XXXX. As this result July

result billion As in of $XXX and of debt debt million well reduced ratio we credit the and our we fiscal with over leverage cash X.Xx, from an our improvement year EBITDA $XXX ended $X.X rating both free and success generation turn extending is XXXX, a Moody's which a adjusted flow, S&P. net our a in And the upgrade improved through an of by liquidity corporate finally, our maturities, last over of and from received million in to year-end. over our in

from per $XXX from was charge $X.XX of results the million were offset million or X.X% or Retail facility closed quarter due year $XX.X compared higher a driven $X.XX net $XXX.X increase quarter in Revenues driven is operations exit by to prior in for more quarter PBM share. fourth net detail. impairment revenues. to Fourth and current of the from up to Pharmacy for loss per company's by year's our fourth review continuing share or the by an This last quarter increase year's continuing and goodwill Segment I'll fourth Now revenues, related decisions. a operations loss decrease in charges Elixir impairment store million quarter

company manufacturer concluded conditions, its risk its rebate had receivable to the the non-collection. and for an for historical at during Additionally, the business outstanding quarter, and due policy certain other allowance receivables increased changes of estimating that within practices reassessed in Elixir amounts

to from $XX.X manufacturer in the million, for As recorded as company in of a revenues allowance result, increased a EBITDA. cost its current item which is rebate is This receivables the increase an excluded nonrecurring by adjusted period. change estimate is that

this Our quarter $XX.X last adjusted $XXX.X was million compared EBITDA to million. quarter EBITDA adjusted of year's fourth

and adjusted easily coverage in EBITDA end, cycle front cold cough, pressures. rate adjusted prior EBITDA $XX.X pharmacy have quarter salaries flat wage $X these front-end to the year's a were vaccination expenses year's reimbursement salaries headwinds, pharmacy million last we quarter and higher of The approximately -- to Segment self-insured which to support same-store our increased increases higher record and the to insurance The scripts year's billion, of business sales expense. due revenue drivers point fiscal adjusted continued of into same-store had than which EBITDA, higher increase mentioned, the fiscal of offset enable the discuss down $XXX.X sales. were last in diagnostic comps. as these Segment scripts $XXX an increases, same-day we fourth Retail last expect Pharmacy of products. would of up last in in was front-end cigarettes X.X%. XXXX Fourth offset partially seasonal our of and testing, X.X% SG&A our maintenance COVID, X%. of driven our year's Pharmacy issues was Segment, million a of pressures flu bonus percent fourth X-year was and let's Front fourth increased $X.XX quarter in and a were quarter in quarter, to same-store by the a results kits X.X%. supply last for fourth end scripts, most tobacco in which X.X% them. same-store as instead in And adjusted now revenues. same-store vaccines Now of guidance. by increase than same-store Pharmacy Pharmacy Heyward Pharmacy attributed as kits. higher operating quarter to in these quarter. front-end in our the These taken segments. products PTO -- is obtained medical excluding to driven same-store respiratory, COVID prescription cycling front fourth quarter Retail was EBITDA sales for compared drivers acute wage sales to largely outside X.X We million million. up Services increase negative the sales, We higher by decreases We sold fourth COVID XXX in pharmacy Retail chain with and COVID been markdowns, was excluding basis, to all X pharmacy had to I'll conditions, to recorded but This were customers scripts were the on vaccines do basis front-end see of is points maintenance reduction compared sales acute to during retail these X year's test kits comps changes quarter, sales, million higher X%, year's market EBITDA Elixir. up due administered impact million XXX sales, and due We up shift in and by basis X.X%. and sales access On in order end higher. Retail XXXX account were stack in key If alcohol and comps access higher $XXX,XXX upper

third $XXX that revenues consolidation. X.X% $X.X planned decrease by a quarter, and industry or quarter medical Elixir adjusted announced driven $X.X loss similar our fourth previously Without accounts ratio fourth ratio of of This the of in billion exit to impact due related the Elixir's loss due medical decreased EBITDA the to would receivable quarter have revenues, million the adjusted to membership the the adjustment our loss in EBITDA was to and at last to line lives a Elixir to EBITDA a achieved incurred we our to in For Elixir's an reduction SG&A primarily decline we write-off fiscal due in in and reductions was business. saw fourth with that a client that made cost was quarter align write-off, quarter year's of been for Elixir $XX.X million versus QX million. insurance increase improved insurance what Elixir receivable fourth of X. XXXX. a on to structure decision January the

to turn let's Now guidance.

pandemic business we Cove to continues that saw the vaccine be expect the retail is significantly to in As wane, benefit financial the from we reduced.

outlined indications Heyward earlier is are in as beginning seeing investment that our we However, our our bear strategy to fruit. in call, long-term

to core expect million. $XXX $XXX adjusted between revenues, be Elixir EBITDA is is million. and business million improve and cost $XXX reduce million EBITDA and $XXX expected Adjusted will between grow Adjusted $XXX and margins, $XXX We Pharmacy be expected Segment structure. while million our to EBITDA to between expected at the million to be is Retail in

second have we some We past over boosters, COVID are X do underline assumptions the key some from for booster guidance that demand seen expect Following including that contribution weeks. our range. the

XX% levels the to to XX% decline of to XXXX. of levels vaccines fiscal saw COVID in we expect We

of core to in in the after excluding our COVID. impact We see business growth script and growth continued comp sales expect

to penetration our expect gross profit an dollars. in million loyalty own incremental program and We brand $XX changes card initiatives drive

in XXX we incremental that quarter. $XX closures EBITDA a this Our Note of includes contribution efforts And the end to at drive that will an efficiencies benefit. XX million store $XX the XXXX. million includes disclosed our XXX -- of administrative yield our the core will fiscal number third drive

is and EBITDA Retail the in $XXX expect we we at to million in during around in plus guidance efficiencies, Elixir. that cost Included store labor the With fiscal these total our assumption savings drive savings, an field a Pharmacy year. grow opportunities will additional of

Total to reduction our to our Elixir dollars impact Elixir the tight We million. of SG&A share rebate revenues be at have at will $XX.X share. net billion between reduce approximately the and $XX prior due revenue, expected and due arrangement. from negatively and and be to and offset million taken impacted aggregation expected $X.XX per Adjusted $X.XX increased our Capital $XX.X $XXX at Elixir. while steps reduction loss gross by store lives is are be this reduction between by in profit by we to from billion. closures is reduction per in lives rebate And expense of expected lives year to loss expect impact value to the be be are The management. the expenditures to

maintenance at file In includes transform our in distribution spend, our to aggressively pursue market our grow regular key a addition important modernize prescription Elixir, and business, systems investments to member stores this purchases. digital support refresh centers,

to points growing is In enhance of technology occurring the powers X addition, investing the years year. productivity in PBM, we increases next basis expense in efficiencies back assumes and projected over office, $XXX Fed experience to XXX Interest and driving and pharmacies, business. approximately and This our fiscal stores are our the million. $XXX be that modernize our capital our to digital rate digital assumption significantly million our over over

down We reductions, inventory generate pay expect million capital $XX continue of a and flow benefit debt. generate free to to to working to from cash positive

completes long look to business of but by membership, the the We our can term, exciting that the to XXXX. expand we fiscal by prepared and these end expect our This questions. X.Xx our for open the areas please only by grow grow levels leverage that into Heyward the grow fiscal XX% and Rob, the not lines Elixir initiatives we end believe discussed. to As other reduce XX% to over ratio remarks. can EBITDA some XXXX, of we phone look fiscal 'XX of core

Operator

[Operator Instructions].

of line comes Gill Lisa question the from Your from JPMorgan. first

Michael Minchak

Minchak on Lisa Mike for morning. this actually It's

swing COVID based we've in off, first the testing And been a the on just factors so. questions quarters. inbound over over the vaccines last the larger given of just the or results of has gotten past X weeks few your few and So number

Just the the with testing sense better on wanted provide could just in you to vaccines the profit for business. to see color of underlying some a performance and if associated order incremental get

I think profit given some past COVID you've the color in per around administered. vaccine

just confirm how then think and from that. both the in-store wanted COVID OTC? So to should And about we tests contribution tests,

Heyward Donigan

So me around -- just by start saying vaccines the Heyward. how let we that it's from Mike, our have volume last actually and assumptions reduced COVID our testing of discussion.

numbers. reflected But will business I vaccines. to And think get that Matt actions can the that getting need is we that it's -- so really in of then to these process. assume back same and to we And the speak because we're I the level not take important

Matt Schroeder

Sure.

Mike, on I thanks, range. morning. good per would the So had vaccination in COVID and vaccines, contribution range $XX the Look, an say they EBITDA

are $X. to PCR the $XX was around EBITDA $XX contribution around Antigen testing test tests probably per the side, range. the On

So some you of can numbers those are from modeling. the standpoint your use

Michael Minchak

think of Got higher-margin the fact you I Yes, acute volumes. very I the X%. And acute the over scripts just your the you that lower generics. pharmacy talked were like pandemic, the one more in course seems down then headwinds it. talked business about largely with guess quarter, are That's it the helpful. script those significant in about of

weak sense to of volumes reimbursement to I just how a acute in what's sort -- a you and broadly, a I characterize Do fiscal of the recovery more very you prior sort incorporated consistent cold levels that pre-pandemic is Are Although pre-pandemic where for flow as a stand year-to-year? just assume seeing get comping of you wanted against the levels guidance. currently we're as And 'XX cough would guess sort to in year. pharmacy compared I follow-up guess the of then there? sort guess environment?

Matt Schroeder

start. So maybe jump I'll Mike, in and

but may all, be I scripts clear, just you -- were so I down, we in the which to what think have is fourth heard clarify So up you wanted that. meant, quarter, I in acute X% just first of to say

and get kind X cold but X%. over pre-pandemic to I kind in back flu stack of to year. first would levels. in X-year and the early, scripts very level, you about We're down are of this We the years ago tell expecting acute cough, a And X it's weeks other of

We expecting flu OTC as well. some we're where cold are they to, scripts this, and also down flu products seeing our due been other And immunizations cough, including is years pre-pandemic last of in thing the from in and over have strong the guidance results were in couple against think, fatigue and it. get to to as immunized thinking I is numbers expect about from talk pre-pandemic everything step we I those conditions. way as being And would closer of our about immunization back kind the levels COVID, getting types back well other people of start all

fiscal there or the and really XXXX. as No as up got the sight into characterize rate years. the would And being good down with way of what consistent for we've contracts probably goes. movements that I rate we've the couple in last of front, reimbursement On as line far either seen pressures

Operator

from question Evercore. from Evelyn next comes of Your Anderson line the

Elizabeth Anderson

the $XXX million sure and where of the into I understand make buckets savings dig coming to wanted initiative relative from. just cost I are

million said from store closures maybe corporate expenses. I from $XX and think $XX you million

So is to all make about just that that of sort $XX the is benefit? thinking I implying of aggregator am buckets those that I rebate sure million want correctly.

out, wouldn't would you that mind that if super be parsing helpful. So

Heyward Donigan

$XXX reduction. Well, is SG&A the overall million

aggregation. have do rebate So with the anything doesn't to it

and $XXX can we already confident significant made that inroads million, have number. highly achieve We the are into that we

break So maybe just could Matt, it you out.

Matt Schroeder

Sure.

a So million and $XX EBITDA here's that's the bridge stores to net $XXX benefit, million Closed -- morning and Elizabeth. a benefit. good is

in this year. basis gross one gross see guidance $XX on a of our costs revenue, dollars going some guidance revenue SG&A larger the reduction -- corporate reasons to why So in you're lower kind going back-office to are is an even revenue from our administrative which reduction costs. million in is profit of with and come

some sourcing maintenance, come it's combination and million store procurement things is retail and labor supplies Elixir initiatives as initiatives the going of from a we like to $XX then with reduction SG&A, the repair around and and control some in a And type store well Another in is million reduction to lives. of the at $XX business as made of rightsize that really other other [X:X] cuts already expenses. as have

that take million those up in benefit. to adds and you $XXX the So numbers

Elizabeth Anderson

super That's helpful. it. Got

maybe to a about sorry rebar. just So as that the -- follow-up

benefit what the now? change see aggregator benefit from So net is you it the as the rebate from XX right to

Heyward Donigan

Yes.

in I It's thank Elizabeth. think Elizabeth. really you, that's squarely the --

think said I Evelyn. I

that. very us putting But about we about on the Elixir are excited So side this sorry the and other the of see benefit now stuff rebate aggregation business. behind

could... maybe So you

Matt Schroeder

Yes. specific aggregation number rebate the gave would on But about think of I we I I profit Elixir standpoint. for from don't the benefit. dollar think gross a would say, a standpoint

We to million see us helping and number the benefit some kind from lives, $XXX we rebate the offsetting are more and dollar to and in of profit going degradation $XXX get see loss bridge guidance. that gross aggregation the than that million

Heyward Donigan

competitive and our stays we with were also our before. a us more become the and speaking And how it And forward. stuff propel we Matt's that helps business -- benefit us we about even through than to clients, lot of passed then that that's

Elizabeth Anderson

on side. maybe, one Got it. SG&A the And question then last sorry, labor

elements. staffing, us out the we've broader $XX reduction help million balance and sort sort across less and of the obviously, of versus economy comments need about us but going fewer doing that the if I your balance retail that maybe from those assume costs up some heard in help you SG&A. you're X mentioned, wage competitors You maybe of vaccines,

Matt Schroeder

Yes.

me clarifying it of kind I'll then and Let provide turn Andre. over comment, to a

about some wage some performance-based, anticipated to increase about million against what expect being rate is That a . rate $XX an the environment. around increase a based. that over to So some goes some more are reduction, being number XXX, costs, of initiatives color just that when drive XXX we to I'll the wage headwind. give market Andre that that is in just it turn think of you of there

Andre Persaud

or Thanks, Matt. Elizabeth, question let vaccines on me address the comment labor. the

spend. for to that we we the the ability -- the Our labor project such pool is projected complete labor have within are vaccines

this volume a are thus, year, year versus a corresponding last As Matt projecting vaccine labor shared, there. reduction lower we and significantly

a for broader far tale our labor I footprint. of it's Your X as as market, in the question us stories think

that turnover. candidates we're a much quality very on And on of retail investments our training focused and higher over our we have a entire the on work where within comes the to and compared industry, last current in of other in done be targeted team guidance, then X lastly, to associates career new general, reducing choice at all more track levels. associates, a comparable workers and we our others. staffing and to at bargaining And much in using mind to at everybody we've to our of attract are business. Rite very you agreements, Pharmacy continues but robust operate Separately, is Retail exit senior technician current talent top building the just keep within on we and made in states First leadership the light in lastly, that. and in Matt and would Aid And rates platform store strategic industry, the managers else collective funnel. an for I states, like top then we're that's started as has we've we've recruiting make Rite meaningful all an seen shared. the to employer on Aid tell years, the work concurrently, labor of And

Operator

Your next question line Hill of George from from comes Scotiabank. the

George Hill

moved told that make that didn't just you XXXX down, XXXX that we 'XX. and somebody I sure just Bank, guess, sure just you was the through First, all Heyward, you walk question. make taking kind heard sure where haven't -- fiscal underlined? big it misspeak XXXX. said me. when your growth start to And thanks. to double-digit I guess, you versus want wanted you was I that reiterate correctly. are got you and Matt, and want to again, And XXXX, what could could I I I make it's through you I has And I appreciate want to EBITDA comments? said I Deutsche visibility Scotiabank. my assumptions unless thought not I then if of

Matt Schroeder

clear. I'll Yes. just start the on numbers, to and jump in maybe be

that $XXX off XX%. out. we EBITDA So think million this we had EBITDA year of that closed we the can in And X-year -- a grow we a period, XX% over of to an base range

target, free we the So that George. EBITDA by the generation if of 'XX. you that's with and will, setting our of end our And fiscal in was with of target, target long-term talked leverage of kind a long-term about growth cash ratio flow, X.Xx

a of reset think targets. X kind X-year those So of as numbers

Heyward Donigan

Yes.

miss did So no, out. you not

George Hill

Okay.

Pharmacy growth? that are I would Matt that's reimbursement? much for would kind given X we've Like trends decade, guess a color that be business? I just -- dramatic that. Elixir the ask love a you over what in the I can helpful. down super any Again, you, kind implications macro last implications would of provide level pharmacy just of if the script -- seen the of for core And level. What Retail incremental mean versus at So what around the How are change mean go from I of that's look at you I you is could there? direction

Heyward Donigan

and results, would I Well, in -- -- we're it's the and we but other not to the growing the it as business and expecting includes it's PBM. I are within you to script, the that other see. areas the strong is all PBM, would in sure, opportunities Retail business, we growth can discussed And that a the show scripts But is both going businesses Yes. for just pharmacy. of PBM, the not other not just say which growth key point as of had Pharmacy

the a of XX% if store discount some adjudication new talked expect exciting or business, card partnerships, the services as the store start that to our points new in return our this business, whether about new opportunities to things PBM pharmacy, order our continues in and as well some we’ll platform, Dialog announced. both and and my which expand talking Laker our it's some formats markets, more mail we health program, cash new pharmacy, that specialty be of year the within of plan Health store, than as service, own So be are to rate

-- begun business to -- think the business. we think tap really a only this of full-service again, is We've as, this, opportunities into So that pharmacy it's as of is beyond pharmacy. the retail it

George Hill

businesses for tell I'll say, second And think keep about a helpful. me when the might and already that -- here Heyward, how talk in going inorganic and the much of to initiatives? that lot of until super be those guys you PBM segment, can platform much growth exists Matt That's about I'll a the growth you require for No. quiet. of in how guess I you

Heyward Donigan

Yes.

and Just a tied $XXX million about is ballpark assets to million Elixir. the within only the sense. to you give all $XX Of of Elixir, in CapEx,

earlier, throw so already money we running to already. all I new said do of assets lot up these opportunities. with have And need a and as We to the these at of assets not grow

very But the a is about. have this that And initiatives continue in we're is in So I talking going it, think which assets. to that invest think, set certainly, of context, we're capital-light already to these. we of

so we have the assets of discount just business. excited And Elixir, growing talking about which the time. a we're that's business about not what the of we're to just platform. the within include PBM, the -- tired it's PBM, Back but COVID all Now at all the services hard about because

that adjudication the for as platform software-as-a-service adjudication platform, other PBMs. serves have We Laker an currently

drugs the We have the type expensive specialty pharmacy, which, business. most in of course, growth, of highest this is

think a order use to smaller as would mail innovators other have like We that pharmacy well. we

of business course, completely turned have around and Health we have Pharmacy Dialog, is So now Retail which also, growing. and the we

Matt Schroeder

George, we are digital the one think think, and thing these going it's kind reasons we're some include color I I X-year would of into that services. my come of talked a about in on bit other our would important the the give drive investments is I addressing existing make what have out we're a target and I and to CapEx our and probably growth around outsized -- to And the strengthening of the -- towards would that proportionally and dollars really e-commerce. in to proportionally include plan that drivers. third-party of I and store I in we quite last be starting growth retail we growth we another that's put allocation is, is to base. there's technology some sites. the also I the the is said while working what digital think include really is this digital our -- But where the from at thing, X-year the say of expect jump is starting more It business, can in it that the to to business, of all of script -- of capabilities in investment, I would continuing make going a And marketplace building invest PBM additional think platforms today, piece It growth to would lot delivery. on digitally, type still we're see -- and our

Heyward Donigan

amount nation-across. this grew the up in pick year. We to last XX% same online, and we grow rolled in Yes. store it And expect buy year, we out just

Matt Schroeder

Yes.

George Hill

at the business, you follow as X we'll initiative, the look given that, business at about. at then, broadly last for I'll know the shots look million talking across when or that cost you rounds And I $XXX guess, there $XX is Yes. $XXX up a now, opportunities it's savings throw we're more I many and of million? Matt, billion how you Are

I number cost savings? business growth think should cost growth isn't EBITDA the how much coming scale the savings business future versus you that about do opportunity as huge a for we and that And from of future the like So of And of what guess, number. think initiatives? how -- necessarily is

Heyward Donigan

it's Well, now, from business coming largely the growth. would $XXX million say right outside I of

in opportunity, especially on believe -- So I I There there organization. is I our significant efficiencies, additional don't is opportunity just believe, know. PBM

which talked a haven't of because [Project called the project, haven't about We are the chance, had yet we actually in just Fusion]. process we

and the So of all backroom operations while and already about Aid, Elixir's Elixir, Rite is organizations XX we've between different organizations. integrated itself in

drive surrounding the the Pharmacy. of additional and of so and will specialty the surrounding the instance integrate continue at processes order expect efficiencies provide the different of and Retail efficiencies common them and with all technologies and mail opportunity Elixir X we PBMs lager at Elixir, to to all and And to a then significant also to moved

to come more So that. on

Matt Schroeder

over well. . around other as our we the would doing opportunity to of a have lot which modernizing modernization back a efficiencies drive we systems, we And on time add of accounting, frame work lot as finance this X-year George, I reporting efficiencies that cost is office complete on are

Operator

next Your Goldman of line from from comes question Sachs. the Giannelli Jenna

Jenna Giannelli

clarification. a My first of still kind is one

about XX it? Is or you maybe little last $XX offset consider? to an of year. million last way on so some think the last this. number? still bit If EBITDA for to think $XXX there did Is that to the vaccines, that adjusted a think around $XXX I Just about there's EBITDA vaccs trying year. contribution the about overall to Matt, that the that a suggests Or did mentioned of million EBITDA SG&A we that million is of we benefit year. right of need confusion you

Matt Schroeder

contribution. an the Well, is $XX EBITDA

our year as quarter. So significant every you're with a to from dollars payroll to of There's and variance standpoint? the cost like kind the is start talked explanations with than talked gross start of to vaccine we've that And of throughout million about put the year, that. net is SG&A, your about that. profit gets headwind kind the But vaccine year, the million number. this that's from last $XXX amount on bridging the But you as vaccine, that thinking a of -- is $XXX in if we've about headwinds that's from actually a higher kind reduction

Jenna Giannelli

just cash appreciate closures you $XX is million and I additionally, that. just the Okay. you of up getting That would point be is this us Perfect. closures? And at EBITDA super schedules at then benefit, That remind be ramp can for positive? store super your of of clarifying the how as the there much you much this opportunity how helpful. point flow more might cadence helpful. And fleet

Matt Schroeder

me with is clarification. XX the Let $XXX That number XX. times just X start million

the total a prior we the expect year vaccines of XX% But of numbers kind of that's levels of do to vaccine So remember, point at starting contribution. XX% this year.

a that there that is will do. number we of vaccines So --

you from to COVID So account. take I numbers on kind of those on vaccines, think a headwind net both into have

So who's want of clarify I . math. to out that everybody bottle hassling kind their for just

-- we the a of the on what think months comprehensive fleet, So And where process very the of catch-up through store the have one the have from done over standpoint last would fleet store-by-store. closures, of pruning I at store review. going think a review we -- the literally we're I X now the our onetime point I kind call of

storage opportunities. to at for will We continue look

there's kind improvements. conditions a going of more So that stores set additional we've not opportunity. at monitoring But got on looking kind underperforming closures, to I and say wouldn't of some be store of not and a where are now there's watchlist we're

Heyward Donigan

Andre?

Andre Persaud

have to process term stores, very on and poor it looking Ongoing decided that performance place at you. store-by-store, and operated at reality to mean how in close as stores. Thank The those right the of we stores XXX addressing decision end shared, come the our particularly performing those as have Yes. are looked Matt of is a close, to closer was I lease. robust store we stores we

of eye to profitability headline moving that close that the is we the keeping a very here store-by-store ensuring So every the store organization. our are forth and on contributes performance

Heyward Donigan

Yes.

bubble. the June of by think the So being as ones haven't that closed we on

I think the under were lot that be it's ones the performance about careful pick going the really the up said, and to forward, cleaned up going largely as management. leases on Andre so a And obvious. And stores

Jenna Giannelli

about? else there about final free is that one, Or that entry? well. that that's It guys year. great if expect then cash It's in of a in looks working of Should as little capital be to And be benefit you of that thinking just it. you said bit this a reduction a largely positive flow we anything Perfect. supporting as there's source I cash can. think one should we And Okay. there like that

Matt Schroeder

benefit is in reduction capital a So definitely the working inventory.

do headwinds a of places, are drugs have hard reduce our offset opportunities some we of these at that have with to that. is, look we an that One in inflationary We're amount even could of think opportunity the in brand X the business some opportunities. I taking in stores. the

we certain The scan, be second end to that lines is a pay which holding not are as front from nice opportunity that onetime converting is on go the or inventory. inventory holding to reduction on going we business of inventory goods to

So the capital drivers benefit. those are of working

Operator

comes question Bank of from Reuter line next from William of the Our America.

William Reuter

X. have just I

offsetting provided acute cold reduced that Is you've with can guidance your bridge Can terms COVID the way help increased that associated factors what impact of about in any associated you there? EBITDA expect helpful it's you to think terms to provide from in administration. net any scripts? the flu us of you immunizations, cough or with help there So and

Matt Schroeder

Yes.

lay to pieces, there's there. in be about growth largely then kind rate if million front loyalty. and think think numbers probably Bill, to million there. growth, opportunity offset sales say did number that's reduction, pressures we be non-script and gross out the we benefit end pharmacy margin the out in $XX laid a end I very say the talked I somewhat a about there's an specifically from from $XX going impact in brand expense and sales opportunity about think of would of I the the EBITDA on improvement. by I addition own That's on would the side, the going like from the to of we you front

you give from the with -- other through, items the do we I those think bridge 'XX we'll I you 'XX. So all went help to think,

William Reuter

secondly, Okay. and And on of a upon scan-based that benefit just question. John's have an you up following year capital working have expectation trading reductions? you number this terms of Do based then in inventory versus

Matt Schroeder

working we benefit in capital that about. the $XX million embedded overall It's talked

Operator

question Your comes from line Jefferies. next Karru Martinson of from the

Karru Martinson

in contribute What and magnitude flu back-to-school, and those super your we season the think what's would of kind a bottom is pre to kids cold pandemic, back spreaders. of the to you that normalized cough -- With line? to when guys what

Heyward Donigan

Yes.

obviously, of You business definitely the of for in us these us. year. the keep not prior business. that kind quarter but floor And kids might it And that's big through or recall quarter sell the a last -- the fourth just quarter about

to want Matt, the do it? talk Andre? you so just And or Andre, why you just magnitude about don't hit

Andre Persaud

a QX front-end up couple ago cough was cold below say, and a and look cold cough a upper would XX% while we or have record at XX%, over were season. of cough up year, respiratory season. I as we would not last it it of was because sales cold still did and years Our what

Heyward Donigan

reopening now. because think right the schools just they're I And

a So bit little timing. is of this, think, I

Andre Persaud

So plan in we cough still see upside this year coal. our on and

Matt Schroeder

Yes.

on least point I what scripts cold the think would at and on scripts year be cold flu the up last give to $X least saw scripts, X million and we -- cough, a cough over million grew. expect to finer at I

So pretty profitable that's are for like scripts us. -- and those

to a think, I that's, So think benchmark good about.

Heyward Donigan

could hasn't up, but think it's levels it it so the way we and think allergy. reach, I reached is that

William Reuter

Yes.

Okay.

seeing trends you the on people And at are are come up? traffic or pick normalization traffic learning that and So of you live start when basket some look tailwinds or the work with seeing there. what we as to COVID, back kind to to

Andre Persaud

Yes.

where is I on work return of seeing through, that think our people are cautious flip one centers work. returning are side to expected. basket The lot is than in traffic this I'll have to urban would and been uptick more share that has we a the

ago significantly years traffic in up it's stores, we're time in over still X year those those certain this when markets. down, at at point but over So in you encouraging look year-over-year, last

Heyward Donigan

Yes.

things was full to considered we office the believe back don't closures we time, did that of go One when that we will the the store ever. that people

well. markets consideration big complexes. of to were a And was so us these some urban tied as for office That

William Reuter

I Okay. fiscal are been what kind static the expectations for And this years, end for XXXX, calendar the the in opening year? season that for X for season PBM, we've the 'XX of of -- up of at terms this of be guess selling selling will

Heyward Donigan

employer and as for Well, in are we said, for business. season we in early the the plan are season very XXXX I business, health XXXX

for time lead longer a have implementation. plans health So

have we've the that's So few gotten against XX,XXX total a XX,XXX year. members started. new barely just new prior months, And the members, past sold and of in

season the XX% final XXX,XXX right sorry and as Our members when million almost mentioned of I we're speak. business we're I heat pipeline cycle will getting really make right decisions The late closing on and really million business will the we -- November timeframe. basis. and during as all, am members to effect X grow is in -- a That XXXX started. around plan We're the additional And go doesn't position. timeframe but August into then sales July, largely for go start pipeline as up is $X the not weekly finals the now health is growing that employers until into And generally in largely that earlier, in just now 'XX.

So very early compelling stats days, think and far. I exciting but so

Operator

time more have question. one we for And

of the Casella Your final line question Carla JPMorgan. from comes from

Carla Casella

follow-ups. of by that about The file file and A And you you're include buys? does $XXX that can what guidance, market, couple million, seeing talk there? CapEx

Matt Schroeder

the I in as next business, kind of million players file for especially lot would morning, in Carla, about of us take are we're providing I for have making business, I is think, -- a are kind some, there's of past think, other calls, worth level. at there it thinking million good I Probably is whether churn be say that it's we've market in $XX call, other depends year. to what does $XX or robust. pharmacy the the talked to you're that. file a looking flow whether deal buys buys. and Obviously, include not advantage what planning at. lot of, area and to -- And want of that's, independent it supermarkets players Yes. or or about about around of they pharmacy what on ability still But the would

Carla Casella

did have Okay. to plan may say you do And remodels year? missed I then that. many this how you

Matt Schroeder

going at the an really remodel. I on item level as And are format smaller this we to opposed pharmacy-focused refreshing be are of give store a efforts really we're us. in than launching to CapEx probably our to key a focused with talked prior would be remodels I tell lower our number about one it's in cleaning we've there be some store going number. specific of going what our and We're extensive year I that to on didn't the think up markets, focus in call CapEx going is pilot some years. stores focusing We stores our that would you contiguous targeted to to remodels then markets that and a

Carla Casella

the timing on the also And XXX, you would the how so many closing Okay. you're -- and formats? you say opening timing be smaller of

Matt Schroeder

are yet have we're this Certainly, those to XXX at The formats smaller And relatively point through closed already. today, but this as small of more be still number we a the probably So most closed speak number. end exact determined. timing, of should of year, by June. the them working we

Carla Casella

Okay. just Elixir. And last then on one follow-up PBM, the

back range. Prime. X% it there? would kind it businesses think the basis, a included normalized I on you're seen what's just using on the a X%, margin big that as with it that the because assuming be gross charge. we've could I you're Or So on as higher of it margins mean, that because than that go kind the a Could that? business margin on -- piece -- on consolidate Could selling? of it But high the this pricing that lower get you gross quarter given was the of I'm purchasing high --

Matt Schroeder

to a think to it next margin level, I on we X% to So level. gross year X% on expect gross margin get a

lives, those aggregation had the this go in margin dollars some into a but into drive XXXX, gross to And is we actually We improvement down, scale rebate as improve. the margin and expect of for fiscal expect line. rebate we back additional tied ability of the rate to the the dollars agreement revenue kind

Operator

that I back question-and-answer And our closing to Donigan turn will period. over concludes the call some for remarks. Heyward

Heyward Donigan

fast, can't a of everyone, incredibly result of who Thanks, this that in to to And a midst course, the strong executing and the questions. of turn year and really I say flexible the again we're really our required on strategy in innovative. back COVID team proud your for I enough. page over call. challenging to the outlined get XX,XXX I'm be earlier excited on our associates, delivered super And

to equipped a and headwinds the workforce, of over grow, COVID talented on the clear and extremely set capitalize We a strategy an and to we're have had are assets we past tailwinds X the ready today that us past brought and leverage get we've experienced years.

and the laser-focused, well. you, of our be company. entering energized, and next Thank we're So evolution

Operator

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

You may now disconnect.

New Rite Aid (RADCQ) 14 Apr 222022 Q4 Earnings call transcript