Walgreens Boots Alliance (WBA) 27 Jun 242024 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Walgreens Boots Alliance Third Quarter 2024 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference call over to your speaker today, Tiffany Kanaga, Vice President of Investor Relations. Please go ahead.

morning. Good joining Third Walgreens XXXX. Quarter for Call Alliance for the for of us you Boots the Earnings Thank Fiscal Year Tiffany of President Kanaga, I'm Investor Relations. Vice

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

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

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

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

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

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

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

now turn to the will call Tim. I over

everyone. morning, good and Tiffany, Thanks,

WBA. retail our and by in future I've on sharing believe today want results expectations, start While observed I'm today future. pharmacy I of because Walgreens what not the were I our reflections in with at in quarter's particularly this since joining line some to

our their in and stores their lives. with Walgreens We place are experience day them provide our by Americans the and offerings pharmacy, in is digital we the in every trust motivated important

relationship patients imperative is have leading foundation business day and retail our way health dynamic earned footprint, can and engage believe integrated X interaction core the care, nationwide pharmacy few customers. is customers health the others to I heritage, right with care rival. an a a that in to our the payers, Walgreens. human-to-human as million choose nearly is XXX-year with our we of Over the have in lives this independent provider. providers we and we PBMs, our work why and pharma Through with This touch that

people We last over world-class have the built business. a several right who for Looking our of are already with urgency team, executing now we've back in a turnaround new on leadership X quarters, sense place members. the including a

is dedicated deliver All and our team every exceptional XXX,XXX who day. differentiate experiences underscored by of customer members us passionate patient and this and

will nurtured customers future confident center. will long-term And is company that over that relationship built The leader health we've the shaped retail by with pharmacy and in of WBA the be I'm offerings potential the around the with bottom line care a be time. at our its of

need to addressing strategic we to of added ambitions. and have we urgency duration severity But The do and the only and environment our we in what operational directly. are challenges today our we acknowledge review, realize where operating and are to also longer-term the them

the and significant the will our our quarterly both Our detail in of retail I conclusions Manmohan after as reached have unpack we results. collection review existing I a assess assets. action greater review of and has series of strategic been we driver business pharmacy

our of challenging trends, worse-than-expected in these stemming more environment by International. quarter, In Healthcare reducing For Retail consumer U.S. outlook, the in through per full earnings we which partially and you U.S. industry pharmacy and adjusted detail. strength Manmohan are will third in business year take from share of $X.XX, reflecting light delivered the challenges significant a factors, Pharmacy we offset

consumer. the Pharmacy, continued on pressure In witnessed U.S. we Retail U.S.

and weigh refine the on customers but will price improved selective driven We omnichannel focused near-term store in-store of become Our our efficiencies. the which for we have they we driving traffic invested experience their our targeted profitability decisions loyalty, while in enhancing approach. generate and as price-sensitive remain increasingly relentlessly have front creating on right customer customers in purchases. and response, promotion and In

such We incrementally NADAC increased as in to including dynamics. industry. and regulatory reimbursement impacted and continue branded also impacts an pharmacy challenging pricing mix fluctuations pricing, trends, face Recent pressures, negatively have

to below market but script the trail is levels. pre-pandemic growth Additionally, continues growing

to affected weighing are our headwinds profitably. have performance serve materially and ability These patients on our

are point challenges is in a we our the and not the at the pharmacy market require environment model differently. sustainable, where operating We approach current

For payer ensure example, active with discussions our are are and fairly. to PBM partners incentives paid in we and we align

and with and suppliers companies pharmacy, to trials positioned already uniquely Walgreens also with we've We our patients. footprint with working to other physical are facilitate which specialty services and our trust partnering clinical directly given established out the is build pharma

of and had management and we year-on-year VillageMD with along at another driven by EBITDA cost Healthcare, quarter positive disciplined at strength U.S. adjusted growth growth In Shields. continued

to actions as to add its last optimize quarter's and footprint, Following structure. now cost is the on VillageMD's it rightsize a path lives business profitability to clearer continues

line comp with the retail and in both meaningful in strength perform achieved UK and expectations. quarter International, digital growth delivered physical Boots and channels. business share In market of strongly from gains another continues to sequential

savings billion to across drive out the in We deliver We prioritize discipline flow. cost continued and cost execute further on free year. cash to organization with $X this to remain track

under to following ahead remainder the year, the operating of the are we assumptions. look we As

anticipate the margins. operating do U.S. an script We not expect We to and retail pressures challenging. remain muted growth continued expect on the in expect improvement environment And pharmacy environment. we finally, to remain volume

fiscal we year adjusted the these for XXXX. now We earnings outlook. In per to to our are light $X.XX of of reducing $X.XX expect share factors, deliver

given industry we trends. in call persist historic is outlook our pharmacy on next XXXX recent trends provide our fluctuations the with we I've into to this year. current normal, wider expect will Consistent While we October, is than acknowledge that approach, but our believe year-end fiscal outlined in fiscal range we for it prudent

into review, strategic of our financial it our to review I'll going to results. turn now details over Manmohan Before

morning, Tim, everyone. and you, Thank good

Third sales quarter sales constant U.S. X.X% on X.X%, a X.X%, grew of currency increased U.S. up basis. delivered was X.X%. International Pharmacy Healthcare Retail and growth

our on driven Adjusted recent and $X.XX U.S. Tim results a constant impact gains, year-over-year of mentioned, $X.XX retail XX% from was overall environment decreased below by As challenging expectations. sale basis. a currency This leaseback lower were EPS pharmacy trends. a

to in line segments expectations. our continued goals and Our on with capital related our and continue cost to And reduction we initiatives. U.S. International perform CapEx Healthcare working deliver and to

results impairment charges to license included million GAAP and As a reminder, pharmacy of tangible assets in last related after-tax $XXX Boots year's UK.

declined increased lower basis gains. year-to-date profitability Adjusted the by Healthcare on Sales lower performance currency sale and was offset EPS Retail partly constant Let's move currency the effective rate. constant adjusted on a on due This to leaseback U.S. significantly and a in X.X% to basis. improved XX% a highlights. tax cost-saving softer U.S. Pharmacy initiatives,

of $X.X was fiscal billion $X.X to net GAAP months the billion of X first in loss a 'XX. loss compared

billion goodwill gain charges The first partly quarter. and Health the year certain after-tax after-tax impairment and for noncash offset prior billion Cencora VillageMD by X to 'XX lawsuits, of a claims months shares. detailed charge related period The $X.X as a Option last fiscal $X.X opioid-related included Care on of included sale

XX% year by U.S. offset pharmacy cover X.X% industry decline impacted reduced a year me and partly sales. decreased Approximately sales lower period. in trends in quarter. year-on-year let lower also retail negatively Comparable retail decline brand inflation Now segment. to AOI prescription incentive the Retail of Cencora XX% sale AOI volume, current the pharmacy leaseback gains in Pharmacy prior income. and relates equity grew Challenging driven versus and by this the in lapping accruals prior

expense, leaseback a $XXX net in Sale in AOI of rent to million headwind the incremental quarter. gains, resulted

As X pharmacy sale any anticipate were gains we not Headwinds ago, savings in initiatives. going leaseback by forward. discussed retail months offset the benefits material partly and cost businesses do from

in pharmacy. comp brand increased Pharmacy U.S. driven scripts, volume by to X.X% sales and quarter. growth. turn now grew X.X% the me Comp excluding immunization, Let inflation

prescription We the year-to-date. are overall tracking in line market with

expectations prescription overall below to due Medicaid growth remains redeterminations. However, market primarily

Pharmacy certain of NADAC generic from quarter reflecting brand negotiations, by driven impacts, procurement year's reimbursement versus incremental mix quarter with and drove declined margin million last pressure impact. similar year pressure gross fluctuations demand launches incremental the to in prior the partial $XX lower adjusted Recent dynamics COVID testing brands. an

the retail sales Comparable business. X.X% in retail declined U.S. our quarter. to next Turning

seasonal lowering Tim As responded and a shift With wellness, challenge. personal pullback have and backdrop spending, a care remains this prices discretionary continued consumer across health and we sustained channel categories. by in mentioned, the

to unit points the and and price lift. product value-seeking the in drive brand new promotions, and year-to-date up invested launches in penetration returns we saw our same basis we XX sales in helped own time, behavior At quarter. Where

as While was This line of to actions, offset we're our by lapping more select promo year's positive tracking margin last improvement seeing relationships gross anticipated customers price we early shrink. responding on from to margin of actions this due in gross recovery are well signs expectations our performance partly margin our investments retail levels year previously higher than with which suppliers. initiatives impact declined and category as deepen our with as

increasing numbers. all estate Total always, as prior lapping Germany year and across real X.X% operating sales International increased wholesale X.X% X.X%. adjusted constant was due down the Turning Boots I next Adjusted period. XX% grew Segment in segment. gross businesses. with in growth And with UK X% to profit gains income talk to currency up will

destination XX% growth. Let's retail categories X% our Comp travel performed continues perform now locations and were pharmacy Comp sales well. cover sales of formats, sales. health U.K. showing Boots.com increased Boots retail beauty, up to in particularly all sales Across with detail. XX.X% and increased nearly represented and Boots UK year-on-year well. flagship UK X.X%.

EBITDA. Healthcare to U.S. Healthcare. consecutive next positive delivered of U.S. The adjusted quarter second its segment Turning

of grew Third driven in of Shields. were by productivity continued was $XXX prior sales up the Adjusted within at billion million, an VillageMD improved at last $XX by costs, lives, and quarter driven year sales partnerships. offset X% XX% and billion compared Shields closures. $X.X of growth increase rightsizing by quarter. growth EBITDA driven growth was sales compared by to robust of year million clinic The to fee-for-service partly risk year-on-year. existing VillageMD improvement increased impact $X.X full X%

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

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

expenditures capital in on to working $XXX pace fiscal and year-over-year reduction continue of million 'XX. We a in initiatives million achieve in $XXX capital

I to guidance. will turn now

are updated lowering guidance fiscal 'XX items. key months $X.XX. ago The to X range We versus two our expectations EPS adjusted to $X.XX incorporates our

and U.S. consumer activity, retail the driving margin. environment has not improved is negatively higher impacting First, promotional

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

in of margins and and lower from procurement inflation include mix to generic continuation within Pharmacy pharmacy worse-than-expected market overall in similar fluctuations the headwinds. the growth. second dynamics is drugs NADAC, half with Second margin launches impact brands, certain branded

We are breakeven range. EBITDA Healthcare segment be full maintaining midpoint for expectations of the the at year U.S. guidance to adjusted

rate We adjusted tax continue be to to expect X%. under effective our

implies fourth full EPS at approximately guidance of adjusted range $X.XX revised year midpoint. the Our quarter

year. from fourth today, bridge not me considerations quarter 'XX fiscal let guidance we're providing offer While next to to key

impacts Seasonality lowest of quarter our quarter the the is businesses, the all of year. and fourth typically

profitability expect in and International segments. U.S. Healthcare we growth Additionally,

as 'XX. assume fiscal impact call other we are factors on that today's Tim there mentioned, will However, discussed

Cencora in adjusted normalized wind shares decision and down to are a rate an fiscal Our program, 'XX. expected effective more the $X.XX impact have sell sale to approximately tax leaseback

In significant backdrop. not U.S. improvement we easing the spending retail, comparisons, consumer do despite in anticipate

on We by the lower-income and strain driven are especially accumulated inflation seeing depleted consumer signs savings. of

While our time. model, adopt we changes will take these

We in pharmacy see expect 'XX. continue some fiscal to headwinds

we payer However, have partners. and margins pharmacy PBM, discussions are focused active with supplier to our as we continue on stabilizing

solid driving a work growth. for the us, foundation to have and hard stabilization we on and longer-term of business We returning more the focused ahead our are building future, of enterprise

With that, it to let me pass back Tim.

Manmohan. Thanks,

the everything turn our been at been we're beginning calendar trying now review we year, review. to table. have achieve, me Since Let strategic on strategic and of what launching to has on clear-eyed the our the and operational

of the of deep have and complexities, conclusions. to come a a understanding have we opportunities number We and important

our in time are more focus to maximize to core optionality, take aligned them use we but and expand generate to long-term our foundation, profitable shareholder Some term. and business; three and will customers, growth, execute of around to principles to our meaningful ways value: businesses today third, to to our as opportunities flow strategically drive simplify all cash second, First, with relationship and continue relevant and capital-efficient to into grow strengthen our adjacent deliver areas; long identify

want care care ahead, and industry Before from but experience be unpacking solutions, the for the labor the widespread health evolve. more our details, review. The most to retail will conclusion shortages, including to and I important more nationwide in health important. been will pharmacy never it the reinforce diseases, convenient pharmacy the With years have chronic important pharmacists demand

Our uniquely lives retail retail have pharmacy of of center who positioned the pharmacy come patients play at business expect the the to role and their is expand to our in we need care.

customer the relevant business strategic experience, with we've our on our let U.S. plan begin for launched Pharmacy. efficient, of multifaceted The a Retail and an business, core discussion So highly success action hinges improvement. this decisions me around

of billion Currently, channels and strategy accordingly. of destination sales, U.S. store $XX customer digital AOI. convenient roughly of stores need XXX% of are the operate to our the our preferences we and driving the As But stores and contribute experience. reposition and for its has central and our segment to consumer customers have evolved, shifted, retail demographics and XX% millions

of the For remaining to our are long-term XX% changes which the not are contributing network imminent. in stores strategy, our currently

years. a we closure multifactor over footprint of motion you next finalize and include are which in these will course. stores in finalizing are we of underperforming update to significant the the portion we expect the start, optimization a number To due program store will Plans X

For to improved of profitability this deliver action them taking portion are the return an we and remaining experience. cohort, to customer

such performance reimbursement We factors not additional as contemplate will closures does if which improve, rates. external includes

easy to in of the an majority intend not will in done vast the we customer redeploy stores is we workforce to importantly, we as close disruptions. it minimize a that work While And decision store, have past, close. those the we to

series these making and of customer are we taking several enhance patient areas. a investments to closures, key addition the In to experience across actions and

ensure First, who with we we us relevancy, are brands. win. work assortment means select This fewer its to partners our partners reevaluating leveraging are own our helping and will

towards X alone, removed national For last redeployed brands own preferred and the example, partners quarter and and in we've health wellness SKUs categories. brands within those

health uniquely beauty positioned sharpening our to and we as areas health. a are lead, We such focus as women's destination for are and

omnichannel and customers engage. digital where to how We offerings they and are our accelerating want our to meet when,

continue see and to deliver approximately same-day We of delivery within orders XX% X hour, we upside for improvement.

have for option we over loyalty XXX convenient ultra the our build As million myWalgreens our to meaningfully plans program. loyalty members,

down We this pharmacy are doubling country. to on the in future of define our efforts

I for to the payers the we mentioned we PBMs As changing value and with fairly ensure starts this with dialogue are paid provide. earlier,

talent. investing also best the We're in industry's

WBA our we're practice-setting work the the as of leading in such example, make talent. the stakeholders, Council, and focus critical For we and choice as for advance industry on development pharmacy profession, pharmacy elevation of our Deans environment help with partnering to Advisory destination

XX days community to country, our supply of X Pharmacy productive discussions pharmacy engaging reinvigorate Just in weeks chain. full ago, the we Deans labor with X spent across

patient more we're result enhanced to highest-volume experience initiatives significantly customer to like And enhancing the average services, underway retention. a improved immunizations, decreased is experience improve patients increase through the digital this solutions. and pharmacy the of our We've wait an And stores. time in several per attract and

throughout to Finally, operating excellence with the both and a identifying continuous further efficiencies retail committed operations. organization, for and with our headquarters driving our improvement mindset we in are

to to close impact Walgreens as industry delivery our to organization more of with deployment around services, gaps and for care. one and development health our streamline help restructuring efficient partners critical in to go conclusions are ensure We and market of these

responsibility regard, President and development of Healthcare, that Langowski, chain U.S. relations and our In will pharma and manufacturer pharmacy, of Mary assume for all supply deployment. operations and specialty services contracting,

operate sharpen more With we our to these be is go moving, contracting, the achieve team, better under now one better operations economic will and market aligned efficiently outcomes. where

Chief will perspective. a force future Gates, Officer, operational from role greater our strategic, take labor of an Rick Pharmacy in defining on pharmacy and And the even

portfolio. broader our to Turning

asset, that longer-term that already flow create we'll We retail we prioritizing growth and in mind, stopped grow fit, will profit stop every in from our distract areas have have evaluated cash With initiatives and shareholder focus, generation. strategic potential or pharmacy that value.

several on assets. our touch larger me of Let

of UK to Our review attractive Boots we showed options business. this that in have unlock value

company. we cash flow right While in key is believe strategic the strength growth, contributors its there to interest significant the and Boots at time, remain

We invest this are to fulfill UK committed ways potential. its innovative in business continuing and Boots to to find for

believe part we unlock liquidity, these of Summit which and an to assets currently remain persistent enhance We for creation in our toward are intend to and position investor VillageMD, Moving as Health three of to value and additional endpoint includes partner. the VillageMD, optionality But them collaborating distinct CityMD. with focus in future on and businesses for an rapidly WBA, leadership next growth.

As relates remain our Shields, complement the to as best-in-class specialty and to a market. and business team its core leadership serve growth performance, it in

not taking are time. this We action at

to We that as more providing a in progress. and decisions on timely to are executing maximizes manner all look we value while I shareholder creating details forward these of committed optionality,

let me opening thoughts. Before call with up leave for four you the Q&A,

is different. our be relevant but core pharmacy retail First, will business

execution the have enhance we and strategy focus, our our the turn team the Second, and around right own business to right ultimately strengthen performance.

services, clear sensible is that a for not but need economics for our way structured currently our a Third, is shareholders. our are market there in

challenges are our of firm a working these grasp business and have model. issues the We to in address

to strategic our and may a deal I on that we it confident urgently underway, work the while am needs. the Walgreens time, our executing review take country thoughtfully great from of deliver Fourth, there's and conclusions are

Operator? let's With Q&A. begin that,

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

couple we just a bit your X with want core things and different today. just be thoughts better. started One, a of the really what little will to I you see understand than that

is future with would what you of talk about look and what view And conversations that reimbursement the the one, around PBMs you the like? do model pharmacy? payers having So you're that, can within new

Manmohan And quarter. numbers can side, going If I great. then a be just financial pricing Medicaid. you number it material just when think was in my NADAC would second about would any million on that think out this the think that put you And called question Is about be, $XX we we around that, when forward? said

Thanks, Lisa.

of I'll let and quickly. bit big So changed content Mary take a about And But And future talk conversations. constructive. both about tenor are and say, our in NADAC. payer Langowski talk detail get I'll to Manmohan we then pharmacy, I specific. needless little I'll think, they have, more question, then won't Obviously, let

as far As pharmacy the store retail of part in about experience. which the overall particular, we talk pharmacy, of as future an

where We in consumer And they to the number need to they are front the meet back the and are of elements to the of and of are us store. working a essentially both the that, today be. where store there in

don't you would take it And so in detail take time pieces. take to I of much to as -- and want as through those all

fewer, -- front investment customers to in standard work we expect, to almost footprint, both a national our being bringing would in to at using drive the us them. outcomes deeper economics order would store which Reducing to more of for talk that them. better formulary as horizon approach rational But assortment better our and PBM-like for with of terms the a us the how well about that have with them we saw you brands, as the store, experience the leaves up

loyalty yesterday as our exciting I a really on saw well taking we're program. presentation As where

delivery, the our the flexibility valuable And dramatically them consumers. everything and have have so as we store. from in to managers changing incent their as outcomes And stores individual as engage front freeing act home omnichannel framework, with up store of compensation in really how owners. order and their That's their well in most to again, program our

done store. the back at team of store, have amount the know, tremendous back a the The around automating and work, of and Rick the we of the workflow

we have know, pushed As forward. investment in paused our had you automation, we back-end but

We a we more are highly both as as part are ultimately committed higher-order to and be things continuing having drive well do to that of be how labor key free to up efficient.

a store, detailed pharmacy the do at of as the deeply looking of deans we that Council, -- the leader what is Deans we pharmacy X space. days well of rather, Also working back deans community association at can association spent trade schools a or in be the XX preference, with as to

about unlike build idea back come school we're of as -- far even pharmacists of middle so importantly, where future starting of the And patients. sort animate pharmacists pharmacy, long-term talking the of as school, and you to pharmacy, excited. to these out curricula community relationships Design of design the opportunity your excite have with to potential hospital

the So effectiveness we're the the sort of supply in it both seriously, labor, of and terms of super taking the size set. also chain but skill of

again, from strategy wanted our the contracting the play about that. were on an a and the of the a innovation yesterday of how a that their part going major in bring we we make to role of getting was were I to of of edge is do going what seat who, sure what excited to back e-mail manufacturer services. in CEO Our store. vaccine pharma we key got Expansion

there we today. of you need don't between So stores front back. lot the a But the the and have number

a have do clear very picture of we need to there. what We

have more will details follow. to We

bit more With for you color to that, briefly go Mary I'll turn little believe just Manmohan. highly conversations with And that then I constructive. had, a it which over payer we've are the to

is a think Quite on we that pharmacist bringing pay the for, value Yes. services. it delivering you, does are role simply, adequately or not frankly, the does dated is you, Lisa. thank Thank bit and fairly being and nor we And the the laser-focused for and and paid account we fairly put provide. playbook value for, Tim,

interventions and now facilitate the those We and And change, also the of this to at the country. disease has to it chronic collaborating don't in that face certainly so partners it pharmacotherapy We in changes. think behavioral industry complexity think we accounts the our management putting doesn't PBM with across we're center for system. that adequately make

And Manmohan?

NADAC, on thoughts. -- This a couple maybe so of

we've you impact. First, impact of significant quarter think got a several partial We the on fluctuations $XX to the in itself. quarter, the about million was seen had months in last index but that

seen was We the some as June. index, again, in updated improvement have

However, we are year the why one it this the a we -- and approach taking seen the on fluctuations very prudent one QX for And guidance the year. range say is point. as we've fiscal NADAC put the as is relates of I'd guidance we this reasons have out broader to reasons at of the the

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

at Tim, sort perhaps intended. probably are to more strategy, little of your under touch out leases leases. cash earlier I'm on than that And a wondering are be position this of the long-term these affect XX% a looking to flow these to I what underperforming. bit able And of getting too, lot stores of just wanted is

facing just underperformance when And a at of a lot problem the also does a broad once? versus close look these levels at stores is stores, maybe And you much of are how your consumer, that just stores, that purely when weak solve shrink? maybe those margin thus, more higher issue, you all of retail

Thanks, Charles.

So part. I'll take the first

the actually stories corners best long I is that widely opened the far good America. As here we stores time period be acknowledged of in one of a as on think to over news leases, was

the believe period as carry the many over is simply a And lease not close stores, there opportunity to as cases, in a so dark time. we of we store

stores of that we we underpinning things. so we as probabilistic And -- I in of review a different look something those actually of haven't to are way handle overhang but it talked is we our less have actually much relates an about, part leases actually how strategic exits a and at engaging as

sort they they as carry think for do time. think at over actually in gold you already have taken balance -- some sheet can be back just we we had dark that them. on lease there's hills, leases because the They're and actually we those minimized. We're certainly as We going of looking think say. So

going to we're that's highly as standpoint, underlying stores our that disciplined analysis economic to from of the well. close and part what on leases, So of be

it that the that So and super needs be of elements one of multifactor is it. is to analysis, detailed, clear a that,

of as and our what benefit the who I'll of that closing for a simple dynamics Brown, the that's obviously is impact -- far store Tracey? as As just as stores, the underlying Stores, let might to high-shrink that. of or not about bit Tracey example. a is sort a talk -- Because it profitability store, President is cause underlying also more

Tim, thank you, you, Thank and Yes. Charles.

is we our has way in at Tim all stores issue a So the close. an as mentioned, disciplined this high-shrink Yes, our multi-factored, eyes some of but looking is shrink to where time. stores, on have

of versus the and trends, declining. are located stores terms that are growing second the markets The thing markets where is that the at consumer behavior, consumer in and where you are our markets look

looking at is these in our markets. you the then leveraging say I these would are Third, markets. that actually look we And fourth we the in actually competitive have assortment thing how at to like of landscape actually each are

that levers multiple go at are we the model that into there drive underperformance. that So look

that on thing this the be context. stores We're will is bubble. other a stores to say that them I are would The focused in also right get there those approach taking on

we're this a into And play know, are There Charles, between thing need last with that action. to are in are growing sure order appropriate in lot to that that those the is set as between that I say, you partner factors a taking law officials, markets that would come between of multi-level I state local those need we enforcement. ourselves, that make us these And guess the players not, to of grow.

Yes.

the important are to from Let matter that of policy me country because company in a we places. is know fact a lot our we just that standpoint. that The last point such in the of standing an add is

We are places between and standing thing the deserts. those pharmacy only being

And our to last goal one is not simply to be leave. the

forth, for we is care programs, goal it's whether and it's them their ways work that with law so to to those in whether with to state jobs jobs to communities. actually new do our so do local continue Our provide can and find Medicaid together, enforcement

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

give a And Two gross margin to for engaged the margin, through that last how to Can and more fourth relative you in low XX related if you it to on gross discounting in to expect you us the point expectation questions a first, I appears bit pharmacy. look at think, at be the it relative the we quarter the taper? and your years. that retail

looking assuming it second change the if full $XX month or that -- and commercial? think and we've do saying the million still change? you over then are was Medicaid conservative and it this more flows is, seen expansion NADAC, you peak of a month at there's kind this in Or second the part And can quarter, from as over to you're X we

Sure. part just I'm in outcomes. to frankly. be we're have we use contracts say Manmohan I NADAC, What say commercial is, terms sort around first having of of relates while in conversations some that I actually the I'd would commercial to it to That's passed do a quite of what if easier that, going him to NADAC, Rick pass of would over second. those NADAC, as neutrality all, it it and believe

margin And only forth. it so gross Manmohan. to out, also would As margin gross will is I to mix pass it the point discounting, relates is I not pharmacy, in and quickly it as

to you want more if that. And talk so about Manmohan,

Yes, sure.

the you of So retail side, think margin the a there. maybe things pharmacy as couple on about gross

a we what Let continue the in and focused quarter, And anticipated. trend as we've is environment to on improve price and the is in as we me think start side. experienced we in promotion. the the on And investing result, QX, didn't retail third going

uplift seen time, and was gross thereof. at sales impact Now on the in the But we've a as result margin short same unit there term. the

so And continue through, coming lines is we same the expect in to along that that's and going QX.

last year-over-year our calls of the of think does well. that piece about is second couple talked we shrink shrink. The I the And level gross as impact margin in

normals. to a it back and it have are trend, there number team of Tracey historical We actions on an are seen taking and the to bring that increasing

then margin, fluctuation in them, of call. a side earlier pharmacy I as the the NADAC is the playing of significant themes one on said couple On out.

some in terms we're as just I level point, play changed this seen we prudent the said, can at in QX. of We -- itself as the improvement here what we're being out of have But have level index in seen of month-over-month, June. fluctuations

that, maybe to the generic as the well, Outside QX play to point there just of of are certain QX. market out dynamics And where say continues some last there those is a and like in be couple is we dynamics are procurement will point branded. in I'd that experienced launches some

that so gross the And impacting margin on side. our is pharmacy

the say coming I'd that's a side having mix the lastly, then on the margin. And also in on negative impact branded is

what's overall profile maybe of the our in driving margin that's So quarter.

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

commentary a is One questions. two find level. is have just because that back surprising health strong. about I around not just your prescriptions so pre-pandemic utilization to little I care I and overall guess

issue? pharmacists Medicaid, was that. percentage my pharmacist a revenue. understanding issue? during share pandemic. market but a it's mentioned the Maybe it pretty think you can Is you updates some you as do small it lost Medicaid's provide know a total you I know some on of if I So

So any would be great. detail other

Like time just, this on lot, retail sense maybe can could bigger frame? XXXX Is my Like investors, on pre-market. when I you for strategic the stock you a giving you great. second operating I not think any of review, guess, a question cash some profit it but think be you frame segment stabilize business have free and update when all would know recover is flow? you the do longer-term in time you're like is down details the your the your picture. And a

your to way, by same question the goal that share very we second the is which implies, implicitly be And Sure. clear.

ways, business remodeling As different heard say actually us around will a in of experience. a have be me the conviction you've we a very hear different say, strong Walgreens really make of let lot we level are -- us that sure or It you here. core a

their same we it's to to We're will actual of path is our by not the take But for to is growth going multiple that deserve demonstrate stabilization a a you It token, not that not it give probably business. you, to guidance, going frankly preference. are consumer, and but necessarily time clear months. quarters, going It's see time. we and have years, to that to but period we

some share our we of Medicaid, are right, relationship the have to factor. were to just is does closer relates role which -- those And reenrollment discussions. that of it is impact a sort a growing slowly. with Do you're although and challenges, could one we dynamics And not share Medicaid. in many having stores why As if urban more have of played Medicaid it's The things. the by way,

Rick, But more talk you broadly? to do want

volume, that Yes, Ann. think now. as look And with you at right we market we think I are I growing stated

dynamic. thing. not a Walgreens is it's It So market a just

at Medicaid not enrollment pandemic Medicaid the as And an Medicaid redetermination obviously of look example, so moving as outside they really during when the ballooned were coverage. you people

to continued what we've upwards to moved patients plans, like seeing out. coverage XX discount of into get who individual that have states to Medicaid either or out is so XX And and coverage -- We're find either has seen plans. to million closer have and commercial of cards, go move million out individuals

so they dropped. as have quickly, actually where seen coverage not a utilization has we've up dynamic and And picked

we're seeing we're is the pandemic, what so now a it we're we're X%, And X.X% what of closer X.X%. running to running market from is actually And a obviously, think to think that, from right were perspective. trying towards perspective. And the I growth seeing end we to X.X% closer with it Pre-pandemic, below that. market track was I

with Our next UBS. of the Kevin question comes Caliendo line from

what gone define the the company gross EBIT, be the impact your your on and XX% or just a If math would the of expand the identified, it? Charles' change say wanted to question would stores, were you little you've on of as were Like those stores want of guess do of profit however, I be just let's bit. financial today, stores to terms in we right now? that I to simple what

you done to is, close out Rx, the you a vast the majority an a most then to when or there yet? retention relocate the scripts able that the those And expectation appreciate follow-up keep calling analysis what of of retain of in that those are stores? of store, expect store of is you of been that XX% on you stores, to workforce, the a Meaning scripts. those usually, oftentimes I Has

part Thanks multiple we've a hundreds And based for we've analysis to the question. I'll and absolutely, know, over take of we experience circumstances. the able underlying scripts very at the may be key good second of Obviously, is half, move stores to as not only importantly, more last been of that being drop-off and years. certain you closing gotten on several predict those assumptions the with. have that's would also sort patients, those which the but what

is all is all store it of And a nearly short in a of overall them. sense. of necessarily, closing them them. economics all key analysis. The Not So makes the underlying retain part that but answer we nearly of way the of make certainly the

let there a put now, more fairly assumed, those and with to that that be of out which factors guidance right it of dynamics. gone, of all about like you Manmohan necessarily forma we have but a number we wouldn't want talk though I'll of pro business to assume looks as complex bit that a relates As have essentially what would the because to

Yes, sure.

from two evaluating. for is footprint XX% mentioned, So the we're overall there. think all perspective, an analytics as it's through And not are that I look, think points Tim we of maybe as closure. the closure, them that

the through to performance portfolio store need action. bring the we detailed we them going we're take improve can the by where where and what's and analysis, back store, into remaining part the So the

flow the maybe I'd driven where Now comes of And on a financial cash that say adjusted it we side. mentioned -- to determination flow cash close? number well into the on on EPS would really I to analysis. accretion, focus close both factors keep the positive of open cash -- Tracey our to it typically It's or to take several flow result down go action. it side. need decision to as positive as the cash Is the the in

the yes, locations far X,XXX closed Tim years. over We've then And covered as well. as so I XX concerned, retention is last think that

depending at this So what stores, retention on upon the have a of the I think good location view scripts the side. point, we pretty the would be of,

thing. me one And clear about let Yes. be additional

We stores stores support have that are closing to fact means well. that those we reduce focused as extremely those our the on costs fixed

those is assume being will we makes costs that highly also stores you very cost of what fixed removed, part by because model are if fixed the So any the percentage ensuring to then closing you're stores back some trying it, to and stores what do attractive. would that in at are is disciplined need carried out be which

comes Our Michael next line of Partners. Cherny question with from the Leerink

XX% the number that, ahead stores So be I How Tim, the the plan. of review don't comfortable to outlined. feel But right strategic reboot of in get want to that's about far stores you this evaluated? too talked of do you you've that

get of the right coverage give appropriate the the close not that's sense you coverage footprint or stores, to that I'm to you give right that let's little in the And your point of why XX% whether landed play this the a number. to say right how today on for be you here event just detail payers, retain should localized the trying the is at like? we and number how and a forward to sit that about most script thinking we will judging you more to that

Sure. we to other have firm in using done this and only used the I models, challenge ourselves table, you that have thinking. to models aggressive incredibly would tell outside scenarios our a brings that our not but very thoughtful

exact one And number. so listen, no right there's

our stores a we the actually that And There that will payer clear. to be are mix. whether is we clear. of a not make are group see factors group There one be in or sense. of that stores are Let's factor they working

also not to years, several this thing. industry the over be its I want capacity last that But a reducing and is bad clear, has been

be, the delivery when the and PBM given think future forth. most knew, was business, the overbuilt was pharmacy where us possibility home technology, knew, I of I largely was I particularly in so that for of going retail to

standards, mean, tough, we they're would as you and of look contracting need factor their the particular clear, XX well, a it a and than very the number very another entity, serve may minimum been as Defense have have pharmacies, that's of don't be be years network. to in ago. at they us, they if for today so different And payer may as stores XX,XXX I Department require let's what

we positioned So need. labor we the a overusing payers we don't pharmacists going very not serve a so is bad capacity effectively with that reducing in are it's not that, industry stores But for be payer think footprint standpoint, remains. that to in to think from that think the thing. that we're good the We also actually we

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

say maybe a of maybe have a flow. I quarter-over-quarter anything think short-term directionally of obviously, us of maybe fourth had the XXXX? And one Can free and then help sort sort you free nice the one. about sort you cash this then longer-term improvement in cash on year, for flow a expectations you can On quarter?

of would think help I that sort could don't for, to as that stabilize be terms agreed side payer this payers I of very about starting of of of these mean, the provide of you've helpful. a know, Is longer-term then things more conversation? Any kind like some And we color that been other on having, any X/X/XX? have conversations kind you

Sure.

remind flow So middle I more bit about it of be any It one super conversations. on to and Mary little Manmohan wouldn't those juncture. right any encouraging, conversation, them. But -- talk would the What they're this and in we're payer of a necessarily I to now. that at characterize conversations color can over then think appropriate that for we're turn you the cash give Mary free you to I'll is fairly of

cash But Manmohan, flow? talk do you to want to

Sure.

capital the quarter perspective, as working quarter the well third a part flows in in positive from was aided capital cash did that have by and decreased the free improvements we So as expenditures. quarter, in

As X the earnings the well you on by payments legal matters of $XXX million the working phasing are and to impacted as the months of about then though, the think flows year, first cash related as capital. lower

flow related QX opioid expect free through we $XXX think the QX, And cash third is million payment we in to quarter. that to to roughly As be quarter. including around a similar positive,

flow I'd finally, cash priority say, in maybe And here. actions outlined we've the continue the is top this all the then position company. for a boost And us to look, will

let Sorry, take And Mary? I'll piece then characterizing around conversations. Mary the our

think, out old, as and align some these old the to generic are conversations. speak And that and payment current I on better. to our just said models it's versus won't on that reimbursement. I negotiations reshaping I collaboration understanding these We, new understanding are of will that And But brand going change. incentives some that seeing there. models specific say payer serving on new an of a models, that Right. there we're we I playbook obviously is system. not to an And in is before, need discussions need the currently

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

I just a kind Manmohan. have one for of quick

contribution persist wasn't continue. of to in talked that And you in have You retail to guys 'XX. pharmacy of fiscal 'XX talked fiscal expected about $X.XX 'XX in expected earnings the challenges kind in the fiscal about

just to pieces Are moving guys now? to my fiscal sure. guess any 'XX an as I 'XX I of about are flow range, would kind you I but give like would to guidance year earnings given fiscal XXXX make in aren't we there call relates want be -- full how know out you And talking guys where is? $X for guidance -- -- that there yet, current is cash other it the ready number low the

George. sure, Yes,

the for and October. and will we're providing not in you're right, But on we fiscal guidance. detailed So provide back guidance 'XX, information come earnings

we is of as couple things what 'XX. consider to the you But offered a to remarks in prepared bridge

retail season, think you the the all you -- First you about the is sales. season season QX think of our holiday vaccinations, seasonality think And businesses. impacts cough/cold about about impacting

growth, International we is our drives QX that. 'XX. got we our fiscal second segment so lowest -- expect as well as our quarter, and U.S. be into typically seasonality to move do in you both profitability in our Healthcare And to consider So segment as

to one sale more biggest believe shares, Cencora down there that, approximately of headwinds. headwind. result sale about will leaseback said consider the here the we that are think we and a you However, And then tax our decision a $X.XX into few 'XX, as normalized wind is in fiscal rate program,

these think consider, then the think easing side, retail this. environment And of you continue perspective, a comparisons side, do to there of you will continue believe bit the 'XX consumer from will is in you the be little 'XX. as pharmacy on And as have on headwinds about to a through some 'XX versus here we challenging but

you these So of through the modeling 'XX. building blocks work all kind this is -- as are

Barclays. question is Stephanie last Our from Davis with

U.S. love be you best to I Tim, but have I'd the future a the question. strategy. This for on Healthcare of Mary, for maybe, weigh in might

given Just the in going value-based get and idea asset we exit the could value-based to fee-for-service profitable best plan see this to to goals, take often a profitability order a few in strategies U.S. And VillageMD the versus nearer-term that the for strategy the years your become forward some the of more of need be on what's forward? Healthcare? take of

listeners, Yes. well. ago let X experience in about remind understands all and I would joined it brings this and tremendous months -- Mary space, Mary relationships will the I

and look to outcomes the ecosystem, work if impact the care really be in to want big outcomes. frankly, we quite care. do health I can the health Actually, are And clear, is we provider cost believers value-based for value-based pharmacy in at that those you

will That's be care the part next as health most fact XX So of seen, number the own frankly, and over we valuable actually love the we the ecosystem, that the one. most and needed, years what accessible.

why have investing as some in and it take we're as different looking relates to It in for growth. are time. what to That's investment two, going I Number horizon leadership. And under to that we like would VillageMD continue said our we a be participate their to we strategically will that it in for said, model. model, we've own

want more versus generally Healthcare But to Mary, talk VillageMD, that it U.S. you fee-for-service question about to do as and sort of relates value? strategy

around disciplined we'll what on U.S. are will we the doing. stop business, Yes, absolutely. what Thanks, where will focus, laser-focused extremely and we do, In we being importantly, Stephanie. Healthcare

market build to the systems, and at-risk our areas double we areas how industry where the grow fit and as impact, we payers, articulated higher streamlining we'll going So with there partner operate, We're down services potential. around have growth They manufacturers. are we as across Those core high how business. how lens those earlier. with Tim and on health as well pharma discussed, develop we providers things

things. frankly, third, stop And stopped things. then have we'll restructure or don't we cases, create we'll already fit certain And value. lens things exit that or near-term In those some this

important that stay we on it's that. laser-focused So really

value-based we plans have that to articulated have practices. don't primary brick-and-mortar With to continue care respect owned to we care, in invest already

in of that, believe Now as businesses, in strongly, believe Tim value-based And VillageMD. said, businesses we payers said love types these in getting their care and consumers, having as in believe these we as frankly, in well these businesses. care and

continue ongoing an VillageMD of across We'll I'll capital-light investor. looking and invest we've to range and range stated be again payers with pharmaceutical of services partner to of a industry is a to state in a way. providers an really what we're do we'll as broader a be But But to a be in the as range partner is manufacturers. well with what

And already we the having think last that, do X been on months. well we're based conversations really positioned particularly over to the we've

critical to ability we to really to engage to our reach, complementary have ability frankly is lot the system. players have, in create and people, a in And they reach that very ability of don't are our want We which our what them, moments. they interventions

planning what we're to that's So do.

Thank to Wentworth call you. turn like back I over to would the now remarks. for closing Tim

for everyone, questions for Thanks, in. dialing and Great. the

leave to a Just thoughts. of with you couple

clear our in all, is of are that team a we very First turnaround.

things of need the view to clear-eyed we do. a have We

every gone part very baseline we're have business resetting realistic deep the We growth. about understanding this of in and being for

believe, in most literally, not a and group pharma of and highly teams the work of experience are retail and believe have us extremely and pharmacy the of to a but importantly, that only company ever I business, blessed work focused need I have. together is to effectively Second, we who patients any folks team could committed the the one payers be. on companies with challenge, am best future our relentlessly that

be it the will will a central different. the quarters, over you have. as that and growth more that create way. Retail we're the it will going look it forward we different in kind of well experience pharmacy coming It is the and that will results telling you And is be to but to the as future we to showing how achieve capital-friendly of necessary,

investments very that And make finally, role clear are capital our about making of sense. as we stewards and

some of those part today. our great assets value thoughtful that of to make to are the our strategy. about have We're other company We that or be on how continue based improve going assets do we sense things longer-term

forward So quarters. in thanks again. the look to sharing We more coming

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

disconnect. may You now