Walgreens Boots Alliance (WBA) 15 Oct 242024 Q4 Earnings call transcript

Good day, ladies and gentlemen, thank you for standing by. Welcome to Walgreens Boots Alliance Fourth Quarter 2024 Results Earnings Conference Call. [Operator Instructions] Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Tiffany Kanaga, Vice President of Global Investor Relations. Please go ahead.

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

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

Walgreens Langowski, of and morning Walgreens participate Chief Officer Pharmacy addition, Retail Vice Mary Rick in Senior Tracey Senior Vice Relations. Wasserstrom, Investor will in Eric this of and is President In Officer; the Q&A. Healthcare; and U.S. Gates, of President Chief President room Also Brown, Customer President

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

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

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

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

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

Thanks, Tiffany, morning, and good everyone.

reflected initiatives joined, a and for consumer. challenging against several execution I immediate fiscal on focused quarter our fourth When full X backdrop our year had priorities. I results Our critical

net by second, to the collection the review from our to team; billion, realizing These valuable groundwork working within our CapEx in undertake the fourth Building strategic longer-term actions, XXXX. Equally achieve positive. benefits cash over positive assets year our turnaround. With billion hit improve is conducted by costs achieved focused and financial could important, out $X was our on an guiding over a our we and new fiscal control X cutting critical and our a goals, improving economics, the full organization reducing flow items quarter as to lay stabilizing this work, short-term year; of of momentum and million strategic our of turn million we flow have $X.X cash operating flow helped successfully reduction condition capital priorities. First, build we the our initiatives. debt within respect focus over $XXX in cash our that contributed our clear balance operational are beyond also and to factors core management on financial with in strengthening we thorough X third, sheet review. address executional a principles Coming a that this declared for $XXX

retail a our relates its strategic as us leverage key principle reorientation to operating to consumer our reorienting model. of is legacy company. convenience pharmacy-led guiding to first WBA strength relevance. trust, This and The allows assets

be day. for services. the face-to-face the for pharmacy trust and have retail term now the will and our our of from choice actions Our And take interactions personnel pharmacy position first health to stems of with consumers continue every long millions to we

be we need to Having and to convenient, indeed, earned appropriately reason be an our also we our consumers' we are to announcing Consequently, sized. optimization but want program. expanded trust, accessible footprint exist,

the invest our This relevant conviction base that accelerating retail come next to funding consumers, stores. to of for we underperforming majority, of will X,XXX supports approximately several X,XXX solid investment these from profitable. We years. Part is and stores, the our over closure stores this pharmacy-led intend have the over a of the in which are model in

approximately We the this footprint base years us with our X,XXX over that respond to shifts will a expect we dynamically realign program to buying behavior will associated healthier of Executing next and the those preferences. close enable them. X on to fixed and costs in consumer store more reduce believe to

who ability competitive Our review. in capabilities close similar and have critical several to over the gap to our our needs past a with to years. a of strategic changing some respond this intend to improve environment We was of objective peers invested

confident and to that to practice While close majority ability continue intend in redeploy in is our the to we decision close. follow store to a feel stores workforce to historic the customers, of one, we serve our those we easy the an never our

and sharpening a we like our categories in for key In are believe specifically lead, XXXX. including new we reevaluating health. brands, and addition expanding we merchandising refreshed being we another national categories, launched year more and be and To convenient, uniquely We to today's end, and brands to selective being own By to XXX over we brand of products, own our are trusted this fiscal in focused focus launch our must owned positioned relevant offer consumer. expect to as we our with to assortment strategy brands. are this women's which XXX-plus a destination wellness for health SKUs

generation financial disciplined targets Our free appropriate model, and strong a cash flow is second principle leverage. guiding which

in on fiscal $XXX working for our Our focus establishing reduction. realize the operating baseline initiatives $XXX while flows improving further million the in we capital expect In working through CapEx and growth. management cash to near in AOI XXXX, and cost term million is capital

In cash. assets VillageMD. on Chief to noncore addition, is focused generate this monetizing among we are

are debt with all take of in to scenarios reduce to plans we this balance different our may VillageMD, committed forms related any our to investment and our health proceeds the redeploying several While improve sheet. net

VillageMD go-forward optionality basis, assets. how, around a are of around one we efforts example Our just portfolio of are on maximizing our

assets, Cencora BrightSpring public generate to will these appropriately further when and reduction. As cash continue monetize to enable our of from to gains we we and consider equities, debt harvest if portfolio and

we improve improving position. X which our and priorities: in establishing leadership To our he will As the Manmohan's emphasis in to debt few speak of moments. strength our retail on we forward, go strategy quality our and advance pharmacy priorities, financial margin, net the underscores a of have stabilize sheet balance execution This

Let me now bring of margin status our visibility some reimbursement pharmacy to surrounding discussions rates. the and

relationship confident PBMs reframe We that be continue with to to are multiyear reimbursement. process a we in on our

both We for we the are at we procure fair a we paid that that price to fairly dialogue are provide. changing drugs and the ensure value

while to worked patients our bring continues to our broad of as have some more our PBMs access. It be maintaining to network serve communities and efforts, reimbursement, with as part we goal to As and stability predictability possible. many

not a PBM of a in into However, will make reimbursement going we high our of fiscal order forward, visibility script for our volume presence maintain America. Today, the services provide decisions for reimbursement difficult approximately anticipated level across reasonable XX% Walgreens have in to if XXXX. will communities in

are we being ensures the to fairly. are willingness together. PBM how with to the can on year, reimbursement, pleased shown will working and partners of and some over process have consider look grow adjust and brands trends are partners with those Several we our such negotiated we in pursue paid significant contracts of forward reimbursement rational next current the that we that and rebalancing We generics, as

seen latest to the Based data, it have NADAC. begin to stabilize. we Turning on

regulators a industry us that work to future ensures critical is pharmacy that is alongside it However, and implement that product benchmark groups instability reduces for solution and a NADAC predictable reimbursement.

we system the stabilize economics. pharmacy and right focus have status turnaround our to of for in I payers the we evolve for actions moment. on key progress and with the overall efforts to other continue and arrangements reimbursement, am Manmohan take we opportunity fiscal expectations to PBMs for. but detail capabilities, care our payment confident further burden fully broader Finally, health and deepen the deploy will team, pharmacist Provider right a will the the remain us services our of time, XXXX paid to new Many and right across strategy. working our our this broaden and outside improve that a lighten get

of Our most underscore of to results core quarterly the recent with macroeconomic business importance the executing intent irrespective the stabilize backdrop.

an and to few Hurricanes creation. And things I recently longer-term be impacted about work drive value Milton. a say the do we're how by a to Helene rebasing We conclude, wanted will to lot year have of I communities before XXXX and important supporting

in is Of always the natural our course, heartening else At these with it thoughts see everyone members times Walgreens, all implement are our our customers, leveraged and patients, Cross to other to by that's need. America's which donate Red donation impacted with partnerships crisis, we've national public-private of to In Cross to response. of generosity disasters. team to urgent been terrible Hurricane raise for the has Helene supplies American pad communities been program Fund. Red a made over has also American and the water used a PIN Walgreens $X million, the

terms impact In provide about it of XX continue to X,XXX will in to We're were of now to or brought our them, by make storms sure of but all impacted offline over to the but for stores have the essential we communities. I results. Manmohan turn them. preparation our these restored we us, financial working services to review to

for the growth for included accruals These assets results tax Healthcare of by on of our morning, the liabilities with our continues income, a opioid noncash growth decreased lapping perform equity our in including and good charge Overall, Headwinds billion a Pharmacy the of segment, full they to decline offset the initiatives potential tax same for businesses offset expectations. the U.S. to by results quarter and in deferred in and International Thematically, valuation on to $X.XX certain lower gains Approximately partly basis. charges. fourth sale in future were business Pharmacy Tim, lower to in company reflected XX% EPS were Retail periods, We XX% available U.S. deferred line in you, U.S. results U.S. everyone. income. prior our quarter offset while related characterize currency relates cost Retail recognized savings our reversal recognized prior Cencora expectations. and year in leaseback that with from allowance year-over-year assets. remain primarily partly were Healthcare pressure the Adjusted line Thank incentive with assets. gains, on constant the quarter trends this monetizing business. GAAP year $X.X

goodwill also charges CareCentrix million recognized for investment GuoDa. company, $XXX Chinese in in our equity pharma We and impairment

to claims and As a charges results GAAP year's certain last opioid reminder, included lawsuits. related

Pharmacy savings of U.S. by Let's Healthcare. initiatives constant was and full and GAAP the certain offset partly EPS on Retail included impairment offset leaseback Adjusted to declined on year a VillageMD quarter. results loss on of to year to prior due U.S. compared The to XX% lawsuits charges This opioid-related for $X.X net GAAP noncash $X.X in significantly included Health a performance the in $X.X billion gains. billion billion shares. sale cost loss profitability move basis highlights. charge a softer second the $X.XX sale improved after-tax lower $X.X fiscal gain currency 'XX. period claims Cencora goodwill partly Option of and Care in related after-tax billion by and was

of Cencora in prior goal Now reversal were sales. the $X Retail the AOI decreased Retail offset offset partly of pharmacy grew Comparable gains, to the segment. Approximately savings retail pharmacy leaseback for and by recognized partly segment. in decline lower year this let driven U.S. most decline equity quarter. sale Pharmacy cover cost-saving lapping by XX% cost sales lower year-on-year, in the businesses in the versus year by with and retail and year Pharmacy me income. a prior X/X billion initiatives. U.S. exceeded benefit incentive of We Headwinds the our of the relates X.X% accruals in

turn U.S. the excluding now Comp sales XX.X%, me and mix driven brand by grew Pharmacy Let quarter. X.X% to Pharmacy. impacts. increased immunizations, inflation comp scripts in

Pharmacy-adjusted resulted overall impact year-to-date. versus and continue of the to quarter, margin prior in prior the versus mix year declined year. gross quarter million impacts. with reimbursement brand negatively fluctuations in impacted the pressure, in $XX track We line the net prescription NADAC inflation in by Recent market

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

Tim customer our sales with entirely almost the As driven We in pressure this backdrop was a see mentioned, consumer nonessential challenge. by remains categories. the as quarter

product own which the end levels. strategy, points gross the at basis partly wellness higher quarter, in year. We gross XX% to up promotion value-seeking by XX during and positively margin year-over-year, shrink finishing year category towards profit new time, over the impacted mix sales health margin adjusted Retail and At launches offset of same improved behavior to our the in driven penetration have continue to the and improve refine brand our pricing quarter. helped by products,

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

in Boots growth. and gains U.K. U.K. perform well. Comp of increased continued showing now year-on-year represented cover market XX% Boots.com Boots detail. X% continues Let's XX% increased our U.K. retail with categories and all sales share retail sales. sales to

of Shields fourth partnerships. EBITDA up the growth full X% discipline Turning fee-for-service for next year year, Healthcare growth $XX cost year. million, the X% $X.X on risk was lives The in quarter EBITDA. grew Shields. VillageMD growth U.S. by driven $XX impact U.S. XX%, year increase Sales prior million adjusted of The segment delivering compared sales of year offset in of of expectations quarter. within by closures. to driven was clinic by billion existing were at the the from $XX ahead an by improvement Healthcare. revenue, million to compared finished and billion and increased VillageMD sales for $X.X partly driven to last Adjusted

lower in to was in in $XX legal savings to of in 'XX. premium cash also partly we versus of benefits million cash $XXX plan. million Operating related target flow. lower phasing related earnings, and million exceeded flow annuity 'XX. $X impacted of capital million related We pension our expenditures. capital, expenditure cash million to flow prior of due in higher versus $XXX working million $XXX by $XXX legal initiatives of by 'XX billion by fiscal year from $XXX matters delivering target working of declined our payments 'XX, capital next to fiscal Similarly, Turning in for contributions Boots exceeded Free the payments fiscal offset million and to $XXX matters capital fiscal the reductions negatively

at cash the working legal The initiatives, driven increase fourth to period. payments flow capital and XX% the of quarter, lower compared Looking year free capital from benefits billion $X.X prior was increased lower expenditures. by

of course billion ended we equivalents debt and cash in over $X.X our $X.X by billion, and and net $X by nearly our revolver billion capacity. position 'XX, healthy. the the We $X fiscal cash billion our and reduced Over with is obligations liquidity lease year of

strengthen Looking ahead, one of of condition the our key priorities balance sheet is company. the to

our activities. cash of this debt priorities actions detail improving which generation flow net on will focused expectations now. through year, our position on upcoming are We These significant and a operational combination and for fiscal monetization influence asset I have

underscored, turnaround. $X.XX operations on fiscal for This longer-term EPS we based progress assumptions. is of stabilize priorities our guidance our in on is adjusted view core XXXX This operational our the is make Tim As reflected to guidance central while $X.XX. X strategic and to

we pharmacy, U.S. in continued First, reimbursement on anticipate rates. pressure

the made, contracts, of steps there multiyear are we impact pressure still reimbursement XXXX. to progress We to be Due more have but for negotiated pharmacy of incremental taking of believe margin. nature goal is contract volume towards the XX% our year the calendar of approximately reducing on these

taking that The 'XX. we're our remain optimization second major multiple near experienced continue to assumption accelerated a number fiscal the price-sensitive customer executing on shopping we're our In pressure our retail over including likely term, behavior the demonstrate cost under In the is is periods. fiscal leverage, this operating and that same to improve to footprint. in of we initiatives dynamic, actions of response to

in accretive to these closures XXXX. cash expect be flows fiscal our We to

segment. Healthcare segment expect in our the we Lastly, International and growth in

next. program optimization footprint the cover Let's

targeted to the We X years fiscal stores half 'XX, to next to in year. Within the about close towards with this XXX XXXX. weighted over the expect we approximately be fiscal activity X,XXX close expect of back

This expected program prioritizing of stores benefits rent. The incremental the should on are are economic negative, scope we our ones our few focusing to locations the dark in the XX generation, and improve with closing expirations of footprint to next locations underperforming the the needs focus mitigate We be of we expect and due are years. over lease weakest next burden where that optimization is cash working 'XX. flow partially own stores the where in to and fiscal coming cash begin our capital accelerating this reduce tangible approach months. flows By cash

in-year of as customers' stores plan the of net to owned from approximately actions to expect time, look investments fund with and experience. these the capital program benefit make we We improve footprint sales to us costs. Over optimization be closure to our benefits positive including $XXX AOI cash in working of contributions, million we in-store higher-performing also enable cash should stores, from the

optimization year, the are we discussions the evaluating scripts, our merchandise X,XXX X,XXX last Net have in improving for those identified with investment recipient performance this this focused XXX closing. In are investment on we're closure, quarter, the of efforts. were we highlighted our traffic stores and of foot we of another from be prioritizing we're stores that as should stores For flows. community stores that that part the the operating their there we indicates cash which for and that the

ensure all case, this However, evaluate will always footprint. the been as we stores group with best ultimately the has and possible we our to operate continuously

turn guidance items. to line additional now Let's

purposes. higher bonds. to a adjusted EPS, providing additional contributions year reflects and corporate from on decline year-over-year and On sale on the of range higher We we're prior of Cencora level, enterprise guidance leaseback midpoint gains modeling impact XX% anticipating guidance are due At the interest segment-level and of our lapping about tax certain items line rate earnings. the for lower for expense

next. details level segment cover me Let

driven the expect Approximately sales. decline and gains $X.X that prior will of Retail the in of billion. XX% is leaseback leaseback gains. fiscal midpoint segment, share of U.S. from headwinds we from We anticipate Cencora range, a of year-over-year headwinds this last at sale decline AOI year be 'XX by Pharmacy the sale For the

from we impact pressure impacts, headwinds reimbursement the footprint to remaining expect net year-over-year optimization program. drive by these Excluding of the and declines, partially retail offset

additional share KPI me Let some information.

to We script volume expect between growth growth market our for to by with closures. impacted be the overall prescription store X.X% total X%

vaccinations and NADAC. including trends 'XX. compared no generics authorized impacting fiscal changes slightly margin, Guidance the trends recent to assumes pharmacy to to expect year recent be most mix, brand of inflation, We continuation significant lower in

of sales year. be And are comparable We season expect last down versus slightly expected negative flu X%. X% to cold incidences retail negative and to cough,

We expect business segment in by to led year profitability fiscal International grow Boots in Retail 'XX, Germany.

expect We segment to fiscal U.S. million range $XXX $XXX Healthcare year of adjusted for by EBITDA the the a the 'XX improve midpoint to to compared $XXX million at million. to

the cash allocation. conclude Let's capital and flow guidance with discussion

initiatives capital approximately $XXX our of working of to We any as to anticipate approximately efforts We free This capital the optimization to leaseback cash reductions headwind near cash AOI margin free and initiatives to as expenditures. lower approximately pharmacy $XXX sales will our In an flows sale hold expect free million $XXX fiscal impact from have through take and we we working earnings. capital will equity time. term, flows generate flow. expenditure not over million In stabilize capital 'XX, continue cash and of bolster retail on million. rightsizing our Cencora gains well expect

sales, financial of in such down terms includes and sale-leaseback but to as Cencora of also allocation decisions to philosophy. our our In we financial capital simplify wind priorities. the reporting, fiscal This XXXX, refocus share began program

we be is net years. assets As good our start, the our monetize in but we billion. balance in to a still is continue more position This coming by strengthen to much work done $X.X there sheet reduced fiscal to debt 'XX,

monetize Given we further this intend imperative, noncore assets. to

financial to while lease of further our on few and Additionally, our the we focus next supporting program. of the our we expect program as these our years. sale-leaseback conclusion successful will reducing to liabilities due as and execution improve over execute actions believe position net the footprint our debt optimization against we decline turnaround We cash flexibility

that, to pass me it let back With Tim.

Thanks, Manmohan.

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

team model be right led a are confident the principles We and we right and strategy, that of this sustainable. organization are we on economics laser-focused we must and disciplined that the have the pharmacy and X retail are that

meaningfully next lease To position. end, financial as strengthen assets, nonstrategic a performance, sheet balance to there our exposure our net path the few so intend monetize this years, we is our work reduce debt our over we to and stabilize to clear address and doing

a As allocation flexible part of capital strategy. and this approach, we intend adopt pragmatic to

channels. believe of bright in clear, and an contribute has goal a our appropriately the retail we've retail creation in longer and program can to with consumer believe engaging to that multiyear stores well-positioned customer a value in both industry-leading to To And long-term we pharmacy sized strategic fleet experience a continue and term. which be businesses future. over we across the incrementally reorientation We're pharmacy of adjacent an invested

We stages progress block early questions. an but foundation time, quarter further expect take in was building XXXX. With of fiscal will fourth the this fiscal important take are turnaround, Operator? let's we the and in that, of in a turnaround that the

And our Instructions] the of JPMorgan. Gill question coming Lisa first [Operator with line from

you Tim, also some the early talk you want when be going around things. of a focus of are contracting about One I reimbursement, just that forward. maybe around would couple decisions very visibility, difficult were talked made XX% just comments on restructuring the the on of to about

X-year do thinking how this I And improving think leaving do some a Like improving are put one, Do I, those about those decisions, of pieces we balance you then that I secondly, how think plan? expect more about Is like all XXXX? rates? when when together? So difficult you in networks? about rates

Sure. Thanks, Lisa.

was share, end taken lessening a where showing pressure you less realistic of of we and a out the if confident I at more which to in, of to we by before, to of are the which dynamic, about then with the looked that if we first continues of the retailers up what So all years talked becoming give. reimbursement the couple line, trend way, being had it to at just as seen a about directly, I've XXXX, market that relates of coming And have day, all, understanding fairly dynamic. it support payers the begins could the answer

so less. 'XX, we in And do see

start me with Let that.

that we a in all by of we clearly And payers mechanisms two, have that and changed. contracts. the question conversations, the conversations reflected in have is PBMs, dynamics see landed the Number very there recognition had we where there's actually our different that sorts seen and both no we XX% peers, parties, constructive have have contracts, the put in the

showing there's cost brands So are a We've all. one new fits for of to reconfigure also And pressures how not we that, or size drugs ability and our we're and not open-minded market for carve-outs to plus. seen frankly, and economic required. seen at not We've unmanageable us generic. We've brand reimbursement risk aren't some protect seen see frankly, prices. brand the that existing high rebalancing up

in not of constructive just that of range the being don't a fairly. those doesn't XX%, is weren't prices. are mean them would conversations, conversations. to if we we're we different. a in showed XX% raising of I compensated all portray to up said, be as to going are that decision And I the want our make it difficult But say what left, All something willing

generic increase not to otherwise ability new inflation, forth pressure the our we purchasing the and clear through because so reimbursement that that. underpin generics Let out we are what It about be either me arresting money downward of market, of generics, give. the be that we would or to are through the taking dynamics means

it from there of constructive of we're have investors to I say, that that a this all let if are cadre doesn't rather be to a of and important cadre. away a of I've even walk XXX% me examples is clear, line So conversations, paying reimbursed where but because topic would sense. know market, X% said willing to to the we our the make business cash XX% than very

X- X-year reductions. do be that And very we again, know that over I'm value confident the to cost reset I payers clear so and that that. period, more than the about we and about from a together reimbursement frankly, unit will are can creation framework believe it, very other for standpoint, we discussions talking have simply

follow-on. think helpful. you talked 'XX, And closings about in develop the of I just That's of half one how Manmohan earnings about would year. more Anything know the very 'XX? we store think the will call I as cadence out would else impacting the That back about as be,

Lisa, about second From maybe cadence We do to seen Yes. of also a of weighted. roughly we perspective, years. XXX same in closures the last think had But back trend 'XX. couple which had half as in you the we around then the are closures, have have half fiscal

So we're X the going as store within from years to see over then closure and continue scale well. to 'XX the benefit beyond next

from coming next Ann question line Mizuho our And the with of Hynes Group.

Thanks free on all the details on cash flow.

fiscal XXXX know, Tim, remarks, prepared about year. rebasing you as So I timing. a in just had a talked I your on question

base grow grow last grow. AOI you call, get conference negotiate PBM and you to really Or from? And think to to about can that be XXXX? -- update have any these Can talked vendor able from some a would to contracts. a you we fiscal be I then you provide progress? you going any secondly, great. provide stabilize to when is go Is That timing where on think would want on wait until You that you're So to that point and there? can that do contracts

repeat I'm second your sorry, could you question, which Yes, contract? just

the supply in some front anything I I'm sorry, whether or store. distribution contracts, drug think some it's --

renegotiate maybe being of has the talked to about the able company think potential the contracts. I

progress that be So great. any on would

Thanks. Sure.

relates -- Manmohan to it this said point for are X-year that the is we've a other front I'll longer turnaround. then of that you are to I'll Healthcare the than to we 'XX. term, we're the already store. are So any to rebasing believe your to This U.S. perspective first, have. Coming from things we and a this all this us a the at of longer-term let appreciate, do replatforming question, multiyear the let timing additional guidance and said terms Services, standpoint, and that going can of Manmohan. we've part the as second meaningfully is year in company back growth positioning you it not color give and giving say along, of turn Pharmacy doing I'll in as the both in over we

as and at a going good to can to frankly, and both to I working dialogue and but cost, with give as to your one know, that make capital, is indeed we there in how they of we're together not constructive, relates underlying this 'XX. that regularly which for where because both arrangement we together allow question, us them there a to any grow together, terms we're you purchasing we because micro us understand we thing it evaluate that with we until our operationally for as sort they ways of As help both updates activities having. fulfillment-related us, are believe longer-term them that can of is model. And meaningful do that's is is because meet acquisition do guess operating part a things are want, that inventory, we very they're them. can have of there It sure well crucial We sit goes that cost acquisition that the in and inclusive our time, of we Cencora,

question relates turn it any longer-term Now your the just to outlook color as to give that Manmohan you additional about. asked I'll over to it first

Sure.

fiscal Tim couple mentioned, as next 'XX to the a Maybe of But AOI cash goal for is and flows first. today. over guidance long-term providing years. X grow not free So themes

roughly of As sale-leaseback as guidance around around higher lower reflects well contribution. recently shares tax -- as today, roughly you from it $X.XX to headwinds sale we shared $X.XX, rate, Cencora the XX%

And million of have perspective. when Cencora. from think $XXX do 'XX fiscal We earnings better base a in roughly a you so is around quality 'XX equity expected from

will to fiscal lap 'XX those comes a 'XX. From in to continue in do perspective, as in contracts we Now -- underlying Healthcare we we will U.S. forward International business 'XX. grow and fiscal existing business or maturity expect to to variable grow 'XX performance prepaid early those and our expect fiscal late

initiatives we're very focused scale years. a a pharmacy the well from As both X expect sales from USRP in longer-term Tim U.S. Those margin perspective, in on benefits those his over next as from prepared mentioned the as we perspective, to retail growth remarks,

be we a that we And from focused the earlier, the optimization $XXX today, optimization so in over program, I fiscal as to And year. be footprint benefit said expect to very roughly year we benefit discipline, we're to accretive is in meantime, close perspective, announced it going on from locations X as scale the And the the in the we cost which years. around million. including next to expect program 'XX the the continue

So that of are shape gives what getting at going of and factors off a think out 'XX to looking longer term. I you 'XX, we're the be some

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

impact cadence have closures we but I I the think in like earnings basis that think missed to earnings any maybe this, the progressed fiscal able discrete to what follow-up color in able be is Manmohan, are would just you slope how XXXX be the U.S. from kind of business? And given about talk about progression the run you provide then the the and recently? maybe pharmacy helpful. is, would my as Pharmacy segment 'XX of to store question on fiscal rate of U.S. of a quick are

Sure.

So the to 'XX far, scale contribution that we expect more and AOI continue as then close into and will roughly $XXX year, fiscal closure 'XX 'XX over to time. in around we locations million store benefits in

that's the run kind So of rate.

capital as are think the And certain year closing that in well and optimization think in the the the perspective, -- cash is working benefit from a significantly the footprint the outweighs monetizing expect this simple way I we cost From there be to accretive in that about well. to be going year. as to locations as closure we're locations year owned we close as way

that's So the on closure. store

On the has be going we're think how over pretty the look, last years. in with I played line out the cadence of cadence couple side, much to

expect don't versus half. second So first significant changes half there,

Securities. Rhyee Charles with TD our line And coming question next of the from

sense on moving volume where lot comments then pieces, around mean I Tim, the of us secondly, flow can coming Just this at we're of that still a cash cash free I these be lower, that for I Lisa's that is terms free question. flow but the is kind going a fiscal you of look there's least you 'XX? parts give of appreciate free will new a the here. if follow-up sort a I flow, of but negative cash -- But all for baseline. setting year. some out for said XX% is stable contract forward? where renegotiated at think And XX% is the in So with

a and when high of about think end the us give where low sits the EPS kind maybe for sense we end of guide? the Just

Manmohan And question. take I'll second the let Sure.

ongoing As again, to more it going -- still. an a what I'd and I than that contracts, it stand is just something is is it reset than structural a reset, relates process. call it's dynamic do it we're When the to reinforce

through is have those the risk many contracts we years few us than which or us so actually multiyear take contracts, is which, to all And appropriate are in less it's that believe we typically going ultimately to of contracts why work more cases, and a sustainable. have, reimbursement taking

And the that those dynamic. And pipeline, ongoing probably you trying in we PBMs surprise whether is back to new don't done. done they're to opportunities products, based work them payers and hear, sit indications, this client, when an dynamics There that. on with to and occur, to help a it's with down new win we're new view so that I furthermore, even won't background, my them are it

the says been number. year. plan XXX% renegotiated It sort for standpoint, that a abstract not a had we that group actual It's it's So XXXX is would from the -- XX% an of of an number. have of contracts

in January along PBMs not by can a on that, XX% because operate plan imagine, year itself is shocking for which as have actually design. We you

expect contracts place, where So are, both I'm get table to we're I surprised by the be. at not actually that and a I remaining there. reach work require And parties the a to we'll ones right would more better bit think probably that us the again,

the do take second to question? you Manmohan, And want

Sure.

couple flow a free perspective, 'XX, cash So from a of consider. themes for you to

adjusted income operating expect we is, in 'XX. to decline First

that due flow. do Now as roughly to cash well as of sale-leaseback free impact contribution not million Those from Cencora. $XXX earnings lower is lower the items around

we that, expected billion to 'XX fiscal slightly the flag around increase the just of $X.XX to that. Outside roughly year in payments wanted So in as legal total. well,

them then they decline and we to before over in expect down 'XX. Before go we 'XX, --

And And our $XXX $XXX year. in is roughly to so offsetting be year. these around optimization headwinds we partly million working b, through roughly what around then, in the expect we're on million side, declining the from, CapEx a, capital CapEx of working the

are So blocks flow the from building a free cash of kind those perspective.

Lastly, we'll this, I'd capital allocation look, to a going pragmatic say have continue forward. approach to

As some in seen We noncore do you've portfolio. flexibility QX, to assets. have in our able we our were monetize

so And as into needed. to tap that will we continue

with the line And Eric our Nephron Percher next question from of coming Research.

on one Tim. any question the rebasing Retail to laid the U.S. is, is component that's here of the Healthcare, principles you there A guiding guess given customer? key out, I question Pharmacy strategy around

reduction you And underlying stabilization maybe the profitable The elements the on then of the in other there from investment Manmohan, ask a or VillageMD. you I'll VillageMD business. mentioned focus here, operation? or in profitability growth Is

I'll it. take the to the Manmohan, Sure. first as take Thanks directed, for Eric. you part I'll and let second him that,

look and back all, of our for first enables frankly, the starts payers our is to underlying that team, of at with, services clinicians our pharma it's core, or what's other for of us asset stores. the which in it terms In whether

on that, I pharmacy strategy. a That's And a health as our so U.S. would start crucial. and why retail with to strategy. care strategy core it's the we've is our recentered

assets whether the a the starting we that, highly will and pharmacy pharma is, specialty be independent to that team then that point really need is their the is probably to that look say, have time biosimilars patient companies have make is our doing as clinically payer a well where patients being would what's more, focused, pharmacy, have inside over the payers you biosimilar of is, specialty want access originate to company. that's when at indeed envisioning the the or companies appreciated we -- which the reliable, need that not growth I of is have largest for actually and products, having tremendous who trusted the

to things that, from so asset. Other see to complementary ecosystem as being payers we And a providing Shields to set systems. Shields of are very health or standpoint, of set broader of as in the services and such that a case services unique CareCentrix that critical a

a the And so important core is that incrementally Retail being are assets us really we Pharmacy. asset for which those to have,

second Do to you want the take Manmohan? question,

existing throughout QX a that improvement reduction A U.S. seen performance. thing continues of we a From well, And sure. segment there, then within significant through. gone grow, the partnership. has as me cost Healthcare Yes, to start have couple been by year things the VillageMD they've Shields -- common expansion so within let program driven

slightly in contribution Now higher risk-based also QX, from we experienced the book.

of bit driving the And so that's in a little quarter. overperformance

themes look you 'XX, these to play. As out to continue we expect to

continue expect within We continue to just their to grow to Shields existing partnership, expand.

we and including year-over-year slightly in little do on volume wraparound benefits also closures on side. by bit Outside 'XX. a of of they cleaning then the driven expect their risk from is improve side, have the higher there margin that benefit base Village that, fiscal in fee-for-service costs fiscal And to executed the 'XX, contribution growth

of And line Caliendo question our next with coming UBS. from Kevin the

this you're terms that used you Like to a analysis? number time to you be over guide, anticipate implied or trying just about it do understand, going go Turning what's Rx terms guidance Is as to traffic? sort the in XX%? and to it store magic retain the how do Is what guiding through for for closures, I'm of Is foot you within XX%? that? think what of of in in you're there

precise it's X,XXX relates that that the and store is important actually number closing be evaluated stores and last it the as as the very we're announced X,XXX an we've XXX. quarter dimensions about we'll for something and The critical, we've now dynamics. recapture to as question. about rate that That's we dimension, continue one very, Thanks of we the spoke Yes. evaluate a to of that level

that nearby competitive? are the how that able dynamics There there is are How profile there number for we is the that to other ours? an added no of today, so et number. on store many aggregating suppose to related the are stores times we're And of What's up we caring number many are one cetera. to based make a patients if level that X,XXX I assumptions

a number there's And dynamics. of

very hundred stores. lot number, also experience it a as ourselves. but closed. have We is we but of we've both year, couple This and patients, moving So we piece simple closed files that a obviously of and much a it's not moving look as a at buying patients as challenge

obviously we very So also at We've this. engaging at good to good how know predicting. gotten We've do very gotten patients. our

And got so that a assumption. we've -- will key a is we number, and

we touch these say, What broader digital as program, strategy, customers and forth, so of enable and with would our loyalty our a ways. a with whether to I points if engage will additional not our retail to them believe in customers reconfiguration close though, and interfacing potentially, part as is both that's other delivery or store they're serve them other home things indeed

but other bringing realistic want many that most believe terms are and from it will stores We in patient, the underlying look at is be model particularly. in our in meaningfully stores of we of to things, but not we any the assumption basing when serve patients contributory and upside those to for the And us. every of some these closures number we're that we patients goal, again, along the with of

if And follow-up. a I quick can ask

deleveraging about level here. way of of something necessarily hear to going about and didn't down shareholders getting And on love keep I'd think at a describe the is going the it? that Is Or as like full elevated of improving a for flow. you as think you're pretty net how to lot a is an lack eye it. forward as you dividend. better It's dividend for and far to cash free I just it current understand your strategy the talked part debt about You obviously it? endorsement

and strategy. going are we And a capital flexible say Manmohan heard our pragmatic have you allocation that broadly. continually situation evaluate What is to we adopted

dividend well continue Board believe our right those our conversations, We we as with plan will to changes talk that's both that about. do. And and heard on things our make And capital you with are continual. us thing allocation, now. are early to to tenure being you've And monitor discussion the that efficient here, that, highly aligning already my long-term power absolutely to capital we our again, our and including requires the better committed doing to appropriate that as paying with the long-term in if our we're as dividend meaningful saw earnings

to We, And improve Manmohan term, these so But the for continue in that our you in I table. news about everything's spoke monetize any the earlier fact, near assets on have over believe today. don't can nonstrategic we balance time. to sheet

of coming with question Elizabeth next Anderson line the from Evercore our And ISI.

on of different working variety how Thanks I parse thinking from me capital so much a a question of come you those I Can help for additional the color. improvement. obviously, have the you commentary things. out sort and mean, are --

how help through like and agreements of on basis about multiyear from to about that versus store stores and is suppliers, much sort bucket other can a of that think it closures. -- sort think so factors? think how coming about talked think the supplier you of we Can You us

both business. I'll of And number It been opportunity of the I it of things capital. managed result a expenses dimensions of the bit to to It's Manmohan focused you're because aware say of that other prouder give a a by capital. I one it's I I'm of we Manmohan the not you working and is have lot discipline never and front color. that and going the CapEx, a heard, Sure. execution well take terms what to they across to of feel of let you terms team that team extraordinarily let thing. at in hear working the being than bear have is very is brought to. going just have executed as in just on a more

sure. Yes,

sure let out about us, of of that conversion as goal as is you working we played for initiatives always at stores of talked 'XX, about at monetize initiatives talk the productive So out the assortment is components have just it to mix side. cycle. we unproductive how inventory. retail we capital, on one take have fiscal more replace of And And some that and me and with the the inventory that ran think We've look all about make out cash we our in work through the do stores today. that we

payable like side, account is of and the to timing receivables is things us Now well micro on ability it giving improving and on as well. of there the Nucleus, company our timing within initiatives the are fulfillment our rightsizing on also as our the as a optimize And center, collectibility as which accounts then number Rx our well. levels inventory

of of being components as you fiscal incremental opportunities at. within all is the about Yes, So think it one of closure kind 'XX, looked them. store

remaining these take gives the cash optimize obviously opportunity and free network, and we it inventory to the that close an that us the As generates year. within in locations, remaining

the Got particularly forward? you That's you're do you very do a OpEx improvement. quick on it. like But on as know follow-up, opportunity And much store more helpful. how see a I we going does obviously maybe U.S. that AOI -- available? core How do -- about corporate many sort on retail, in feel that as sort just talking about driver the count of that. I OpEx think then things, of how adjusting like the and mean, you've executed of base, years of

will then the as stranded X,XXX it out And next no managing those said you to over is our we of plan is that store frankly, ahead costs years, relates is there's which closures costs. if question there as to, important, go X Sure. just close really we those after. Well, what goal to X stores be that we are

something to. And that's So important. committed it's that are very we

able in to store-related are looking forth. terms capital I'm training in and of culture we invest it we get of be company -- to looking that about to it that we pieces. that frankly, -- of this Second, -- both of be particularly to every associates smarter at which stores, in our now will nondirect our would company, I'm say, so of the it terms can I look back dollar is we are is relates ways looking terms into as a in and way life forever spend, the

that's that focused standpoint, I different that time things this look the from so topic. think management we a team And these on have this as be at we will really is

to will execute. we shown already have level I of a We and we've show discipline and think that continue

so And more opportunity meaningful No, in to what continue. Is our do ago? continue big we as it do it's $X that way. as see billion improve was a efficient we to business But will opportunity not. across it the and

principally so a for those corporate this from And just that's are advance there level. going to And continue. store continued assumptions in our optimization closures plan of in again,

What can and the our at We lot this walk don't all. in have see because and left stores you to destaffing a I you of say see would have the in it. stores, in stores

Our tight. are stores

we standpoint, think those a And positioning, that but you where in point. will and so stores our vis-à-vis, strategic standpoint, our we that difference. In making people to about talk from us can touch from and crucial point, that's know you forth, see we back not Amazon so are our come the

system. so, And there, as looking even support we're invest we our rightsize to

And Partners. line Leerink the our from next question Cherny with coming Michael

the anything recognizing that's, faster? since business. about but the on Is basically that started Maybe U.S. various side. to in also you the time about moving on I particular, it's appreciate just the VillageMD, diving holding on back in in the dynamics you different I moving Tim, color pieces, Healthcare gave something need guess, monetization. on I fit the in you there the front back you've know expectations talked

given process terms monetization, the have all And need think around some about a you've you for dynamics so what the to given about as the flexibility to of are in complete questions regarding checkpoints discussed, for you dividend, process see flow pathway free the thought we monetization? the understanding of the cash and

goal in asset looking monetize, you it, as but Healthcare to without do Well, it unnecessarily. know, to the monetize And is key destroying U.S. the business we VillageMD. value is are our where to

believe it's that wish me, process. nose declared because wiggled we've And have future. our it could crucial happen, part longer a I so not from just a it my of I and standpoint, made been has

than you on employer be the have become have that how it's and means outstanding believe news that, ensuring but that course and do appropriate business, of that the for in through also its and an thought well a are value. There do very very would are been to down process we and great saw part are billion to debt methodical we We thoughtful pay trying and choice, $X.X it. of there we the us we're really going longer getting that own. hoped, And preserve But physicians has we'll about be more to going good of even Cencora example, sell we're the their of is situation of year. over that we of

of have cash We situation. dealing ways short-term with the

on a have We of lot the revolver. room

so anything And value. that achieved even and rushing particular would would more have potentially have decision destroyed not

investors and right. what get Mary therefore, working we'll been it the to there. We're and with very complicated other the team keep posted So there. going to you happens it as relentless, is Village both our engaged Langowski and have team we're very but

line Barclays. of our Davis question from last coming And with the Stephanie

VillageMD the into beyond going kind topic Just of again.

about walk other was forward, to and think puzzle? very that's relevant value-based looking a fits And on. How been announce reduction margin-proven beyond that a did any CCO this lot takeout just how But us Jason I we have initiatives experience cost that's You going business. should you through closures? new of hoping this has cost you hire could location

of sorry, I'm question, should your about... last think how the part we

CTO the fits yet. puzzle, Jason No mentioned hire. the How one's new him

his mean, being this excited on I based a on about listen, colleagues. -- more his Mary and note even his great. sent after he's being and payers, week No, just Yes. first pharma than Jason and with planned we conversations I he

incubating So valuable you we now just are appreciate and to And a expansion be Jason of have Mary's and clear to I we growth cost it, that listen, your signal that and services recognize right isn't a we on is, point. margin initiatives others. bringing highly number believe have that should cutting

today, their We haven't some of company about example, and for initiatives. go-direct talked pharma

in are, partner inside natural there We of a are and those. fact, one of

those couldn't from that more to come want said, be That standpoint, I of the of clear we're innings you tell ultimately you growth be that. in really with to so initiatives. that excited more early And I about and some

areas, of think a kinds team, and built of into believe cycles result Mary -- on a not a in I as are upside baked sales they laser many And short a guidance has time. so The BXB we of tremendous those, cases. let color give we things have is of have specialty built meaningful. I'm has she take But effective will bit we not focus number all our boy, particularly number pharma in actually wants building we a a and quietly double very and down services, she can little -- going a data because very analytics having a Mary team. if has she and certainly, where Jason we including team, to other just more been believe can

discipline. that's Thank focused Tim. Stephanie. focused on cost really is before, you, strategy it Thanks, We've and U.S. value business the really disciplined near-term said creation Healthcare on shareholder a growth

programs that, near core on generate term. would didn't Growth we're part primary months and think adjacent assets. exiting as the of of nonmaterial we things: we current programs, our now X last focused over X so spent the And growth And

the specialty secondly, that data more the built pharmacy services. And and pharma then really our doing do which pharmacy, reorienting things Tim of on Shields, to So our mentioned, we best, business. analytics, is core what infrastructure

reaching, So payer and and services pharma. engaging patients providing and activating to

of development. really a Optum he'll approach services and and partnerships driving a to part focused commercialization, Jason's this part and critical experience, CVS a this BXB be of the So with

Mr. any Wentworth now back Tim And for over I will call turn closing remarks. the to

that table. We reimbursement. capital, a multiyear of modernization that told the first and our in We around is the dialing if serve X business. positive own about cash I spoke it process leaders year, retail done conducted pharmacy Walgreens. have whole I time, senior hired disciplined framework this then our $X.X thinking We how built And the sitting net loyalty, time and today. driving next year. merchandising, years. leaders, Great. just capital on coterie a for to And share I held here the grow patients the thorough at the over about. it day, driving about would based and at year do digital review here. simplified in in I've spoke something our first everybody pharmacy been had by a again, thank number first reporting, that debt to and beyond in the reduced tell And my we here year. quite additionally about new my for getting we've, been have more is, we brand, It's almost goals heard and that aggressive a for level you Jason, around with a going only team strategy in X-pillar sit just table reflecting approach that of CapEx, thing would we this to initiative VillageMD a wanted We includes drove want footprint better refiguring you meaningful I a we and financial see. Thank every leaders a we evaluation to the brand-new strategic set you achieved for to We It same billion, And you. us who all we've many morning. quickly for you achieved market are enable our Chicago the at to working has flow of expenses,

way that This assume I is who's consumer wouldn't year. Miller, one this of magically the believe by end in does We the And they right a met about this to of have needs fact where stronger counterparts the the amazing are are are. on consumer may We seeing that. many experts certainly, weekend meeting that Al consumer the where be it stronger, of are. the they they consumer brother-in-law, guidance estate, not an you real industry real boy, consumer, but the to we now. country, count in and were get talking estate ours the

of to And where as we've differentiator most is the important about realistic customers. in done been our members evolve thing we've and the So maybe will the XXX,XXX lives ultimate our important culture patients our the team -- consumer. be over

much progress dialing in. quarters. to Thanks forward look in updating and you upcoming updating for our very on I

gentlemen, that does today. conference may Ladies now you Thank for participation, for you and the conclude and your disconnect.