New Rite Aid (RADCQ) 28 Sep 172018 Q2 Earnings call transcript

Ladies and gentlemen thank you for standing by and welcome to Rite Aid's Second Quarter Fiscal Year 2018 Earnings Release Conference Call. At this time all participant lines have been placed in a listen-only mode and we will open up for your questions following today's presentation. [Operator Instructions]. Today's presentation is available for download. To download click the blue files icon located in the lower left hand corner of your screen and select the file. pleasure begin. the my Matt over now to Schroeder is to call turn to It ahead go Please sir.

XXXX Marie We our fiscal welcome you, you conference Thank and to second good quarter morning everyone. earnings call. of

Chief sale Administrative will me update with asset on provide the our our John Chairman Darren call the provide today’s quarter of results, Executive and call, Walgreen's today and Chief On Officer Financial an Darren a On second Standley, recap our is then questions. and our business, and Officer. will we Chief will Karst, John and take

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

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

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

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

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

restated agreement we Alliance. by that a Walgreens for purchase asset announced critical week know, you and our step took forward Boots clearance with regulatory amended securing last As company the

Rite of Dialog. six stores, Just WBA nearly distribution our Once debt-free on price centers, benefit Rite of agreement, and amended to recap, $X.X centers, complete, with through the pharmacy along distribution is inventory transaction manager the cash-free, all billion related will three purchase to a and basis. Aid selling Health retain X,XXX EnvisionRx, is for cash Aid stores RediClinic, an XXXX ownership

benefits complete a necessary this While we forward path the deal, to still have clear are that some conditions the close to gives clearance and to transaction realize remaining us securing offer. regulatory the has it

work about to over to about So I wanted a before plan more transaction minutes will our provide discussing to specifics and few our rebuild information how some I turn we second it momentum our quarter the who a Darren results, to spend team grow and as business.

the standalone as of Chief place. Operating Crawford fully benefits to model, important our pharmacy Aid and to announced manager as Officer this in forward understand To Rite is move for we and in competitive to we on forward a creating our importance are purchasing we company ensure grow that redefine patient Rite believe management President focuses streamline and payor operations, to joining business effective our areas have having we engage business and are for Kermit cost, to six of important plan sustainable morning customer what This Our and is an leaders October a our our especially time build Xth. evaluate experience, partners and our right EnvisionRx. they Corporation Aid our the with team future, enhance our to the of team as to pharmacy we a heading options end drug that

served Kermit aspects was financial Walgreens' know pharmacy Pharmacy, responsible strategic, for as of and for with all management Health, where operational, As Division Vice proven a leader pharmacist division. many retail he of experience. extensive the President Executive and you the licensed is a and and Wellness President of Kermit

innovative to We’re team. our well respected pleased leadership have and extremely such senior joining an executive

on In addition, operations, we business. had for be position Since Operating Rite recently position distribution, stakeholders. We of lead our improved operations to our Aid deliver value retail these look created logistics Stores. as of provide our merchandising, and Bryan a our great well. of store organization has for of the drive significant in to business our areas as announced other we newly Everett results, areas Chief customer Bryan the a experience, key will promotion Officer the this he Aid Rite impact for person and to positive responsible believe right of Bryan is joining business and In store

a role Vice at our patients. Jocelyn a also Executive With wellness our Pharmacies. about have us. us is in higher We’re is delivering to Konrad is years pleased of extensive to believe we place who the pharmacists and valued in certainly XX more services with providing our of a help Jocelyn Rite expanded She can play for her member services, achieving of care vision President as our knowledge of team Jocelyn pharmacy passionate will that an Aid than in for very retail the in that valuable and clinical experience areas is experience, level health pharmacy. which pharmacist especially important role lead in licensed Pharmacy

of making leaders us. of associates have our in the With guiding these leadership enhanced most key other team further strong ahead a place, and opportunities have our and for the we in foundation

and our provide team to that experience. redefine health in the area upon enhance service. job patient and the we important will of focus, and build Moving to customer strong wellness has on tremendous note continuing It's a great second platform to done to our

momentum the are unique initiatives as providing our the we important leverage successful internal an satisfaction front-end Rite look are higher Aid. and in a to engaging gives In for overall This already further pharmacy. that experience year-over-year and us at fact the metrics both highly

you of terms format the sales rest as to customers script As in outperform of has store front-end the wellness our same resonated and store chain count. these know continue with stores

completion with will our continue the stores. These transaction of the along long-term. the chain be an Following evolution world of part to XX% than our comprised of short-term stores customer continued be wellness wellness the will with WBA, the of both and of format and the important strategy in more

come. and to Rite provide will Our remain and be build features proven loyalty pharmacy, an in program to key both wellness differentiator in standpoint upon space for our program immunizations will continue plus innovator Aid. highly services continues to significant popular loyalty loyalty filling a prescriptions. from how the we opportunity in successful months business to In customer by We've also the be our the benefits beyond can valuable and new pharmacists showcasing a adding a customer

flu As also strong more is to off year-to-date. and an a non-flu immunization our increased by immunizations example, start campaign we've than XX%

engage medication will the additional program all patients OneTripRefills each to and We our management which month. to maintenance one fill pharmacy patients to at also convenient of allows therapy medications eligible trip look in their

the deliver of to communities plan level RediClinic care Health higher in addition capabilities the a In we to Dialog we serve. of leverage and

reimbursement pressure no of doubt Now created business. there's that challenges looking has our at focus, rate third our for area

address clearance, are have our to with position reimbursement to Now we actively PBM in a that engage better our rate received business. our asset payor has regulatory issues sale affected partners these and transaction that

retail taking fact Our create will that these a believe patients to benefit work by to care model therapies share be the at clinical discussions business of with goal partners care Rite from will of managed offering a partners for pharmacies medication and objective these value. sustainable effective a Aid. common competitive services We and

focused completing pharmacy partners a purchasing the with comprehensive be also of which our highly fourth plan. engage key we on options our evaluation As will we component is our payor of

with we purchase drugs years. consider for us XX WBA strategic the As agreement of that us aspect future. through WBA Walgreens other are cost for an we to the a the gives attractive last as announced period substantially option the week equivalent gives This affiliate to explore a option to generic of amended alternatives of an sourced at agreement

Our cost our in meet objective we evaluate patients the pharmacy is manner. a best how can to effective needs of

our of will address control our are have positive developing also which later already contributions initiatives Darren our time further made aggressively efforts specific to as continuing to aspect will costs fiscal that is important Another XXXX. streamline our we in performance. plan At this operations

to of emphasis efforts result The from grow an these EnvisionRx, to expect business. $XX our is We our area about PBM reduction run of current million final in rate. expense

six areas beyond EnvisionRx business. provide few to significant a there's important growth invest for additional this a opportunities important regulatory and Now we're about of that believe in review refocus We moments. these process, in the business. Darren will the potential information our represent opportunity

capabilities, implement time to additional for this we has to in store factor a over sense flexibility results. transaction I'll some can the our purchasing Darren. plan improved move comments. forward pharmacy more balance positioned it stronger clearance and also and the of a as benefits that enhanced well received you sheet WBA the improved Now such we're key profitable a Darren agreement At amended purpose. footprint, with clear with When financial delivering turn regulatory of for

John morning good and Thanks everyone.

through investor that our I'll On our sale of and are the slides. updated the flow, asset financial recap morning and discuss this will quarter second the in results financial also cash revised forma I the supplemental walk liquidity. impact call pro results, included

stores, restated inventory which for sell As agreement XXXX obtained WBA with John have the centers, purchase to and three clearance for amended for related said way clears and $X.XXX us distribution billion. earlier regulatory asset to the we WBA

transaction and as possession assets stores used tax, of to liabilities restructuring the of receive to liabilities, will ending and trade $XXX proceeds predominantly month a several which approximately pay million. The accrued approximately takes related next $XXX the of period million expect costs and of of beginning We of is income sometime of of receipt XXXX. net months proceeds be $XX and divested off sale million in with the asset approximately fees to payments payables proceeds from spring over the tax net WBA

give including these and and fee in allow us a we to strategically already are flexibility amounts these XXXX keep transition merger ownership Please $X.XXX that the expected distribution will of see balance some numbers centers. nearly we've little and the and around business. to move sheet of the you invest to billion. estimates terminations of Aid have six our Once will could approximately net net in can Rite is received but to complete proceeds proceeds stores the retain are significant delever us be that Our mind

include and York, New Pennsylvania, Washington East. Ohio, We store and key that profitable California, will in have states Coast on footprint in and and Michigan West more the and a locations Oregon, markets world average. the we store adjusted Over stores than stores per higher our at chain of wellness customer is retaining these current the XX% at sales are and or EBITDA the

forward as exposure the business. to This rates pharmacy diversified pharmacy XXXX our retaining also a with will manager that will will our that because come our Dialog as less operate addition model well RediClinic a more higher nearly going and we adjusted EBITDA businesses. business us stores In Health percentage from give benefits PBM are is reimbursement EnvisionRx we to of our

retail pharmacy our in times. to providing reimbursement in or quarter. XXXX. competitive guidance. X, XX summer sales the billion X.X% at excluded second million highly would pro-forma adjusted Retail see was results a which by participated mindful and can decreased $XXX.X Overall was a we these retail I'll million, net lower by versus store partially Total in SG&A EBITDA in diluted was which second and from share $XX.X from million last sales. basis from The in or as a so X.X% million was and sales due pro second the improvement of was rate quarter. income reflect $XXX.X same negative the fully percent in adjusted per certain XX versus million X.X share $X.XX net lower in LTM lower should for well pharmacy EBITDA be ratio in by is Adjusted networks loss share retail approximately net were million $XXX or is last million you able WBA from soft quarter. guidance XXX to quarter the store current this pharmacy the compared dollars current pharmacy and benefited EBITDA quarter categories. for in pressures that this $XXX gross were turn X.X% Front-end were gross second in pharmacy year the to quarter diluted adjusted results quarter period we $X.XX not revenues expectations. day it was We that ended year. a counts. a which rebid consistent as on impacted are Please second generic the Pharmacy during segment income sales revised was numbers environment or part would declines that the our million prior our due of percent X.X% was decreased net gross we basis the $XXX not revenue year caused $XXX.X seasonal $XXX of The school revenues. Pharmacy to financial impact been and was rates. in reduction of filed segment information prior decrease have purchasing EBITDA a with prior due diluted gross for to store year's review Net million reimbursement seen in XXX than segment was which being was our quarter. of last driven income year $XX from quarter quarter a offset per by points million of points we year $XXX the same million delayed of to expenses. of generic second several be by share year's for by Retail also the McKesson drugs than forma received down of the pharmacy $X.X second quarter quarter. short now $X.XX had of X.X% construed continuing same pro which lower to profit that with gross per decrease Adjusted the profit on back we've time the been to negatively $X.X net Adjusted and million points As basis Note $XXX by results segment EBITDA lower last been in was reduced $X.XX an to million prior in profit diluted decrease count same of or $XX.X store or updated quarter. was revenue. adjusted was million. year's XXX and the quarter would income The impact as morning, adjusted results. last $XXX have have which asset last income or Revenue timing pharmacy or fee September $XXX the completed merger drugs the X.X% declining and adjusted leverage slides trends profit or also decreased Pharmacy forma new in X.X% adjusted sale quarter the and unfavorable script months dollars second basis EBITDA for we last have rate lower retail of year’s quarter profit not as past million, the per billion this EBITDA due in offset $XXX.X the our that supplemental prescription quarter. was Pro fell but with was quarters. and unfavorable to of drug our our million $XX.X second to termination that forma year prescription bid than front-end efficiencies as

segment expenses the compared XX gross to by to lower sales. expect increased SG&A to revenues as last unfavorable million basis SG&A due rate the prior operating to higher SG&A basis compared last pressure margins second Retail quarter points of but been $XX due Adjusted the dollars as the profit sales expenses a but by year. second our revenues pharmacy to by continue decline primarily as deleveraging XX were remainder to to for points dollars end were percent year for of in have the $XX pharmacy year Front lower quarter. that front-end million a the year of was percent see of We quarter. declining. on EBITDA were

first quarter executing reduction more job has our helped a expenses. operating trend continued of done on payroll efficient control store We which expense good operating as get various initiatives our have benefits to teams us and

have reductions We back expect year. expense to similar in in SG&A the half fiscal the of

in $XXX prior which XXXX to not revenue. Moving on services due a mix is Envision's which line largely of to and in with D quarter billion $XX.X offset to Part the decline improvement decision mix chooser pharmacy million as year in the a or an a participate segment of adjusted had services EBITDA The reduction segment, higher in EBITDA $X.X increasing was patients. certain drove regions of on pharmacy to focus X.X% of customer second Medicare strategic our million our revenues in margin

Med Envision membership to been long-term. strategically Our believe at subsidy historically heavily are we D weighted profitable we towards the chooser more income and in which member be can grow business seeking the low has

While we we members. to XXX are Med not bid believe approximately in that membership yet the XXXX results our final, XXXX will XXXX by of D grow

provide segment overhang the improved performance and and We after leverage of pleased we to to pharmacy profile invest WBA grow in lives. with transaction our PBM the believe the us the are of our the with asset services removal sale opportunities will complete

to year's driven operating shows activities This merger Our WBA cash from of $XXX million terminations source was cash quarter. for compared million of quarter quarter. in fee $XXX improvement the $XXX use of the last as the a second by net flow statement of current cash million in

cash million a million $XX activities reflects also versus for investing the normal last seasonal used activity flow build. cash was in $XXX year Net current quarter year. Our inventory

one one end wellness opened remodeled and and we store, one stores. reopened At stores, expanded XXXX second the quarter we store. relocated quarter had completed store, of the During XX grand the

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

$X.X Now outstanding let's $X.X under of credit. discuss billion billion borrowings debt credit second Total liquidity, facility cash quarter million at $X.X approximately of the $XX revolving in had of had $X.X our of liquidity. outstanding We end letters was the and we of billion. net billion

our expect said completion leverage I earlier the upon improve asset to substantially we As sale. of

We planning at forward a our specific revolving do working maturity our minutes specific we of further as currently the size but store minimum our to to go our capital the well timing John a the the and still divestitures that facility guidance smaller to few fiscal plans through right store and extend to facility provide work given structure credit clarity as regarding base. the not ago. refining are reviewed more through impacts the XXXX as initiatives financial expect on refinance both We're for remainder get we of the business of

fiscal expect and presentation we We year-end our fiscal my release turn John. XXXX guidance That like to providing XXXX the of I'd to to results. now completes when portion for resume back it

for Darren team Rite of of time. That a and said proud this that nothing prepared incredible. our team. fact highly great our example Rite for for the process. strategic delivering taking our how our take on for patience, thank morning. has of some displayed an displaying outstanding is been begin The transaction to of an Throughout the have earlier have entire a concludes remained our before like associates metrics professionalism, I'm Aid great care customers as this entire dedication associates we been I tremendous our We've just Thanks experience. our Aid to quite pursuing would I entire that process improved questions focused remarks commitment throughout service short taking moment important customer

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

you ladies Thank and [Operator gentleman. Instructions].

from the Rhyee of Charles Cowen Our & question comes first line of Company.

And delays understand John, just of of McKesson year. new the you a about -- for the in kind terms contracting bit McKesson caused the then the generic for for in thanks a better Should the of rest gain wanted to I think result Hey about contracting you some that that pressure. talked hey, yeah, Oh with is is pressure of from the you rest that purchasing made ClarusOne the with taking year comments pressure we that as organization? and the less little of benefits questions.

being we this for morning, us thanks thanks for with appreciate question, So, the here it.

the quarter. McKesson bid we his comments the second during mentioned as completed So Darren in

probably our as was to bids that that think a I process. bit little Darren our of ClarusOne they the I ClarusOne as That as was the and expectations short through bid part bid, pointed came market. were bid completed ClarusOne coming out that a think was first of

in also the of We’ll and and as but second we also well reimbursement fourth the some our working those those quarter, the are reductions benefits first of got have through remainder mentioned, quarters. So way third second as we the some for have the quarter. rate in benefits still impacted that Darren year

continue back to pharmacy pressure going half. through see we're margin So to some on the

little a can expectations, clarify short and was kind you of that? you you kind said that what the bid of by you mean expand of Thanks can bit,

reductions the estimates believe will Sure, well cost reimbursement you, we on we and be. are have generic aware I into rates of to build future think, what we some so as contract

digest So can we we what that rates third in know party contracts.

we what built terms in. short in the what bid for plan So, was of McKesson we've of

any see. divest I sort dysynergies about or there numbers the you've we us into the of sheet And that factored the forma stores, number and considering balance we the of should beyond Okay, with other the as we are pro -- us? deliver as given be you've we all sort think given was cash

we did or in provided, purchasing drug either build in on agreement. receive TSA associated WBA Yeah, we that forma I not payments mean We [ph] did the I didn't that we under synergies pro information di-synergies. build build would think with the in we from any

were TSA – transfer I goes think X structure bringing our line. is in our that as away the is goal that our structure to adjust off stores cost and million cost try

any to best So that we dis-synergy the minimize try we're can. and going

a we look the does when states only assume…? Understand you’ve of of it, have that should mean still and forma couple store profile, I handful a we really stores, you at pro got include where

think dramatically, states one that where was number know, out of reduced that you we is we've the the came I dramatically this thing of good case.

couple think I So be instances those material the of cost don't of of and will of that to overall really a just the the operation there's those. business,

last right of my Medicare for D, the D would and to bidding really networks it sort that XXXX, as next Great, question be organization? the chance think to is Part Part already rebid process we missed year a into is new your first back

That's right, that's right.

pretty line the for we're contracting retail think on I the down far XXXX. fiscal for our business

open So are those well contracts of rates a locked at we as to Med point. it for I'd have largely next couple are say got we relates -- in that D but year this have

lot. a thanks great, Okay,

Our question comes J.P. Morgan. from Gill next Lisa of

very just your contracting. thanks on much comments Hi, and the good want on morning. follow I payor up to

PBMs health fairly are I super said you along far about in at more different country? on thinking on you and that are this and rates XXXX. would how call Are with parts about of they the regional you now you talking John, plans fiscal commercial you So like a point

of rub have XXXX, there. Med What on far right to am along we XXXX to perspective. I D lot I a a commercial we're going meant do, Yeah, for from say pretty to back was work on

the you've got your be? stores that Is on there commercial calendar now of any where footprint opportunities side in will XXXX the

figure still contracting some is We've for work is got opportunity do from shape a I there how and calendar XXXX out exposure perspective. think up. to year XXXX to to going there

talked -- a am you little And bit sorry, I ahead. go

we're reasons guidance now. Which with out is one the of not right why

XXX have forma some as XXX start to more -- this will that expect of we guidance color you a think when when number to give think of incremental kind we but about, pro going clarity rate we forward? do about you as us beyond When think the the will of number

our fourth think, plan. provide plan to know, guidance I to that's get quarter, XXXX, when current the our Lisa for we is you fiscal

then commercial as and around your on I other went we but Medicare wondering side your of ask talked Okay, just season question into just you business could the if go of D the selling one PBM, Part I'm how book XXXX? about

So, feel there. the where I think about glance pretty first think we where files Med waiting year. good a landed this about We so landscape we don't in I at here officially kind have our of good position for we're D pretty we're we to next talked yet but see

side the lose of process here through kind this get protracted client review cleared. commercial On one we did were large transaction going this as we to

that us year So back commercial. seasons our selling bit for little XXXX on calendar set a

side business to going soft of be we're So on the that XXXX. for

is so material and to Okay numbers, any kind through is way it I a we size there we start of as mean this just our how put client, to John? about think that?

the to We're going on commercial for be probably slightly lives XXXX down in side.

selling we in lives the be season are little to offset to going we gains commercial. the the going on in so down made we’re a bit So

for color. Okay, thanks the

of Our J.P. next Casella question comes from Carla Morgan. the of line

Hi, Casella. I Carla think that's me

to million time forma as the expect of on pro TSA is EBITDA, just off, want XXX question SG&A over that rolls that correct? XX of million confirm First the that just you includes reduction the I

correct. That's

can that time the just XX what’s frame so you And on month over remind us? an period,

as it take Well, kind stores. they really is of built-in on

So, yes two additional option two-year I is mean TSA. TSA have an the period they months periods. And six a for

years go but for less So than it in that. probably could theory

stores now Walgreen Okay, than more are you've once we selling the for you’ll but that is to assume great chunky store or you your refine of the the that? and evenly the then got most of next should period it you over about timing happen closed just guidance said month six

of these kind waves say purposes in really I it’s I'd for stores relatively, operationally on. mean is it taking of

of them So, that can over over be stores a there you number know cut given are certain week. to

speaking guess fairly relatively I probably So it's smooth.

a There slower using. system to certify cut we stores know a some everybody store it’s I just the process an it a sure because that is be is sure works them and over very make I just little we test you where there closing, to kind and cut a process is a over. there's all process early for IP think of on just to when TSA to that there's make opportunity wanted bit of of just going

say up. would is to then I that the after slower So first really it two month or a probably ramp starts little

think think ops -- standpoint, the terms disco ops be from to figure going I on the in to mean the I start in I numbers mean to a I it's stores some will flow terms am [ph] being move the closing sold. that of accounting I as trying cash just process out are we in disco we first on terms wave,

with but will great in a would number kind basis do of store proceeds be in-line of the go it you will like chunky? on it that -– is or the you as then come more Okay, per

it’s per on a basis. know, store I

is you've a this Okay, bonds to have about ABL with to you there we great. excess a of with we the at that wins, should we the How down on something kind stores at something it's down that first seniority after loan? to get pay -- apply know par markets in on of proceeds until the getting debt that assume sense for buy of loan trying amount we see in then been the paid second. maturity will not term to we and the sense look that think because or then bonds a lot ABL back is -- in could year, that with down as should being of I term the debt And go paid there's order and wave focus

would loan I correct, to in to notes. think said would and position we be proceeds first unsecured you to offers what go in a make the the the term ABL is then

you. thank Okay, great,

thank welcome you. You’re

Our next Jeffries. line from question Karru of of comes Martinson the

Good question. on morning, Carla's just follow-up to

the of those proceeds and take offer to how what's work that mechanism don't the of terms and In what kind offer? if excess will happens folks the proceeds

see debt If then us we those they offer to would available proceeds don’t other for the take fit, are as debt. repay

of offer a rata XX’s, those so it for be XX’s, and pro Okay, but tranches will par XX’s? three

Yes.

the valuation. about the how about script Historically but $XX Okay. all the valuation, talked those today be in you that we industry? a And ask old an time that remain, I to question script still is that terms should guys used per is case thinking in files of $XX to this

files. range That good we is often script probably see, a as we pretty that buy what of

You we buying -- view when know the files. it when how script we may view different we're be way it that's buy lenders but

of go Okay, we think of forward? of thinking up, here, that and we be or kind CAPEX pick start that when that quarters buys, be spend, remodel when the but of forward build will the kind something file as should messy day this the that recognize does is gradually then as will you script we stores a transition kind about couple wellness one

obviously and By perspective, looking that, kind takes engine during back time do areas an frankly merger what I remaining side Well, mean where we active on out time in We the running. period at the limbo in on buy. now could be. bit buy have we we're of back file limited company we're it rather up. of and of up that terms of course so we a the a file right were there will market ramped get just were But a pretty little where to

On the CAPEX as we're well. remodels side do continuing to

but ramping ramp So merger the up. during probably will slow bit a that's little well. as that back period up It was

That XXXX I normal would takes of… back a be we think cycle fiscal to more time, for

business Yeah, for the we size have. of the

of lot time. a takes it So

appreciate much Thank you very it. guys,

much. very you Thank

Wells Hunt question from Our comes next Fargo. Bryan of

just percentage Thank D you in time. that your can an of wondering, idea was of Medicare the I a Medicare kind you talked you give increase wondering terms increase a was PBM for basis side? on XXX,XXX. your I D. of on in lives about your us Person if is what

me with is here. Frank

about lives. be overall our XX% a in increase would it Yeah,

one the I the guess on philosophically half for tranche I forma pro continuing you. sense account the down your balance discussion, balance will sheet just wondering of on [ph] what's assume over than you a in your fact was long-term? over half pay XXX that slide more thank presentation your in debt Okay, based have make to does in sheet.

think we we bit in Yeah, before see what kind at continuing and we and I conclude application see Bryan end I where of on to you see proceeds this is progress to think terms we of that. this a really of the like that's, just further know are look up little

I to where trying are pro give an besides forma and to Can of going XX% Okay, businesses kind think like give other and business? one, be two, file maybe CAPEX idea, will you is it grow you be may going the forward, you in allocate of an dollars more pharmacy stores there buys idea way towards be us you updated mean can us will what formats. any seems it your plus

forward think neighborhood looking the in on company somewhere -- CAPEX we're for I probably $XXX million of go a basis. Yeah, the remaining at

that's stores. how of will it to the to I think allocated continue be terms In allocated

You're correct, pretty we are shape. XX% is good in --

add will stores to will also We script continue and buy and to we still files. remodel stores continue

I mean Yeah, think I --

area well. think able the are -- is there front we other Envision to there to some opportunities as The on be in invest

back are good about over mean some the there's shape will excited done we're to opportunities time. evolved we in that I store to in I think that the stores we've to going previously pretty we on are with be Right, But invest and we're markets There be base think stores. concepts We I be in. have. we opportunities a think touch some the going that

of really that being be strategy focused and to some we've come will even our the now with money going is got drive have markets in are competitive local Our in to after will technology dense putting that operate very some things hopefully We're we and There on forward. Envision and our that technology. some strong XXXX can right left good we transaction. really is the And have as we with our grow some in as importantly their most improve real quality put growth If maybe us over in opportunity opportunities place. really technology associates for we the we think experience potential those Envision business. for areas the really things invest then that's we to work and to things into the do bear and more efficiently working there to stores synergy look more things to fiscal where

some we things do with So have. capital we've got exciting that to

XXX and I you million. forward. quick in It tax imagine Great, Kind and EBITDA cash acquisitions that $XXX focused pro of on CAPEX, going like two of your you'll putting and interest flow you it of flush liability looks sheet? to If expense is I million more free look have foresee you to of figures, use, what the what out kind no round do additional million and solely XXX forma delevering to ones. businesses are generate balance or

mean is be great is what, time. long a conversation that you to tell we for I’ll I there asking. thing had a very that a haven’t

It's been a while.

out. figure And That so open at are start of that just to lot just exciting of is is to as do different got lot here a answer that we kinds we those about for is now before. opportunities what really the of doors where honest us. to all these of things, things a even some there's we consider couldn't But looking we're work

there's cash look generate then pursue we've free we're there's to opportunities done, back about and to into really some talked a excited things the chance get again the market, money some here just transaction things opportunities. the flow we get So But that to refocus get put repositioned this ourselves at. some business, to can in exciting so on

could whole and I a behind But of down things would private they stagnant track we're think review that the noise just getting the winding I we process get is remodels through while little on in to of us working script buys, jump come business, For think getting them And different a momentum here. through back got way an thing Envision, of were here. little started. directions slowed the go opportunities think business bit were now file bit as that like Envision primary back we help there's cycle some a to some up suffering and excellent our these right labels lot core while focus that this really the kind thing for really other I we this getting of

as think and will of I the transaction noise opens away really well. think this them overhang well this things I getting up so that for cleared just of --

whatever pretty all excited flow got excited and here We number don’t So we've with we've give to what here. we're pretty free we're cash but to energized is. what that to got about it get want we're guidance

and payors if When pressured think that's what gross pharmacy better, and about profits you overhang results look Alright, opportunity with you in improve thank align this question margin on we for prices with peers at your do it the your to your we me, be they the partners transaction. last definitely to based your in cost basis environment at the your lingering, we associated look and the on with my underperformed might work for pharmacy how you relative peers performed sorry WBA as a you?

that great Yeah, a I think that's question.

work out what a are really sustainable those the think the last doing to lot the question competitors, of what things. opportunity model. pharmacy you marketplace do intelligence. to we think And work I on have at look a the than lot of call I competitive been we how That's had here of obviously we've the purchasing different competitive we've a day. we our of over kinds so And of business is be in behavior margin figure those not on cost And can a of benchmark also lot margin seen cost And I CVS. to gather what versus would but gross at and of Walgreen's script, are generic its the years dramatically obviously you if couple market have our

think gained lives where difference the I access we haven’t. those they've with is some to investments

a I through in access I those opportunities. at through their and some no of lot of look gained where think lives had we was and similar Walgreens narrow benefit really I lives, to there Med the lost haven't commercial where D them declined when think rate we where right networks here they space

are a also we shareholders. model But what we service makes that clear for important kinds I that that a allow about its it an open the partner things. competitive both us us and of business now one think it's that respectable deliver ongoing opportunities of and to a that an return also those our dialogues great being is we that for for But works great in should out in think terms it's how I profitable payors, in and business participate that ongoing we're marketplace. of I also figure to that have we're hope

just that went that long-term on a as the as the got we of but to we're us partner. and through merger of balancing view it of act the kind because both more whack the conversations us not that's a go little They people out hoping find always So value. probably didn't to working place I process I'm really think will one. as represent now equation And viewed sides a

your for Thanks and of luck. best time

it. appreciate much, very you Thank

of line Our next Jones the of from Robert Sachs. Goldman question comes

make? could will given Good how that kind about that's on think your talk is whether about the timing, Bob. evaluating the or your McKesson, also when current move you go then contract move morning, Walgreens you if of around you just morning, for making ultimately WBAD you decision Nathan of McKesson with you to And the from decision? could and purchasing to Good process Rich this generic not to

so end you our McKesson Yeah, of of March mention as XXXX. contract through with the goes

the of options. think exercise until WBAD May we to XXXX have I

which outside sort dates out. forward. the we probably expect how the merger when just and WBAD -- under relationship agreement. asset the option the you in the and is in conversations outside it plays should will that's trigger of in in time we under We're agreement with the obviously There of about So kind work point am sale McKesson going are I WBAD of a thinking

the here ongoing an And time There a to so we here McKesson. be of obviously purchasing marches with happen will a as option. will to what have is point where access we bit kind on will discussion little WBAD

that as our It McKesson. with contracts date. And some have opportunities of that we is that a compare from XXXX the think to opportunities we sooner we decision. work really in decision of the we two that cost I of analysis I could possibly We but would have be outside to and April opportunity that do if kind kind date could a make outside view can the the implement through

SG&A just understood to Okay, And a up, on as correctly. it comments go back wanted I follow your just make I to helpful. and then that's that sure

talked about So in $XX XXXX. fiscal you opportunity of million potentially

think the pro that included had cost that in You estimates given forma XX know you million I of corporate savings. also also

think sure the the wanted that in million broadly you in that assumed talk is XX more maybe And pro just to then kind million I XX of So was to forma? can make or that addition closer about could go just look areas as are take the think areas business savings of yield a other opportunity to efficiencies? and on a you you the at costs lower basis that forward potential there

set we operate XX for really is I as are -- -- that different trying the make that the initiatives. our So are think XX, million incremental sure We're of stores they possible. on we to to are easy associates to our focused as

to in to asking So we right are tools giving resources what we're and do. successful be them them the

we but and streamline around really associates those and we, effort some really we a doing cost processes to how the to more the Corporately we energy there that. go use thereby well. gain for also administration make things at way advertising the our some market advantage very for term and costs been how here. and use easier our do of our and So lot on focused efficient is is looking that as We're been organized corporate we've of

our of we've I the of business. synergy found the Distribution And side general in lot of so those think are areas. a kind savings and cost distribution

of pieces I So those think are all how comes kind together. of parts everything and

you. thank Okay,

from comes John of Guggenheim of Our Securities. next the Heinbockel question line

you is important. disruption about important again curious So options, so your is right John and of the procurement think when lack timing

Kermit you do of do the do brings off? a from McKesson maybe to pharmacy the that, get more lines sort and way you about think managing about of in you when you he to if importantly get avoid does about and you then most And table of think along Walgreens you disruption it get maybe how maybe have have that you that what WBAD, to XXX% when that the to and trade think the with relationship there understanding if so do quicker, talk standpoint? with much So you help you

in questions so there about there. five is Yes,

let the So, me beginning. back go to

purchasing transition actually whole you information from part just AmerisourceBergen building background Walgreens we process whatever that here TSA whole stores the a on have we worth the are So, as it process. for of know to for to is options McKesson

pathway will disruption have move choose if we built do. choose move can minimal if we that's think to we So we with of where a what a we amount to

they've be to confident believe there. be So in XXX% the McKesson they the We extremely they're to we that yes, marketplace go way we're of deliver have long-term do the be with the that to going need to got value. competitive going if so to I over have

driven answer on that it that's thing our I is earlier And So of of kind and in going McKesson terms again how McKesson to timing that I really of the really to I through contracts think bit around little and plays touched the one. work it's dictate to ability timing, in this a with the think out.

we're a have him to really and the great through Kermit, know Kermit I’ve have him a a did over of join key it bit the for pharmacy terms a during I had of of I He management very not here. benefit NACDS through number to in in competing the little pharmacy have a areas different known against In a really brings other gotten function Kermit time. and excited role for grew operations Kermit, long very He years. for respect years that team. industry pharmacy pharmacy deep business play experience of period he time just very in experience rapidly. number but

were drove that many also for the of in so flu the responsible of He Kermit he But to flu key and lot mean and of played party a understands third year. third Walgreens shot market. had contracting a them over this concept he deep was things has Walgreens. Walgreens I whole thing. really was innovator he role innovation. shots the bring the helping years did He side And a in of party very there. on leader they role interesting number So for their a an key he experience healthcare

really spending relates Kermit bring to So really TSA or pharmacy going Jocelyn strategy differentiate on transition much marketplace. He's we with future see and more and patients markets to the to as really thing. Walgreens. in any a it his involved care the can really of bring how see of with time where for the I impact really very helping to be in Bryan really determining local healthcare this forge working I the us and don't Kermit having how huge ourselves in That's better the

there's think And and been of when retailers Do then the not much and are second to obviously the margin we be to at the a elsewhere, things soon? do shift more going topic, one of the the to anytime the to had philosophical that -- margin focus right among see has need maybe we you in just go retail PBMs, the seeding think there's right see that PBMS. have power at you

And standard generic. in others our when about what our situation spend we that really by job. that relationship I determined how just drug like probably our there's generic But think you plus me at their really and rebates of it we the especially you their our fairly look look book pricing is is at in of marketplace. cost and answering that a the have smallest marketplace the with brand of generic question is specialty a is that's cost. in than certainly cost think the of at from different XX% Well, what is competitive I all is I really if control, competitors our perspective just We brand receive, control challenge for generic have and buy different and so you philosophies less are maybe XX. the cost look mean that brand the to PBMs business, PBMs piece brands, spend situations

done on we've Our generic efficient and job on the work the generic very on based be side. is efficient we're to side the

over in costs like business. that think again others some whole we're here -- say be a consultants for to them understanding small happen the that's overnight and the mature be starting generics generics growing ground They've think payors is piece value to those years going rebid the get of and to to made there's the I isn't drug you marketplace a while, think a many puzzle. find in more spend some been it's still understanding are there's John, over marketplace overtime fairly to that We're over a to So I dynamics. And working of very And and are really book generic relative help I here. and in growing to that. people going with honestly but understand getting and

just to year. be Target to XX lastly file used it's target is annual. of than a it you do going then XX a million And buy is Obviously think to lower you what million but that be what a fair can

John, Yeah think a I fair that's number.

Okay, you. thank

John. Thanks

question. gentlemen time and for have one we Ladies more

will Ransom Raymond the final from James. come John Our of question line of

love morning. last, challenging it's a clever. being good Hi, to be I

Don’t be clever.

mind bunch disruption. lately of is top to and talking about say potential course group your been question I of we've probably a Amazon investors would So and of

we think front which thanks? about need at your the exploitation, things worrying Amazon two business you about So the you Amazon to to model much are what lay do at and when to there you today in sort weaknesses haven't think morning night end of vulnerable on talked in particularly you business the do what do proof

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focused on terms really improving things I very I we we're In it's digital our for experience that do customers. think better, can the of think

good not not our historically So in they're relationship. that that's with interacting improving. just That's the are something how extremely day building to to that probably day important that vehicles on store them is that what it's it I but that's at. strength think doing other we're we’re we very And through digital extremely focused

I So a there's if to one But thing there. point probably to that's do. lot mind of top right

kind any the for is home door minutes, might, that I home XX you delivery they you think know have that delivery same give a Prime would think your you electronic [Indiscernible] delivery, Amazon purchasing seamless mean is because on but to order and of clunky, from about frankly your you you you of a membership day I new got pills same interface thinking front are just to would Do in discount the the their be home at not PBM fees mail test stores, day going and pretty in are interface would through more come stuff?

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it's so And mind. of top

this had do I and to rebuilding at you've so how how do during question Okay, how have you middle thank you you my to much got the are [ph] is rehiring week other the below some management much process attrition positions? top ranks. six

holding than You terms done have might actually team together. okay, better you know of we this expect in

very here. hung in of this team think a process. to But way end there the overall as this through I we I'm obviously whole we pleased has had through the say came whole couple have losses I profile high with

shape pretty So at a management in good from we're perspective point. this

think the are through pretty build Kermit holes in couple good We where good place feel a think good and and Aid but kind we so we're foundation we very done Jocelyn Don I have here Bryan got of and from shape and I I really with gone side team fill overall and as We've of to pretty to in this. Rite on have side we about hanging I Frank there. PBM think on us with got well. as We've their the

on with -- and back to get about I answer questions the what to going excited here after million pretty they're good. think I pretty think have market so XX is into we're without

my can but do how grow hurricane every deflation and you these tougher is, if just headwinds? I other competition more scripts, environment we remember you see don't declining doesn't D generic then just flat can with can't do with where personally I not Part are size a you EBITDA then environment front-end. are pressure, year, on at what we reimbursement looking I the the now get and Okay, mean how one better

tomorrow and of different WBAD My or we is buys, some consortiums that CVS, next everybody over way it by I not necessarily. all today. the [indiscernible]. at I is quarter next my WBA has to think not or are that in the think McKesson margin point week pharmacy or CVS, saying I'm large But belief, Walgreens, the it's volume or stabilize, long-term with

to great involved here know of cost that only only other dispense these generic a of what a so manufacturers and us. focus There's got got a and to abuse supply much to need down You terms economics we can to opiod that costs to has all there's line it the right regulation, thing far we've go of starts are down the things retail so lot just and to to little of do lot bit. we back chain a work care on cost up in settle drug. virtue there's back At where going on. take on this there's There's of patients somewhere by so

you very can much. Well forward okay. hope congrats Thanks move successfully. Yes, and

it. Thank you, appreciate we

morning. we'll you to us this appreciate talk soon. and joining everyone We for you it Thank really

you. thank Absolutely,

gentlemen. Thank call, you and you today's This may disconnect. ladies does now conclude conference