New Rite Aid (RADCQ) 27 Sep 182019 Q2 Earnings call transcript

Good morning. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Rite Aid Fiscal Year 2019 Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to your host, Matt Schroeder, Chief Accounting Officer.

You may begin.

good and Krista, you morning everyone. Thank you welcome to our call. conference earnings quarter second We

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

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

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

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

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

we with heart for on call Thanks, the Matt, call today. that It conference us a is joining our today. thanks everyone and heavy have to

that week Maryland. occurred Our by team the senseless facility support Aberdeen, deeply saddened at last in Liberty remains tragedy the Rite Aid

their families of the with those incident. and by this Our horrific thoughts all are victims, affected

keep to support prayers. and the We as the their need are Perryman our help at this victims, it committed Rite and everyone necessary of their to a Aid us and result that thoughts those families All incident. providing in of who teams ask Liberty

We quarterly earnings our you will now report. provide with

During the beginning increase the quarter, the strategy progress further separate for quarter, we effort standalone value second accelerating to in of the work, organization evolve hard near-term our our critical of our the been fronts. these a long-term. we’ve at while made on both to In strategy

positive great control we time, evaluate count continue same we the also of top-line results and Our experience same long-term a script we momentum store Company strategy. generated our and as engaged deliver to its customers. to show as and expense evolve to SG&A ensure exercise we our sales largest between our At to that in how to our investors many with stockholders alignment begin

As the insight Board are announced CEO new this Directors by effective we valuable of on we independent refresh as Chairman our the enhance believe long-term Annual our for Stockholders. or continue significantly our value implement develop and to as changes best and Meeting at to the We stockholders. Rite three and Bruce separating the accelerating received, governance Board’s will XXXX directors based Bodaken strengthen of and appointing creating in roles position Chairman morning, efforts oversight Aid these we to nominating strategy

the the adjusted growth. traction. that customers; in Medicare revenue, growth year, relationships by EnvisionRxOptions operating Part in to under by wellness top-line in other focused to a from growth is PBM period. in adjusted forma driven operations pharmacy of and pro which count. year efficiencies from to adjusted reimbursement our continuing prescription $X $XXX.X our same-store operations PBM, and period that improved to being D million same-store $X.X last operations investments our implementing Pharmacy in EBITDA, on year Revenues X.X%, from driving EBITDA last growth, second increase outcomes, terms decreased for valuable TSA key networks, and stabilize terms Pharmacy both on Retail decline million count year future leveraging purchasing pro to compared with continuing Services key capabilities margin EBITDA omni-channel prior a adjusted current revenues, grow access top-line that operations pro our to these number clinical continuing was of Heading and key the Pharmacy EBITDA for segment EBITDA To continuing to for from in count. value the strategic from WBA A customers the working membership. in business. payers pressures, of highlight the priorities, were we’re continuing forward, building the $XXX.X from due same due year the This expanding Retail due to our store compared $XX of our increase are reimbursement momentum increased business billion increase have was to earned Rite and Adjusted and sales a success achieve priorities: the providers. continuing the that In from a rates includes stores X.X% compared fees improving forma of driven EnvisionRxOptions billion, the were Revenue experience; providing priorities in forma would base million, validates million, Medicare D advisor our quarter convenient refining growth In all of $XXX.X In pharmacy the with been and our for includes million. personalized strategy elements of segment, $X.X offset commercial with to results. full and support efficiency period. because prior it drive operations we but and proposition trusted the prescription profitability. expanding valuable Serving sold including in to which improve significantly our to These service Part sales. operations in payer expand segments our quarter. Pharmacy are businesses quarter strategic X the enhancing we supported Prior initiatives if was prior is segment to were as rate Services of to fully segment, an important, quarter million, gaining and $X.X to sales increased adjusted Revenue brand, script and compression and in cannot EBITDA decreased year X% a are mostly shopping Aid PBM preferred merchandising, winning designed limited capitalize capabilities, Pharmacy our improve generic

through also and drug a Finally, obtaining focused right on leaner, pricing and more to control structure. efficient we’re size efficient costs continuing

early of And reimbursement by managing reimbursement some improving access. we’ve relations made these D rate terms XXXX gaining for Medicare payer rate network fiscal efforts improvements pressure, in benefitting XXXX trends. In increased are and already with progress fiscal preferred Part

been stronger With important XXXX. strategic momentum most convert format this our Envision, our percentage the continued quarters. to leveraging the is wellness X rewards in an some to reestablished to which to to same plan second has exclusions and results. And the strongest we’re received by decisions have build stores as to significantly same-store of making underway, In be count to wellness of and that growing additional prescription drug which said independent program in efforts We’ve customers. the reflected Bonus believe same-store as successfully a terms our new of expect some XXX,XXX loyalty we at plus begin brand, we best January half delivered At for continue industry. introducing comps strongest D We’ve our time, D Cash, well chain In we progress wellness chooser X valuable our notably time, the from EnvisionRxOptions. expect our innovative we transitioning year. net our as also is while in by transition quarter, to fiscal very cycle enhancing Medicare store compared over locations well year in the we second include combined have higher These XXXX, front-end lives prescription last format, in we new with made top-line gain quarters generated Part Part count portfolio we offering, members. the the significant

product We chooser very are well as Part our also excited existing price to as point, our at be reentering D a California chooser market the increases premium with in geographies. competitive minimal

We expect Part to continue in membership significant growth will this XXXX. D drive

manage as opportunity we continue have most to drug the very we possible. important efficient costs efforts way in our a our Next,

discussed, the is years. exploring option and As generic options, large with our up price even able drive very for a enter a rate for purchase same growth, to drugs we’ll key as purchase Walgreens footprint, helping because XX at the at the be competitor. to minimum, consortium us option including This short-term into we’re significant potential smaller at to we WBAD all drugs scale

expect to our this already SG&A plans WBA. savings. have with made have some to fall. SG&A to And our expense finally, to progress going to We significant We continue we’re as and TSA decision make implement off cost efforts reduce stores managing roll

take stores. operate key parallel better and And capabilities, Walgreens, seamlessly these new to footprint omni-channel plan investments we the enhance generate the million more and to to in with have as path, cost TSA organization we of our as this. is plan further On align of our to to executed we generate the business, we experience out continuing to $XX areas income. in a in customer our strengthen store Our our achieve goal new we have is a momentum efficiently make our technology which

first So, important of accelerate evaluate approach some marketplace. the further strategy momentum as us broader important heading best we evolving into our the the time are retail year. near-term healthcare we made progress while business strategy see, and to as fiscal can to look during And efforts Separately, of busiest our gives you to our to this progress we’ve ramping our in up identify our year. longer-term half

future a strong we a As company, foundation growth. for have

and an a of We wellness services. store health and winning award well-known and and have expanding loyalty program, offering trusted unique wellness differentiated a brand, format, an

significantly our reduced in have debt we’re balance We seeing improved positive performance trends and and our sheet, top-line script in count. also our

momentum to of work have for significant ahead have we amount full team as strategy, confidence us, the we our a our While we future. Company of in build and our succeed tremendous

on time, it excited Kermit? President our near-term to the our critical turn our is the drive I’d we the Operating over operational about time Chief strategy. will opportunities year. At Officer, enter Crawford, to additional like have we who helping of key and details capitalizing that very share continue progress as We’re to to this Kermit

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

to like most near-term operational spend time, on organization driving next growth. value driving area force critical areas focuses initiatives these be further of the Today, strategy the for that increased our of will over each near-term our and I’d behind an couple for providing explaining key Our update years. the throughout the

One preferred is network, also of in access XXXX. two national and To most of limited continue in focus Part addition to networks Medicare to D expanding important to regional build Envision’s in our preferred areas on comments, one preferred and calendar John’s networks. we’ll participate our

continue ensure current discussions We on and script Maintaining that to access network help momentum. D our Part us to calendar on capitalize network XXXX. for successfully have commercial to Medicare will also access opportunities increase preferred growth our we both

also while ahead of outcomes. count enhancing efforts also capabilities clinical the in we continue our our management, health network will second adherence script to and to therapy our drive by pharmacy cycle count contributed around we forward, quarter. In medication capabilities continue has XX-day improving an medication enhance adherence, as exclusions increased Heading on helped certain and quarter, patient increase improving immunization. which script expanding growth which medication focus for prescription drive Our growth our the prescription, plan clinical

continuing providing vaccine delivering level our ancillary by nearly quarter number our to with higher successful certified perform during new immunization see As additional given services to grow strong therapy management a of medication non-flu look we a deliver by tremendous pharmacists immunization opportunity results doubled highly patients, already The this we to to the year. well. also is Shingrix of which the care program,

allocated business. appointment busiest another to In insurance flu million shots, number growth, support efforts necessary a and aggressively a grow total no script important no count. buys up in surrounding Year-to-date, growing file part addition, cost of we through prescription we’re with our as administer pursue buys for and most we’re immunizations, we’ve are to file year prescription our toward opportunity conveniently completed time year million market to This entering also and year, this $XX.X which an higher this increase for with ramping of we’ve completing further plans. as our record of conditions of number fiscal allow. continuing at flu prepared ancillary transactions eye while we are of ‘XX available $XX To

We to by growth also opportunity a valuable great wellness leveraging drive brand. have our

of Our to highly important rewards part popular brand. business. to make significant our wellness+ contributions continues remains unique an And loyalty it our program

savings our Cash significantly advertising our partnered our John develop engagement is that which now flu As further campaign agency mentioned, introduced To Bonus has strengthen successfully program. Bonus with vehicle is X and have primary in brand, program. this increased of Havas every out America, transactions. Cash marketing have helped top-tier North we a supporting us immunization X we a marketing annual comprehensive and in redeemed as for customer

strategy specific areas Elite SEM focus planning, e-mail direct content, and for PureRed media mail. for for JPL including social circular digital are partnership design with for with of We this TX and agencies additional production, and X and supplementing

sales they to base. continue our continue the part to wellness store our script outperform will terms the fiscal And wellness innovation Remodeled same-store newly the believe for of count. awareness our serve of Another innovative best rest the entire year, we in stores key opened and is efforts of This also and by format, of enhancing in which showcase as format of chain merchandising. represent industry. is our XX% format end than more store brand through front-end store we a refine the as our will

made more support store, also excited developing the to of assortments, And to and highly customized, health as really optimize be be additional the wellness customers bilingual and in expanded healthy our merchandising, and local options their we’ll offering look has we ethnic inside on We’re star journey. We’ve focused and newly which omni-channel customer engagement already as with our expand prescription redesigned significant is refills. app, our experience a enhancing all this progress at points to increased rating touch and mobile we driving X.X capabilities.

addition, or awards we enhance or shopping great direct leading Aid with in-store using in making platforms loyalty we are sure experience. print with channels. data us customers Whether shift they have to Rite to or leveraging our from In focused app advertising, our wellness+ drive-through, personalization to on integrated online our continue digital management successful are all highly are being a mobile

growth strategy our To-date, business. growing EnvisionRxOptions, key D specifically Medicare from has its D Part Medicare focuses Another continued. part on of Part our record

our XXXX lives enrolled January XXX,XXX anticipate Part XXXX. D now XXX,XXX in and of for Part of to over gained over D the begin calendar over to the steady enrolled All growth we net have when have remainder We members end the year goal by would XXXX. of and XXX,XXX lives new meeting told, compared

able same have terms for Finally, while as gains been offset have the season the of number the our obtaining to a drug those toward majority the XX%. reimbursement our vast XXXX, expected be secure we At be areas approximately will larger most we been of renewals move focus we’ve of experienced of commercial Two end by client selling efficient with retention stabilizing a clients wins to of pricing. of client. in lives rate time, calendar pressure rate loss gained, the and critical generic of from

reimbursement of commercial add our In have XX% we important over effective reimbursement rate of business progress going and made by multi-year protection for rate predictability rate, generic even with securing contracts forward. greater terms an to

all of understand manage possible the significance efficient costs. we our addition, to drug purchasing In delivering way most the

WBAD option. including As we all John avenues exploring the said, are attractive

ensure terms the SG&A, March of Our in And optimizing deliver of This of we see and we cost to and our in and savings going to we expense pricing our opportunities significant in forward. contract base. maximize improve current XXXX finally, evaluating profitability continue wholesale to expires process evaluating includes are controls. store

with an of fiscal this rightsizing our XX the as continue closed evaluate down we underperforming WBA. have XXX to TSA the year wind locations We of identified organization and

to I our over to the and of operational many efforts it Before progress like making I I’d strategy. we’re execute say the as team turn just near-term our Darren, we appreciate that

we our quarters. front-end performance count second the As John delivered script best in quarters in same performance sales our in six mentioned, nine store best and quarter,

key As of we accelerate strategic time. assess for the continue we look to long-term you to partnerships build our on opportunities will strategy. Thank momentum, evolution this your that and

over Now, for results. to Karst it Darren I’ll turn our information more financial on Darren?

begin performance bond Thanks, changes for on on related our update that we an impairment Kermit, asset I’ll joining also made second use walk touch non-GAAP to and before on results We I’d of and business. assessment fourth provide and of the quarter minor to everyone to the including address us proceeds I’ll financial measures. during perform took that some charge I asset WBA goodwill an thanks today. our test to through a quarter. we our would redemptions have intangible the intangible discussion, EnvisionRx our assets impairment our annual But long-lived like typically sale.

However, impairment during year, of required periods. during the to are we test for are interim impairment when there indicators

we spite delayed EBITDA projected tax. but million that opportunities continue accounting see been In has ramp to that program we primarily business rate growth from growth our which our our of industry-wide business, As business than up for intangible for growth a changes fertility our net to assets all retail required the to consideration quarter. of our Envision of pressures for the loss concluded approximately result expectations expectations of of commercial of taking and guidance, an were assets adjustment, that tremendous impairment of administered. Envision, primarily driven second current $XXX our of in including perform growth impairment expected extent, lesser excess the to direct-to-consumer in in testing by impacting we slower due there earlier our those at drug intangible were somewhat during was into to our of we After our a

the result, impairment value as So, and when the see portion experience XXXX. analysis flow in at our we lower expect time. to growth of discounted a growth determined assessment our fiscal business by annual That the the we to than we business performed opportunities continue robust over valuation our D said, cash of Med was end also commercial

remain this continue over valuable our term Envision the grow view charge, as very a to ability in asset. to we despite long and So, confident non-cash Envision

capital our structure. turn from to Now, let asset WBA me review our proceeds of sale current a and

as of stores As of we calls, received the additional of Dayville WBA proceeds $XXX X,XXX billion. to and million Center of September will to required the on million distribution remaining all XXth, about received received Distribution After completed that transfer WBA, nearly to $XX sell end and had our cash sale we of the TSA we be These previous completed used discussed of on two reduce we our not XXth, quarter, the sale were March the the totaling agreement. second do debt. after end WBA include an proceeds the which centers and amounts further before is to $X.X that

by of revolving this facility. that a very maturing our from our our debt received requirements. all $X.X loans, term $XXX and million. now of notes, on of our with we XXXX, pay debt April have the credit other million manageable we have reduced The our on result we call, X.XX% of We’ve also notes used last our discussed our redeemed to reduction to-date, borrowing is which proceeds redeemed X.XX% prior XXth, credit $X.X on been capital to none XXth, June we our to billion billion all off structure reduced which we have As to $XX revolving X.X% than we reflect commitments note reduced our

the approximately pro adjusted cash the that of before debt least currently at $X.X billion of quarter-end XXXX times forma EBITDA, pro end of of fiscal leverage pushed when effect revolver as to of out or distribution and are has of for and XXXX. debt the our net expect We about trailing given trailing be EBITDA receipt ratio a maturity to-date WBA. proceeds down of times and of The to the centers a forma X.X us balance of pay sale to planning to X.X refinance

in factors the higher Other non-recurring a to share current or a suitable offset and adjusted loss charges share will was litigation litigation were litigation termination the California. settlement fee The Adjusted to increased be year. the was Our today $X.XX all from income or quarter I in $X.XX second adjusted turn the in impact in versus charged $XX.X Revenues many seating Aid of Rite charges, charge net were per impacted share from which impacted current of reference in not results. difference. whereby favorably previously impairment share The settlement of merger per was our now quarter WBA. versus I The million in an is action billion, lease quarter $XXX I’ll $XX state continuing lawsuit, loss EBITDA. This quarter for has due million mentioned. driving of lease the $X.X $X.XX to receipt over this of quarter billion. $XXX the the our impairment year by related in $XXX per was retailers and most year increase from million operations. costs, or loss strong primarily drove impairment increase income with an in operations income increase liquidity of a acquisition-related X.X%. or that during net loss review of and prior which by of a per will at for Note from $X.X associates $XXX that $X.XX providing charge Net class quarter store $X.X quarter. to and and million or loss Net of one-time the million continuing net quarter a the for data asset of intangible million, merger the was million was year net continue California. charge, a the termination termination prior was partially the prior prior

we quarter, interim $XXX.X change fourth by in was stores include under extensive in in fees than quarter, we continuing more compared Adjusted second this being quarter, the August. we assessment guidance a $XX store to do impairment XXXX results sold our did in annual were announced quarterly triggered do normally $XXX.X which quarter. analysis period. do million the that our an supported TSA been extensive typically prior the testing earned, during our more year would to quarter. We operations of was X,XXX During have for the current in if million WBA prior Fiscal of million from all entire year the not that EBITDA

impact basis. our X.X% quarter. effectively on same-store XX-day sales of count script being the from decline in year same-store $XX billion, store year’s account sales, potential the If a of fees, increase $X.X up pharmacy higher which have been was Same-store of with million X.X% to than segment Retail reflects an Front-end you as initiatives. result script take adjusted in in offset and by the and adherence the networks due into count these or the in slight flat pro -- quarter sales a increase certain sales forma impact improved X% adjusted with $XXX.X a quarter. the excluded prior segment increased quarter, increased were EBITDA for year pharmacy closures. Pharmacy Pharmacy revenue same-store of cycling The clinical X.X% the was would X.X% partially by in last second same-store prior of

was reimbursement dollars profit last margin a As quarter were unable driven gross $X.X to second and we percent Kermit $X.X unfavorable The in Adjusted the decline referenced last quarter Total EBITDA and offset drug in and million, network expect to XX gross million as in was we expand year’s margin his profit of by revenues. XX year’s access efficiencies basis basis in second of a compared Retail gross our to quarter segment preferred by points declined revenues. that growth. percent calendar in points as gross was generic lower, remarks, to reduction rates with worse Pharmacy XXXX. script

quarter expectations. Pharmacy experiencing While and savings we our met have and Retail million quarter the trends, EBITDA a revenues as a XXXX year revenue. points XX to drug million less basis percent Adjusted historical $XX.X not generic segment generic was fiscal as of than SG&A are prior than better year’s expenses second by our have were rate compared been last SG&A was our while cost higher SG&A flat. in deflation, $X.X the of for percent better

in $XX reflects prior the WBA results TSA that EBITDA by quarter. prior our actual which adjusted million Retail fees. million from forma of EBITDA, Pharmacy $X $XX the of inclusion segment year SG&A Our decreased effect versus increased our the year million TSA pro income to impact in current Adjusted fee versus gives

Our increase Pharmacy an primarily membership. or which to was of Part had million D revenues billion, segment $X.X X.X%, of Services increase $XX due Medicare our an in

mentioned strong Medicare had we a see Kermit As D year. earlier, and to bid successful XXXX enrollments continue this very Part

quarter year million and the our course as invest current EBITDA were $XX.X calendar of lower covering we add as investments through segment $XX We impacted the for are of quarter other now to by the future results EBITDA than business in over expect Adjusted and last Pharmacy was operating growth. million XXXX. $X.X XXX,XXX lives adjusted for throughout remainder we million. year’s the for of The Services enrollments second and of grow compression operating the covered margin year lives commercial

Our cash a higher flow had mostly statement of shows working receivables was capital build, primarily differences. from CMS seasonal working inventory and a other activities various a capital million, net well for timing we increased from payers from driven as receivables the quarter of retail specifically, our Envision, build $XXX several typical at resulting More timing. use segment as cash and by which receivable in operating

was year’s was the quarter the fee the year used $XXX million investing last half $XX.X Last as We turn around. these second to cash improve cash termination of the from timing million expect operations merger million from received working by for WBA. impacted items versus cash Net our positively in year. flow activities flow capital in statement $XX.X

fiscal the quarter, stores of $X.X make XX operated of store And base. within wellness the we are At continuing the the remodeled XX% over wellness expected second our the our spent During stores buys. operations. up year, to we of end by stores, quarter, the X,XXX file and million on end

wellness be performance to continue pleased with We our of the stores.

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

now Turning outlook. our to

We our X. expenditures we same-store on updated fiscal sales, are EBITDA guidance capital for XXXX adjusted August confirming previously revenue and had full-year which

of is expect $XXX Adjusted EBITDA to We for store billion expected same expected between and be range to to $XX.X and be full-year revenues $XX.X $XXX million are billion sales X%. an from to increase between and million. the flat

for full year is net guidance recorded from $XXX $XXX primarily previous now due expected between between Our that loss charge million non-cash in now share income we to $X.XX net a our asset to per is Adjusted quarter. range income to loss share be per impairment expected and The intangible of be increase the to million. loss of a the is per or net this share. loss $X.XX

upon to EBITDA to that couple want call of touch adjusted net we adjusted Before turn I back our over definitions and a John, changes I made the to of income.

EBITDA. a as income related in included program revenue item reconciling changes wellness+ We to have to loyalty historically our from adjusted net deferred

instead has under how this the we timing forward, item relatively include Envision. that, back amortization adjusted release quarters loyalty been now during to are adjusted sometimes due reconciling all longer annual program impact And made revised the on rewards our have to turn income to have reconciling modest does conform our presented of earned periods Going to in EBITDA, the as net our a The have customers a item net no we’ve with year. change elected wrap income, expense the impact program and comments. this let including of change by to this used prepared impact revised from to the me to expense item. of amortization as is to just but minor All to The over to our John related presentation. John? include it up

Darren. Thanks,

transforming the these our an of our and team our customers. questions, loyalty a offerings half delivering thank great taking wellness done Aid doing. to made year focused in Before has And converting the as they’re the accelerated format, work job all to during great to experience the Pharmacy we’ve first on Rite strategy We’ve we for TSA. like our executing expanding program, stores by team staying important additional of begin some areas, outstanding our the I’d progress all our Service

our In rating the fact, like reached the all-time quarter. high overall quarter, the just in first customer second satisfaction new

says the our strategy reason remarks heading grow full and about to that another extraordinary have yet That lot the business our concludes think here at have gives confidence to prepared Aid a team forward. for call. we us in Rite our I

will We lines open questions. the phone your for now

question [Operator line comes the ahead. Guggenheim go from Heinbockel Instructions] first Your Please of John from Securities.

Your line is open.

Thanks.

XXX,XXX the growth of projections, in So, I start the in the your long-term given Do today? of thought think think some of much past grow D could And PBM off guys that teens, John, sit long-term. with driven that me still by let how that would Med numbers? -- you had where you be we

So, today. we believe still that firmly

we couple Envision, to do we’ve here at if look over and of that the think are the where we Rite years. last stuff is been M&A some there this that has Aid attempting at of some activity strategic question had business no on with impact I

I legacy think, all We what that of a we pretty form decent probably actually than other with agreement legacy, a a a we different commercial selling our season. had, had customers. customer have John, of larger had

kind landed was of it legacy of that a so, we but little landed. we kind And a on worked where bit, here ultimately issue we’ve

So, we’ve on the through temporary I headwinds side. some battling think really commercial been

transparent offering of ton Envision. There commercial to kind focus Medicare D of the some of But about of us, Our Part noise the there past transparent is in plan part is on to on as an that growing We the of our growth opportunity for continue a get the think business. us opportunities lot is and I side well. interest a there to in as the excited invest we’re it. really important marketplace. business. of here resonates we And -- business

million? think, dunk a a a goal? out of X Is you to that years, sort slam Do lives Med looking X getting or D stretch

I It’s bid some But, very marketplace. process. rapid think, it’s an here. a growth it’s competitive annual had

competing year we’re grow. be competitive every And to bid got against year we’ve every have the or folks that very substantial in that space. We some to pretty win in

So, like lives where I’m not But, going are for there. we space. projection to give you we the in a long-term

We’re making good progress here.

have product we again, think, resonates. I a that

can do And over years few the next here D Part grow we so, think space. bit a I quite in the

in quick in the then, members, sits Is just when a that’s And patterns. kind of lastly, -- there progressing? growth seen potential for silver, in growth their update, reacceleration? where moderation So, is we gold, spending have and at that a haven’t all a maybe we how wellness+, look you or heard about just growth that lot

I actually Bonus good there. think, the some picked give Bonus got some I’ll comment overall Cash in there. just an marketplace. But, since up Cash and think has gotten has got -- Enrollment traction data I I’ll you we out Bryan

time. is think opportunity program. some spending develop think the the to we’re to progress making a So, really with there great continue and over I I accelerate

we’re I Bryan�� So, right with I think in a good now. it place pretty mean,

customers. what Bryan for with our at it’s that retention our funded gold John cardholder said. of is total news about on that I here. John, base sales. It’s we’re accounts XX% great our rate X% currently about XX% And about the agree Yes. total of

sticky it’s a So, us. very for group

from next Please comes Your of from question line Charles go Rhyee the ahead. Cowen.

is open. line Your

it’s will the stores on year. James past, stores Charles. end the all in non-wellness said It’s not that Hi. to of stores About be XX% the wellness become know I for wellness your are by expected of stores. been

to remaining format? that refreshed Also, the will -- sorry to to of older stores wellness the transition much I’m newer be stated XX% how you’ve non-wellness wellness you formats. some XX So, remaining stores of expect

stores current will sales can help profitability? in or makeover? So, of the between wellness terms older about in much quantify performance be of And stores getting us how maybe, difference this the wellness you of newer and terms

where not may I’m we up a end being necessarily that specific This those the stores -- Darren. is number will a certainly of Yes. not have group XX% sure go? There or is wellness stores.

continue Our and them kinds new kind to wellness of a And process location. probably then, really stores. of they take those relocate is become stores to to

of say, XX%. you activity kind remaining be have... don’t in would a I I that that would lot of if So, know there

that good relocation I I renovate of here think way mentioned, way have chunk about as it there. with the mean, in is XX% as And I of we Darren group There’s well. opportunities some for stores the work years. this guess, to Yes. to the have still a we’re we next couple

what as do those continue as to original can stores the opportunities wellness get been right and those working of at we look relocate even stores to the we’re we we the of real estate to working and So, portfolio do, -- probably we’re few in locations We see some to market. have place have a also.

the great continue It seeing some at some I we’ve next for got return, to the invest help we’re years. good good to So, the few pretty in least here. places base, on drive And a refreshes. growth store think, us should

then. of stores, of evolved early it’s wellness in really But, bit them. and those some since the Some quite they concepts had merchandising things a

back the are a at the that this you years cadence thing, point. this stores when have X, we good to program of now go about into wellness can X we think of So, that group

here continue store plenty So, to capital the to -- invest invest good into spots base. there’s of

Matt. And is Jim, this

the if XX, front-end basis the slides returns the have XXX investment. done I front-end an count. would have expect over script put wellness both count your and we from out out order we chain justify in would say to from generating of time both stores they in rest and outperformed question ROI are by script that roughly And we’ve the perspective, a points page But sales on on performance, -- got on a think the perspective. I data you they some to stores go on how the the

gets reinvestment [ph]. [part] good pretty the another But

of the model. of is, kind capital It to does. type full fresh-up is the news a opposed good reinvestment as [indiscernible] spend And

current market generic on are expectations sure that current relative generic to And market? previous what the in to downward the more year $XX the rest you the changed in steps in your August. resulted EBITDA generic expectation, in this bid expectations And market to line drug activity, with million the of Can the for you make adjusted elaborate in early revision led to future are revision? your taking what’s

that of a actually. half second question, the question is -- That’s great

I and estimate think kind clearly, yes, on we But savings what achieve in we’re as of jump in contracts third-party can have think So, the pharmacy can probably here. our and we Darren to we side. Kermit negotiating

the into as contracts have long future. we So, that are X as years

that the those there, savings potential into of help longer at we kind occur what contracts. generic market, as they the to will drug reimbursement us pressures can enter term are looking rate digest the constantly trying we’re So, understand

we based particular trends, what last be historical So, an expectation as seen we that on in the our this instance at years. think had with our I had we’ve to that current would here, built available we plan looking more us, for consistent of information this couple generic year, savings over

we expected. quarter here us, it’s savings we just of level a that substantial that through the pretty at came in bid our we and bid weren’t for second As

really that’s guidance. So, drove what the change in our

the trying can, marketplace. of get the We’re they purchasing in to working terms partner, best information carefully with our

marketplace that have remained we the to the because buy a marketplace. to in Our team directly has here, used drugs we here very ourselves, connected our team

we we clearly, like information But felt right. I there. had good So, that pretty get didn’t

So, But to a necessarily clear driving we’re build in plans us best add? to the will the that as can make you always manufacturer trying just sure point, how to guys it’s from want the marketplace. to coming not we your That’s these we year. have. we’re behave information challenge Do the we

in significant is, certainly of generic it has saw so as wasn’t Yes. years. add and the last I deflation. we we been would have The did only couple I savings, mean, as It just thing

that the market, generics the to come And lot is actually change. things how that of have kinds always manufacturers a these with new will add that exact market these those thing come to profitability and would these don’t only of on information, I We of depend on can number generics products.

is part I And change. issue, manufacturers, of the of and our existing number think drugs can this on

with disruption there’s if or of we their cause the enter other takes manufacturers year in there’s on to our regulatory a for or drug. drugs, rationalizes into that that, actions like manufacturer drug So, cost several can expectations. can a land portfolio large where a the side not line But

with Okay. of Theoretically, just on $XX this million WBAD question generics. could of that… kind option? been a savings to much the What have follow-up that And offset how would

now what as we time back sale today that identify in with a a year associated we’re process of option approximately the value did process that our per at room the of right the the we’ve as again work is did So, right said we is WBAD option. asset that we option on the evaluating are Where now the clean in ago WBAD agreement.

and a a of in looking including on have forward, terms go the I process, WBAD how we do options anything? Kermit, at number that robust we’ll in a process, option, we’re of a to mean, have conclusion. pretty comments that different So, as process you comes further

that, John. I covered you think,

process, in expect it We’re evaluation and complete to fall. this we

Your question Please Sachs. Goldman from next comes of go the Jones line from Robert ahead.

line is open. Your

morning. this Bob This is Kevin on for

more preferred how networks to with the regionally? then, your on profile existing does or Could plans they have getting these said compared And guys focused XXXX? access just going out national Part So, D progress noted the plans some book? guys your you margin you you in been early in have conversations to specify, been maybe

plan. Express regional our plans There’s Kevin, plans regional that not a these plans, would book two place are be both, on we’ll these So, as us. business. business actually takes book And of regional Therapeutics we’re that plans, tell focused one but conversation in and I as you our preferred very as on for Prime both within within Scripts good of much national well one

margin focused PBM the have really contracts to and multiple our Many getting network. networks. And we’re these it depends XXXX. D year the the continuing into that’s these why So, on Part on we’re networks work and is, preferred of partners with

should in have to we’ll because we’re looking to cases. We’re shouldn’t at one our many business these one networks and we get reprice determining every of and which strategically in

those contracts so margin. We’ve So, gotten got of We’ve to our do rate. to predictability we’ll stabilize of providers. that. effective networks, to continue rate with We’ve -- reimbursement our our we’re XX% our rates, we better multiyear continued continued generic commercial protection to in protect working we’ve have

Part profitability to So, business maximize we’re looking book our network. of D business, our and to the at of try entire both complete commercial

have Great. housekeeping Thanks. And question. I just quick one then,

noted guys guys refinanced idea XXXX. on push the you what any have at? a expecting you out early into you’re So, get this I Do think rate interest maturity might revolver

-- existing I it’s probably it our somewhat think would rate. I mean be comparable to

from the next of Evercore from Muken ISI. line Ross question comes ahead. Your Please go

line Your is open.

the and Hey, that two for perhaps the two peers quick your of of anything results uptake store you’re closing. then your reaction The some do around are stores. format. changes see deals these there It’s that’s to guys. starting nice I think see in at driving on just biggest as one It’s a had deals questions one wellness then, Yoon of productivity? selling these maybe What EnvisionRx you maybe to around this format. largest to Is within comp these Ross. on seems season to Suzie wellness on on another stores be vertical pipeline? the up closer to getting the And another

to those we as season, And last of front. we with the continue have as some of I do we health that’s terms transactions today a on customers the I a couple space in of relationships regional plans. some have really cost vertical interest of in great think for interest important fruition. lot well. are to will that on And integration And going come additional growing a So, option think selling that

pretty and kind people if option us. an concern focused we them. that aware to a are of So, them And on in marketplace independent that’s of it’s that making opportunity for be out exciting trying a for we’re to

So, for think pretty I that’s us. opportunity a exciting

what -- second the the was Envision of part second The question?

What do improvement? within the changes that’s some these the are performance think stores you biggest driving of

I you number of makeover from on of some that merchandising dramatic yes. we stores, format. do, changes. that? wellness do the some to both is There perspective, want move to wellness staffing the On a to Bryan, It’s there of pretty things a a the don’t store touch is

center. store. staffing layout model repositioned pharmacy is full the expanded Wellness new mean, of new position, for merchandising, the Ambassador I assortment Yes. the in The store, store, in the

of format. old it’s just complete new redesign a So, the

In lot over-the-counter and easier the I with the it’s important to couple work instances, kind can a things work of things merchandising that easier cosmetics for really with. many done and I some things. organized touch shop. just think think in of our you of other and to It’s customers categories, make We’ve store differently a does product. to

in what that stores, model the provide deliver store; additional are we pharmacy these a including rooms put can in terms we into So, really pretty immunizations. consultation different services, so thoughtfully it’s of

pretty the store. a substantial of it’s So, makeover

Please from Your Glen ahead. Santangelo from Deutsche go line of next question comes Bank. the

line open. is Your

up already good But, Yes. want follow-up morning. John. on of discussed. follow and just points couple a some had questions. you’ve Thanks Hey, I to I

were thought? deflation what making you changed market part the wasn’t more? Are in the on I making biggest the case that as about of First generic was on that bit a mean comments what you elaborate you the the generic XQ. maybe by delta was could that in driven as little high maybe you

it what what exactly That’s happened. is. That’s exactly

pretty as We I have gotten generic substantial year back as can savings remember. far for every

we’re manufacturers, and time, and manufacturers source, out right order instances different now of to the manufacturers them They So, not there’s that’s to reasons. drugs drugs the and dual on more a but in generally over in have that some back many some couple too them. we we drive seeing more what in manufacturers away. and I in for is pressure which into over reimbursement to single some come every mean, happens do and down that tends offset as then you’re can one get profitability have marketplace year. those rate may And time drugs. more getting What more is, at have cost mature, enough really will

on cost down instead down of may or go that up the all. go so, not individual And drug at

so, some other things those savings places. kind get of the in we offset of of kinds And

of deflation that generic have we the level rate reimbursement sense? pressure. what not will net-net, So, drug have to for as we make expect Darren mentioned, at the overall, it Does but offset we in terms year

put of you’re gross what and generic around your and how impacting expecting branded numbers that’s maybe you Could deflation, margins? does. it in Yes, some inflation terms

those We head, generally close of say, for off the side, don’t top the that I that This brand down over my substantially reasons. would just quite last couple probably, slowed is competitive the years. do of just on inflation lot to year side, say, would what that kind we were this we’re the inflation a traditional down on the less -- last from year, savings quite bit brand but year. of but a I it’s getting levels. generic it’s of

You can change, see a the from of the guidance big magnitude it’s number. pretty

more. maybe ask the material discuss Envision store lives, operations? mean, having of if look I and you covered one when on a seeing even remarks, you little noise impact lot Envision. on of that up sort Ride of in Could there scripts bit strategy And within around administration’s to your Envision within a Maybe the around the last obviously are your Aid you’re ramping your been uptick strategic concern your Because rebates. I’d you population? it’s the a blueprint, value just follow-up has efforts evaluate in prepared suggested you

you’re just you these sort originally little fits as a businesses bit are bought that when thought you synergistic it? into elaborate So, pie, if and could of whole as maybe how the

Yes.

diversifies of there our them. little the bit. on make a think of business less I mean, it were the business. So, I us a couple a things about One It does little dependent is, drug retail acquisition

stores. is D important Envision as to other Second to us to some realistically, our preferred in is, us. plan in. drive it the as access gives right? that we’re big big And those that yes, assets. that’s not Medicare allowed space, particularly to thing Part to a And us It subscale has X, But script count is

our synergistic that I of and drives stores, continue to some has our progress forward. So, we’ve and script to get it some kind And count as there. more going made we it think, to of some grow value it into is opportunity

So, what that’s doing with point, of how they your fits -- really to we’re kind how together today. it --

as that preferred you customer. Part D Medicare is around have this Medicare D. been customer networks in Part not And know, our we just valuable add most I’d

our initiatives to Part is of into those strategic get of more D networks. One

significantly versus our a D other our Part share of market Envision have higher We lives competitors. within PBM Medicare

share So, play network and network is to market the Envision Envision in within that our the that it, network we’re gaining us. the important and we role

Bank of ahead. William Your of Reuter comes next question from go the from Please America. line

line open. is Your

But morning. open follow-up synergistic. Good time-to-time press be bit you’ve of the question. It’s business. be obviously reached a little could PBM from that to if on out to that I the the were rest interested parties discussing, there’s from I would felt But, relatively guess, you? separated suggests of a last they that retail know that the you

really I asset unique think Obviously, its own has own It’s services. it great facility. is makeover fully and provides capable, marketplace, business. we It like freestanding a a platform. It its very PBM. its EnvisionRx. specialty in has today It pharmacy. clinical a it’s has the adjudication formula. has a that It a own It

think unique a able, business. our animal help to, synergistic the marketplace us as been said, those a capabilities in it’s basis on use I And with to So, pretty Kermit we’ve today.

some the we all we we’re years. coming And So, of the has not view them create makes here That’s it. of value think ton of believe growth We shareholders. really what couple think a Having a noise the world. it’s most from think last potential. probably we sense to helped said has great the company. to our for But, do of just in it always going that, our over

time-to-time retail order. big brick changing evolve provide one know of network terms X about of are you time. kind of years? And pharmacy the in going Obviously, I these from picture. for center such guess, talk some has then, anything is mail the might this the sub-segments X think to there there is can How an you next to be pharmacy of e-commerce mortar been different to extended of articles commentary over about follow-up. and just I that the how period industry

it’s interaction clinical store provide The clinical to to be think, digital quite can I appearance bring bit. think tools and increasing mentioned it, But, we the that in are through to pharmacist as kind better the a these impacted, bear I action, is supplemental if universe, important. bit really saying to our And we Kermit of a remains I’m tools going interaction different and will sure these I’m think order, center Mail will a of not will. things be about lot and to going you we’re of be pharmacy little I that. not the be.

mail have provided and those industry. come there our that the ownership XX%, to our with way bear is opportunity in issue. differentiator those will what we we an that also our our access issues impact the a and pharmacist to think be with for to that But model, customers. in is can in our team as -- do marketplace. And take that services XX% an But it with and viewpoint pharmacy e-commerce interaction today, forever. we availability relates from the relationship of the that or like can it’s this don’t order So, pretty but lives share been are something around as got It’s that around mature don’t or it’s

important an I that’s if we’re think we as we go So, Kermit, what want you cornerstone doing to… know of don’t forward.

or chance, services, you whether capabilities our our provide The it’s if would or our consultation drive home stores those however whenever, an those app, omnichannel to they thing to pharmacy Whether we do customer that needs our clinical online using want need whether built And meet customer. is are wellness room all and, would location, it’s have with by is only to goal I mobile, delivery, customer’s convenient mailing, new add, this of it’s we wherever, when that. services. through,

provide when she to us going how that and to service. where, meet we’re customer wants So,

go ahead. Hill RBC. Your next line of from Please George the comes from question

Your line is open.

value? ask, the guys. the the I Albertsons John, opportunities to you thinking the we’re are that process, years as big for Good of the We guess, Company about kind the about I would pursue? is Hey. integration guess for bit, as John. to what to way I create we a the past morning, touched company think the next, space And question. and now with guess, the kind a next shareholder in the on taking over growth that the I competitors channels PBM of thanks know little handful call can the of business guess, here I drivers going X move some But, talk other as the you X years, vertical of that on in over strategically it, big strategic opportunities

to on we’ve gone here think the is Well, through. is integration some going help content to vertical us actually and this in that what I think touched of But, a lot little bit of a of I we’ve going here. them --

really before, that avoidable this costs building with clear, to it hundreds because going after through partners I in growing is recognition to to outcomes recognition, doing billions I values without for these getting really being at additional But can probably think integrations, the incurred cause opportunity of think dollars pharmacy joined is of compliant the that relationships or growing bring of people vertical that treatment them I’ve in without It’s of said kind a here there’s we’re bear think aren’t that things to adherence a integrations I probably because vertical are couple but happen hip there’s a medication realize getting these and us. patients. some are help important what achieved cost. a either -- critically that’s of with real of the And, probably terms some we work where with with there’s retail of marketplace.

with in demographic a on resources an really to quality the have on really can work down we’re that, on costs. we of value drive So, to we of down here an can working our years. bringing health of to help a have is bear impact to drive great can If our focus care to drive our think of we aging we And life in and we’re overall that position the the we capabilities have couple shareholders. patients portfolio those lot over additional I do and for next what costs that

the know retention quick I much you safe kind on or Maybe publicly-trade level LMB the similar the of appreciate has of PBMs? of their last Okay. a larger in PBMs rebate risk, a two level the change earnings I But, be kind guys In to more that. get large of process. that we a levels. of a would of compared cycle, Envision pass-through Envision. in should rebate the have follow-up detailed a assuming lower retention lot even we reporting

Yes.

Carla the Casella Morgan. Our from JP from go final Please line of ahead. question comes

Your line is open.

Hi.

follow-ups. a Just few

selling timing sold the that On the proceeds you that? amount one. Walgreens, the for you DCs are and What that you to was mentioned of

was It after quarter. end the of the

it was beginning think, like I September, -- that. September a was And of million. $XX it something

two? -- then, that another the is should or this year And to cemented or happen other year, two it be would Okay.

WBA controlled but the to purchase Well, it’s when they really the of them kind of purchase TSA end period. wants as must to by them,

So, that…

what… And

So, before any could guess ends right in of XXXX. that mean, TSA I now, the go out. kind of October I extensions

Okay.

XXXX ends So, October by and when the the then be then TSA not would need DCs to -- sold? other

the exercise extension TSA Correct. there an for could they six-month two under But are to -- period.

two in regional -- that you commented Are regional or to And that? Right. And in preferred you networks you’ll be then, you currently did something like one did switch one aren’t currently you Okay. network and national in or one national lose XXXX. networks? two

calendar preferred. Envision network national D a we’re preferred that only Part our -- Medicare The is in No. in, as this

Medicare Now, D Part we’re open networks. in all

participate all network. preferred Part that’s Medicare one EnvisionRx just Medicare D, our Part we And So, in networks, network. D

adjustment CMS you issue it timing working a was Okay, receivable great. big you and a reverse? the here, And didn’t a finance do, quarter. then, we of sort which capital that should this there talked, normally see there working capital is Why like or you

well. reinsurance we’ve as as years It had past think, tool at that. call. talked to a We cost I finance this portion of used a in Carla, comes historically a last

reinsurance. we’re the using year, not this For

not it’s So, years, have a of an kind to significant of won’t if in capital future opt impact. use reinsurance onetime it a use, working to we

the in it have of Okay. the the is you value now what said books? then on And PBM write-down,

not now But, books. it’s million think I on said the We we value is have books. a is is I $X,XXX what can. the value what the the mean, on

Okay. That’s you. it. Thank

wraps I here. a that think misquoted Okay. Well, number I up.

I gave count the I share. the think of script order instead mail market

share X.X% order or mail the is so. So, market

otherwise, correction think today. a we’ve there, I done just for So, but

for think wraps call. today’s everybody joining I that us. So, up Thanks

you Thank now This your participation. disconnect. concludes today’s And may call. conference you for