New Rite Aid (RADCQ) 26 Sep 192020 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. And welcome to the Rite Aid Second Quarter Fiscal 2020 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded. Thank you. to today. conference like of to now speakers your would hand over the one I Treasurer Investor Purcell, Byron and Relations. Please go ahead, sir.

Thank conference everyone. second you We welcome you evening and to quarter call. earnings good our

me today's our On the Bryan Chief call, Schroeder, of Heyward Officer, Operating Chief Heyward Officer Chief Bulkley, Executive and Executive will Everett, Chief are Ben EnvisionRxOptions call provide questions. second Officer, we Donigan, Financial an with today comments. results update Matt will on Officer. On an Bryan update Matt business; will introductory guidance to provide review provide will quarter then and for and the and Ben XXXX take

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

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

and uncertainties item of on in start, and certain you Securities most Before our in are press XA we to we Report to other release, Form furnish recent in uncertainties Annual conference certain documents are actual and to risks statements. the that the differ. to forward-looking forward-looking call presented context results and described remind statements today's that our cause XX-K that These risks can or These file I would Exchange like includes Commission.

in with our reconciliation our non-GAAP described slides. certain the in using release in GAAP along be measures definition will and related release measure to slides. the we of the and Also, non-GAAP press measures their are accompanying The

Heyward. to With turn these like would remarks, it over to I now

be very my everyone us. I'm here at Aid. thanks for Thank Rite you, pleased And to with Byron. team joining to

on most consumers like Aid. Our company's Cross, leadership focused need communities Sigma Healthcare, my in providers the and of employers Blue healthcare. health career for and at in Digital. customers Sapphire in a spent importantly I've and healthcare Rite Primero are industry, companies the health associates, plans, meeting needs care served bulk foundation the I ValueOptions of of strong loyal the roles

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role play crucial healthcare delivery system. Aid Rite in pharmacists this a

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stores XX also This transformation. and Aid. on jumpstart and bringing been I the to is growth At Coast, West future challenging a acknowledge Rite recognize the for same organic company. a drives a that pathway right for our execution status I'm needs the spirit held new and East I Aid Aid profitability. I profits. the Rite And in time this days. a both track this disrupt have in transparency, growth my quo to the I with revenue have the for I to Coast. that is turnaround. was corporate time, organic vision now where team of focus Rite job and a strategic clear roles is of record I've visited

urgency day. with I EnvisionRx understand This team work face pharmacy to day with challenges field I've strategy. months the to in met teams, with to with I've our leadership our they their come. services continue teams our store the also our met closely to teams teams. leadership and pharmacy discovery review will the

a and It Aid to take business. excited at is We a Rite some new to forward for are day this weeks developing in strategy the come. I'm of aspects important all go first steps

plan to our our strategy months communicating finalizing and the be elements in of of forward key look strategic the coming with stakeholders. our will We all

increased for success second I'm to business. delivered delivered The and segment, has Services to Now our into momentum pleased Pharmacy we team EnvisionRxOptions building Medicare their pharmacy plan Pharmacy clinical beat helped the and been that tight the our segment count our EBITDA. us business the our In able In which adjusted solid quarter. continue In growth its control results. behind private continue have grow and see the materialized services growing of for the expense D fruit revenue team offerings. quarter, Retail handwork prescription to brand Part

needed fiscal alone to one in not solid membership, with we a growth generic trends While quarter cost anticipated count the current is savings are enough finish to SG&A growth, XXXX. seeing deliver momentum in prescription future services pharmacy control us expense provide the and and

Our team and our results. these And additional team key pleasure introduce details performance on quarter second of proud and associates. my of one leadership key to our leaders has hard I'm to the you to about worked initiatives. an It's for deliver update our our now

Chief Bryan With Operating I'd like turn over that Everett. to Officer, it our to Bryan?

to joining continue momentum of start our areas with building everyone And thanks call. as for saying we're I'd the again by key in I'm and ways. quarter highlight launching pleased Heyward. you, like the business, was prescription in in new count innovative Thank the to growth improvement engage A with for a X.X%. customers unique our pharmacy the same-store of that we key continued our experiences

services, clinical a the fifth high immunizations pharmacy key count Ancillary our of and quarter Our sales during and prescription from against deliver protect measles pneumonia like well grew growth. consecutive us engagement illnesses helped same driver were focus our of pharmacists quarter. store level XX% which shingles, as the and on as

campaign. provide will enter the momentum with flu of peak growth us our This important we as season immunization

shot, critical in how are our more customers our receive even year. teams firsthand the against highly which engaged I've their be that recommending stores While seen flu this will in protecting visiting flu customers

TV, full marketing XXX-degree plan immunizations campaign addition management. clinical supporting deliver key of medication and that to we're best-in-class adherence, search therapy In pharmacy flu a in-store more. to includes strategy radio, strong and a through services our engagement, are AIM Immunizations our part social, with immunization

maintenance three. count our operating this time so from roughly this more up And will we stores drug services. we additional our helped to our the and freeing begin while our including the East stores approximately Coast To clinical a means the X,XXX these margin help rate refill quarter. plan prescription our central a than shipments will taking expect step growth ability on expanding this important on to additional expected clinical capabilities efficiently higher customers. reimbursement that can place deliver fill experience support volume Coast. for in pharmacists and receiving complete cost We're in pharmacists free manner, This to cost-effective savings for also pharmacists enhance continue best-in-class locations stores time a to focus provide pressure, additional our XXX quarter by growth West an up forward to expansion better medication, for And must on us to our By we care. our services predictive beat pharmacy

devices seasonal access delivers we We strong will comps by an from provide integrated when decreased household But Express pilot launched to categories. continue had offerings. excluding to and and Ready care, Clinic cigarettes the summer X.X% delivered and tougher have evaluate performance same we certain front assessment Clinic tobacco. solution consumable personal with performance. we skin quarter Since two, enhanced other OTC, end, with chemicals In the distinguishing and care, also locations customers enough store our items. point-of-care medical offset Express this to and July, not sales opened efficiently vitamins to and virtual In in testing, five virtual Ready care.

to improved which same front for the and of penetration. circular margin our penetration optimization rate end a quarter our the XX%, year-to-date focus our seasonal is advertising a At new improving brand organization. for merchandising, rate We recently our owned brand due on time achieved own record partly

the new response XXX been ice the and launch our designs additional successfully stores campaign customer brand in packaging the expanded We Thrifty has including our of have positive. brand Refresh in iconic and to and Northwest cream Northeast;

a robust beauty and feature natural consumables. focus better-for-you and health, organic that brand items on new have increased of also We own pipeline

working we removed further quarter, during will accelerate and We e-cigarettes diligently forward. heading to our products all the continue Also own Rite from brand vaping growth stores. Aid

schedule any of completed We chain. also purchasing the announcement changes ahead for our our in were following throughout tobacco increase April. product age of these to XX important Both

customers, As we with capabilities presents digital know also significant relationships reimagine develop we offering, that while to enhancing our driving growth stronger a our our opportunity end front

digital leverage for second customers all business, excited relatively capabilities create and Our touch small to new digital with points. to grew to continue And quarter. seamlessly we our our still the focus our online as Adobe about on experience mobile in-store, connected business a in growing although XX% we're help across their partnership

As Gartner and by highly in to optimize to digital central will insights Aid's in-store Rite digital rich solutions resulting solutions, will leader Forrester, Rite a recognized channels, Leveraging in and marketing experiences personalized digital journey. role online and marketing acquire Aid customer across enable experience proven play leverage a increased Adobe investments customers in these revenue. and

launch this will Aid year. early next end-to-end experience personalized Rite new

care we the importance high provide. to driving service the of experience additional foot into recognize also traffic We our of stores level and

to services drive Aid with Our represents Rite to opportunity traffic a to and stores win counter incremental Locker Amazon key and new customers. partnership add

Aid Amazon now rollout than of completed have more the to Locker We locations. XXX Rite

new over providing X,XXX stores at pickup more addition, launched Aid rolled service Amazon's In to option plan out XXX every quarter than counter this locations have location. to at an we've Amazon in service Rite and three

are We're counts responding our currently initial incremental pilot stores sales increased transaction encouraged growth and expense. which in is of we self-checkout and the these underway. success by positively without are seeing adding Customers

to to throughout XXX Our sales. stores optimistic volume deliver an higher third additional this to is potential has expand we're about experience to drive and plan And enhanced the quarter. customers the

Rite and they for costs. are thank deliver As I controlling my Aid all grow business, experiences our conclude great entire doing to like while I'd team to remarks, the customer

by for continue innovations Aid commitment new associates and to the of opportunity customers be the and you in launching passion and Rite inspired Our we time. ways. we're the engage extraordinary the many Thank to our tremendous continue your team. I have to exciting embrace

to on Ben update EnvisionRxOptions' over like pharmacy CEO, it I'd Bulkley to our Ben? an for services turn segment. Now

Bryan. the feel you results, for plan the our in second compression achieving quarter. good business the modest about Despite EnvisionRxOptions quarter we Thank margin

in have lives We D a as won track mid our plan. in amount as Part well our and businesses substantial of health plan

a off December of as market XX, As margin XXXX. quarter to the few we have two not contracts compression in renew is did previously mentioned large attributable that

well. modified EBITDA We in several also two successfully will contributed as that to positively contractual beyond quarter and relationships

the more business independent attaining EnvisionRx We're for in lives about of health as our being position pharmacy marketplace. about their the a Clients plan at independent as in an progress with concern solution time plan is alternative the excited an combining essential competitors. meaningful because Our an indeed experienced when in PBM models. there and health prospects their services support of offering larger is flexible share option

PBM component under guarantees a growing clients because continues MedTrak a pricing company. we this traditional in PBM side of Our on pricing our renew well while allows. business self-insured to that focused employers client some the arrangement small model, is seen our envision transparent And business, of PBM perform pricing offers improved our core traditional a have and

pricing on preferences we're models. We is will client's our continue relationships. our contracting Part pharmacy transparent network of managing performance traditional because our to better or improved follow

performance. better is We network contracts, pharmacy agreements, side as contributed to the as pharmacy the which client optimizing our balance side of financial improved between are well

in and wrap pleased won current selling momentum year. are with commercial the the several XXXX season prospects the now XXX,XXX up pipeline also We lives with in our having commercial over to

with new business. arrangements one Laker our software white have also We label PBM

Our our segment both achieving strong MedTrak business and health plan double-digit growth. are

client calendar net working We for year retention our improve still seeing new of in are XXXX. growth and at are commercial base to lives double-digit this stage

a calendar year, Medicare roughly All D Part members past and gained as approximately over to for year XXX,XXX plan D Part now continues D Part we've sector enrollment lives told, enrolled in the well. expand Our XXX,XXX XXXX. the have

plans D year Importantly, approximately our XX,XXX in Med today. to XXX,XXX calendar increased number our from of chooser members in XXXX is

to area And specialty increased the the Year-over-year to important in previous strategy. lines quarter of business. approximately revenue revenues by be approach business. pharmacy in As year. we've progress by leveraging to XX% made key compared for second go second continued the of specialty opportunity continues of second its forward other with our our lean Operationally, the an Envision important our specialty growth quarter this our quarter business,

the our operating in so levels improve to structure of our are employees to and important the and performance, a clients We service their cost our members. and focused areas business few

beginning deploy We're to we very see better we're end everywhere workflows to to excited by our the traction this manage end. approach

optimistic very this alternative. independent business a time. an the seeking are for We about for your is at time potential Thank market the you

Now, I'll Matt? over information turn Officer Financial Matt our financial Schroeder, more on results. our it to Chief for

the year million of And per income in net million due was Ben. the quarter. the quarter, The $XXX.X joining or us quarter which approximately loss $X.X offset was million in $XX to quarter. everyone million per diluted quarter. by compared Adjusted lower the today. Revenues net in our prior this from current results partially adjusted decline EBITDA call, our share prior Thanks net down a second in and adjusted will impairment in for the share quarter $XXX.X to million XXXX which adjusted morning's thanks year's On current an in review or versus quarter, a a charges was our were fiscal diluted the year to through for walk $X.XX in billion, improvement the guidance. second $X.X current I were $X.X $X.XX income quarter prior

revenue billion, last lower year's million quarter $X.XX was which $XX.X Retail Pharmacy was than second segment quarter. for the

store tobacco adjusted stores programs. quarter. to of we X.X% the X.X% quarter. basis increased in same end X-day increased clinical store immunization the and down end Pharmacy by points of same prescription Our store same increase sales. since initiatives Front store points last basis XX store have was success down excluding cigarette of count by of basis in XX the sales closed when same were sales and on but our with the offset due a X.X% impact year's Same the second XX sales that sales

a gross be year expect and flat gross back growth of due lower to and margin And but Adjusted basis better solid last Retail million Pharmacy gross count in our points of Total of than quarter quarter second prescription regaining the the were segment year by EBITDA profit of a $XX.X year revenues. to We to Medicaid last manages in the quarter large percent unfavorable than XX percent as immunization year dollars programs. $XX.X million, second access half was the revenues. a to continue was to as prior clinical Network. profit

rate profit Our by front-end decline decline growth. adjusted prescription and in were profit gross store flat count was due savings primarily continued generic EBITDA to our in were offset sales. reimbursement dollars cost Pharmacy as pressures same gross

last SG&A second segment better million, for $XX.X points Pharmacy the XX quarter an expense Retail than year's was basis quarter.

lower and to adjusted the quarter from flat year offset a prior Our SG&A payroll income as strong was current expense control Walgreens. TSA EBITDA fee

$X.X improvements second we $XX.X Pharmacy than Services Medicare revenues membership. adjusted Adjusted network expense million to EBITDA improvements as $XX.X continue of of Our segment for in year's Pharmacy quarter. offset lower Pharmacy SG&A by D million performance, Services increase of increase segment pharmacy due million our to were increases to an but the revenues our invest EBITDA current had in continue as last which from we segment an for or $X.XX Part Services growth. was future billion, X.X% benefited and these in grow was

year $XXX the of operating for cash year's use of in from quarter the in activities statement quarter. a current prior of flow compared Our from million activities $XXX cash shows operating to cash of a million quarter, the use

quarter-to-quarter receivable and cash timing last the fluctuate I our of CMS operations second XXXX call, of from which of receivable in build occurs the from receipt which bills year occurs expect in flow seasonal current the our business third in our year to primarily due As retail versus inventory the to our we on mentioned from CMS quarter fiscal our quarter. prior

receipt due XXXX improve of to the inventory flow initiatives terms. to cash reduce year and the CMS during the to receivable payable expect We generate the of back half and payment of positive

pro was the And into debt of approximately leverage forma impact X.Xx at of which proceeds end pro Our adjusted balance EBITDA our ratio sale account quarter. Walgreens. distribution centers remaining our net of cash the the the of forma to second takes billion $X.X from was

ratio projecting end to due the of the the to working capital receipt receivable leverage We the fiscal be are inventory our seasonal XXXX six referenced at of I initiatives around CMS activity earlier. and

strong. of had flexibility It until was debt maturing Our billion liquidity we was XXXX; very quarter approximately at initiatives. end our runway and to the $X.X strategic execute no

Now XXXX updating let's are turn fiscal we time. our at this guidance which to

continued the drug SG&A Our generic year for strong control, rate of reimbursement expectations and count reflect expense guidance assumptions remainder offset pressure. the growth, by savings prescription cost for

Our performance with improvement driven in segment service guidance quarter, network what in also we assumes continuing second consistent pharmacy by the performance. pharmacy saw

total revenues between be in of to to billion to and $XX.X X%. billion expect sales We the of be $XX.X flat and increase an range same store

We $XXX and be million million. $XXX loss between expect net to

$XXX adjusted million between per adjusted per and and $X.XX be EBITDA net expect We income between $XXX million to share. to be and $X.X share expect

reductions. guidance the large the Our estimate $XX an portion XXXX the A we for includes of initiatives. net and our related of right for of restructuring our fiscal severance organization transformation restructuring loss of related costs sizing million expenses expenses at end announced that to to headcount

expect restructuring fiscal of the amount to the We incurred of decline XXXX. cost half in back

restructuring in part Keep or expense is income. of that adjusted EBITDA this not mind net adjusted

plan be continues expenditure $XXX to capital XXXX fiscal million. Our

we our XXXX critical capital XXXX. building the fiscal elements fiscal for at out our a the of As remainder spending work and of will on strategy, look we be taking

prescription technology will on emphasis buys include growth. XXXX file expenditure in remaining capital drive continued investments Our that spending fiscal for will a and

for be And will my we that completes your lines the now phone with questions. presentation. This opening of portion the

Instructions] [Operator

Goldman with Jones Sachs. Robert

open. Your line is

Rite strategic questions. the connect for taking again. appreciate and I I Thanks many the turnaround for comments for about the the Good company. Heyward, Great. good And, new few early at with morning. level us I need the I the to a you rate wondered vision as investors over pressure. this could see how you share be This do an much if level, company's probably high really you vision some if you and to network. think reimbursement within challenging environment? industry turn you know updating trend how forward in repositioned of think like it feel narrow persistent the think But will? around your see next So And Rite can you issues as just Aid of if driven control? maybe toward you'll you a more on it be it's do days quarters. kind facing these at Aid about

industry you. my in. been from and and whole Thank healthcare healthcare I've I've hear to these again. Great but that's that same faced I of different served Yes. exact reimbursement just same in we And different you issues, same environmental areas the healthcare have pressures world in listen, pressure, boards on -- career live

is so overcome been having That's headwinds the being fundamentally believe the company, I the in these of of to the And these issue. now this I can we have headwinds. execution think and and economics here an believe healthcare. a part understand of just fundamentals to business enough time we do overcome do really mostly that that I

in Where we that especially where tailwind thrive more there EnvisionRxOptions actually these And this there same the business. in headwinds. aren't in the can environment are business

excited the the excited execute though this tackling to about about going way. a fundamental pretty on we're blocking I'm to More this. strategy. opportunity and us long opportunity to against basic against our very come is to So take execute

back this tactical about just expected quarter? No. and I how income had the of how just to we year. overview in guys Matt, And give income model then an thinking know I the and, us TSA in Can much the should you maybe you appreciate the that TSA a over decline then declined that one. be half?

Sure.

$XX The XXXX, is year have So we fiscal had roughly this income. $XX in million. TSA million amount expect about of we to roughly Bob, in that, half fee

that at I think one fourth I remaining quarters million quarter year. around number. to in continue And the $XX that the of headwind headwind was to the the through we of that kind had expect would that

Glen Santangelo with Guggenheim.

open. is line Your

Yes, thanks.

I somewhat, Kind maybe maybe First question you sounds did for comment like pressure we see Bryan. you see this Could the on reimbursement abate that are and to that starting terms if of sense us quarter? that a pressure may year? the the was fiscal thinking for characterize us wondering back in give what of half could sort for you you're of and of be

pressure Glen, expected is what well. the the I but in probably would we Hey, in and largely year only to think we first I Matt. prior it's quarter, say saw reimbursement rate what not consistent relatively as the

some I decent levels XXXX it's seen think looked sized to further, in fiscal we little I still we compared XXXX, need we've a if you've but to back stabilization that back bit a overcome. saw pretty headwind think, and look

for the seen of I the in what we've to consistent half see I think we're year, the kind think pressures back quarters. going of two first

agree Bryan. as it's reimbursement it. said with would the would add, we around. I to pressure Matt I characterizing don't it rate about And -- way the what Glen, fading We was expected. what best think just describe is

Okay. billion about long-term issues think be get cash you around day? cash the longer-term Do you situation, how about? you're the question interest file technology,. lot to seemingly Matt do the flow And the and paying concerned of for expense feel CapEx before like due about your rate you, can $X leverage. I the the at concern And Heyward. what look current mean, leverage and of bunched there's and just think you EBITDA anticipate investments coming in the together? everyone improve term buys all seems that your flow that enough? you both and in and the about do sheet XXXX how I mean if sort with I here refinancing a do the that's Like you given balance mean, you're loan and Heyward, facility, run to notes more you talking you of and maybe

to the is And to leverage that think particular of our at is reduce very most concerned serve. and to cost to current to and focused cash. means freeing And and organization leverage. objectives on judicious much efficient scaling also about investments. structure That will try substantial really about. our of I free that issue. my more lean methodology Corporate to its up become amount an am here the Well, We're amount a a concerned down And have we're and this to Aid using regions system. our I Rite we be take issue which one up goal going to working our be at scale very the capital of be down in That be substantial we of out also take Yes. paramount is the cost going with same time appropriately

I there investments to us. than words Matt few turn the that have we'll invest have different it some it key over company. doubt be that to are a as ones I'll leverage focus no to to in maybe a do for make. this is well. in There's maybe past to So going say about the But

Yes. Glen, on I out think opportunities laid have going with reduce capital. Thanks, what efficient think costs. focus be be kind kind I of leverage. on we're of And do to do working we we Heyward. have is those. more very our our working well opportunities I to to think, Heyward,

to that address we of in anywhere cognizant certainly thing be before we're the wall to we'll at we opportunities that have date. taking wall I XXXX think other and close very a hard maturity is get look The

debt maturity point we activity wall leverage with some attractively. to get a that the combination think, you a deal get frankly, better to can our refinancing ultimately well with and as, as ratio refinance place we our where of as I And overall reducing

revenue remain is I on. And obviously and bullish that growing EBITDA our our something

that something on to focused we're And well. both. be It's going really as

JPMorgan. with Gill Lisa

Your line is open.

moving given I Great. meeting really it blocking retailers from business a outcomes. lot vision. talk Thanks model up way being And I'm just forward is in really Heyward, at just opportunity what today. some where came tackling curious stand to paid on good I current looking model healthcare opportunities. traditional to for health and to very for potential wanted paid point. you and you the services, opportunities. But We've heard reimbursement you retail for. back of you the and the just much the are change about heard morning. your of the some follow talk and and around from look understanding thinking to about really as getting where plans I to those away strategic the

more Well, I going to health obviously want thinking their ultimate other America. for basis think future. we it's a -- They thoughtful to health regions on daily can basis if the are in really tremendous given provider in about daily amount this members pharmacists and my consumers I that say and it. background, plans my to to to the a obvious are physician into finish more before Listen, you our of going be between robust company. a think are will pharmacists add manner far strategic key I crucial to too The probably our than focus we touch a in But I get this. that value we up that engage plans be on going a us And partnership -- is any future. extender, be serve and

And only also to consumers that got has not have to our to to us partners. health plan value our tremendous but

going to these the are focused spelling forward coming relationships. this you months. we I'll to really be And look on specifically out in more for so And

also you understand want commercial model? or you a have lives the as incremental that traditional then this also that lives PBM about the in a business how design more thought of And I you talked you today? XXXX? to anything XXX,XXX remind the commercial just around changes follow-up, just to talk Ben, Okay, plan you just about shift And for Can maybe shifts side us many year. won on great. Can just you

Thank Lisa. you,

strength So XXX,XXX a view of being as key our. other increases that X health in our a around million with and strategy flexible of base plans forward clients on and we go

day. every our adjusting design That's So do is we plan wheelhouse. what

own our formularies. have We

partners our own gives enormous needs. adapt flexibility to have our us We platform. their adjudication with That to

Elizabeth with Evercore. Anderson

Your open. line is

seeing sorry is the I Good Elizabeth mute. you more I'm are you or was on see Hi. bit think pacing was going you out and change wondering improvement XXXX. terms on little anything for This the can I and into comment the if a year of that to say could I generic Anderson. morning. you in of guys rest of that the that how

Sure. Elizabeth, it's Matt.

bid the cost the year. our of the really of, if results to quarter. to that improvement to coming to largest about continue margin a the be it of of see you -- and first in benefit expect business. profit half an but trends I gross and annual second remainder part year. did our from improvement EBITDA of at in anything also lot think beyond PBM And quarter improvement pharmacy savings really back had talk through of that, the extend really look I pharmacy really was Too in the was fruition I bid, second margin our kind quarter-over-quarter. generic quarter we the rest, the to throughout EBITDA expect certainly kind early of the to we part But improvement, this

a Envision, what then on that and pressure you're else? selling been your anything And season client of if or the seeing was in just can season changes Okay, there's sort I great. That's with of about has on terms sort selling helpful. in in anything any just I talk pricing very of the of resonated obviously, color. wondering mean, of particular overall. base broader terms lot you in

Elizabeth. you. Thank

PBMs, the we dust-up good as we the see alliances them and for principal actually some it's in a what this are giving a larger plans their is with year. that's and partnerships because bit health pause opportunity us. marketplace rethinking a That's So of the see change

Okay. then been changing And wise? any there has pricing that

It's consistent our with expectations.

George Deutsche with Hill Bank.

Your line open. is

of percent guys Okay. you percentage quantify rates everyone's we down? echo the of welcome contracts to Heyward. Good morning. to a about nailed your expectations thing of the book talked kind PBM negotiated on way can for one little I And been is, kind in comment I yet reimbursement haven't bit is any XXXX? what for the of will And calendar and is call, there payer what change guess year have

We Matt. George, contracts. it's through are working payer PBM constantly

environment we've further ahead I think in early get fiscal that. of to rate for a sight pretty line of the good XXXX. got Probably little any reimbursement a

calendar of Okay Is $XXX about the One doing to two in wins or the a million the gross quick like think the dollar and value. net follow-ups. that going right lives. as PBM number about that on in million a on number on we it's is seems the kind XXXX? then wins If $XXX the I'm math

gross a Those are is XXX,XXX wins. The number.

-- to net Okay. able are able for talk Is -- is there to you about we like calendar XXXX? are guys number trending what the

And is renewed most stage. contracts we very number double have net importantly, digit growth. our still Our this at important

how sees and goes about they're company guess the -- the the one the stores. hop I'll available? that well, talk think about CapEx that I opportunities have right, kind of we about we from pay stores to all Okay, been queue other debt think do investment about more, in can down of now much is three-quarters diversion versus where wellness we migrated

George, it's Matt.

we working we're of resources CapEx turn through spent some still allocation about other kind of as of think how comments. think views finalize CapEx kind over our here. strategic we're I to you going our to I'll for and the our

Yes.

and money of year what specifically thoughts what what a And to that's in our leverage we highest our our been budget invest. needless also that looks is And is. that money. including amount coming You say to some EBITDA CapEx continue to this do hasn't and I work take we sizable have to get my then and you've And on sizable someone about initiatives the all get that strategic control which about. pay are horizon under strategic to want spent our underway mean according next heard allocate horizon, some see down, really are final to drive together I the now like. what will of to on near priorities, technology tech, and plan

year. the So we remainder the rethinking of fiscal will money of that for be spending the

I know think I tech know, the technology consumer aging technology on just or you there? structure I Rite about think about of can you of bit I more has versus facing an how just you in if call can the would break down one do I beneficiary business what around Kind Maybe spend Aid sneak how guys a side. guess, ops?

you Officer. address Justin let in, introduce to maybe Information Chief I'll Well, I'd let him And like jump but to our that issue.

Hey, there.

Menon. Justin as as it we look -- both, right. I at have look to it at

stores have in be tools give And online in and drive seamlessly our connected jobs. we associates our and We have also in to they footprint. efficient productive to user to need to invest a continue to their our experience

to investment, continue we coming strategy get we're where the where look in our as at to look should investments ROI. as capital largest Heyward at going we and out we'll can to go. team months, So those our roll the And in look continue

I growth How opportunity in with for is in for and for And big can for it's of through the they they've question, online terms a Adobe. to select of the revenue items. and delivery Adobe your driving hands they here. And front-end growth are revenue that new of can of up us actually-- get they can both and prescriptions. think putting one that partnership is select power Yes. consumers with really and partnership significant ones our a signed buy prescriptions how pay pay in product how And we're we and the

to in drive opportunity And ways company so we are on and from really, business current really really technology economically. for bullish the forward new this the leveraging

with Martinson Jefferies. Karru

Your line is open.

morning. Good

million of by cost TSA headwind getting savings offset a income, we the declines. on is wondering to I plan that kind thought $XX how that? of Just in quarter the offset done had I'm much the

It's all Karru. getting offset,

headwind that question I and on we're executed with the savings answering on. the what's on cover the think side. to we offsetting was TSA got I we've already cost the But that more just that issues

but counters, of you Okay. locations? the And stores other have versus where traffic there terms terms have lockers early in Amazon your or you I you -- in of are what seeing know the the it's and days,

driving Karru. Hey, additional traffic the just It's Bryan. early this sales time. or The at additional Amazon it's into stores. too partnership share is But results any to building

of outlook there then lastly, the Okay. competitive that the margins, also private-label you've gross what's the of response increasing terms And just in in and seen? terms penetration front-end

rate be brand As with -- the a I from us We're own for rather. mentioned label performance is, private to priority. from continue year-over-year will quarter-to-quarter pleased

And we and so to significant will how continue part we assortment look we've before own of how we with at the as curate how branding we a that. mentioned merchandise promote,

JPMorgan. Carla with Casella

is line open. Your

on discussion. Hi. capital working your follow-up I had one

in with Is on ops you greater Can you little on in color use or just to You are your -- the the of payable you cash? increase there positive a from half. terms expect mentioned back anything inventory the quarter that be cash more changing bit us give inventory the payable vendors? and

on get the look general. with think already of going assortment of at coming we good that. we we've working over of And think at out breadth inventory at taking strategy well look initiatives SKU there's the of of pretty of kind idea some ahead as, kind in the months capital to some -- of coming I rationalization too started we think hard be I not as SKU side, to far a offerings looking So a kind I SKU have of the

right think would being vendors get we're some also think between vendors terms market to and that market to trying there's on of to line exploring. same side, those the those we're that market terms. of -- currently being within within And terms I partners of our to expect that the obviously the I some strike kind with opportunity payable some good we

Yes.

very the update variety what's we How I to merchandising? undertaking to merchandising in are merchandising the in what's a really store, that think manage our it's the terms approach very, change in we fair say health our of our we substantial aligning for the offered. but and in plan make also for exciting future. well want the it partners destination. see our vision and that hopeful aligning with with health destination it to wellness might others And as an what consumers, How

upside whole how that see some in to are with substantial improvement. terms see a of be we a what team out inventory lean manage management. we if try of And decked As approaching to this And we our we against the methodology believe this part have could inventory. with opportunity we an

that well So have are been underway; I these even here. before got are things underway all

And really so initiatives fruits bear the see to out. excited particular of these we're

just That's great. And want to up. follow then

remaining I'm to by it And assets at and the proceeds cash to mention leveraged centers million if one Walgreen. Xx whether be expect two ABL balance year wondering we includes that's $XXX target end. those distribution then year end. You of sale of net also from

exact projection Yes. ABL an stay I --probably away balance. will from the

way is the assuming of the which net Walgreens Xx we've the been $XXX consistent the several cash of the calculation of I quarters, the over sales think is million. the is and receipt showing leverage last distribution about proceeds which centre

file did And Okay. give have you your expectation? had I originally six target this an on the think update I year? buy was day

think drive it's an Carla. into still, didn't at to CapEx, fair look say as we're a our as something take growth give we at I a number, stores important -- we would do at. hard still we buy to and good spend relook to that specific that's is way that do going how I relook file We say a

away a I number. giving think specific from I probably shy

Bank with of Reuter William America.

open. Your line is

of the are one large part seems those this the is clinical to how side services. they're you on retail drive Good pharmacy and growing? like how talk Can morning. It growth at these point strategy quickly about

growth. not Bill, capacity this Therapy really Management effort up to also XX% Medication the it's we services, whole part a for MTM's free of adherence Bryan. the these critical of They the pharmacy mentioned that's over time the immunizations But and and again about but pharmacists. only part up as year. the the as think are prior And I

this without adding repurpose incremental can absorb we So labor. volume and additional

additional So of do that hits with here we're initiatives. some our squarely what trying on to

you seems like scripts Are given then And think have it's prices guys down following the for unchanged? file it pharmacy the closures still been paying industry. --there right. that the All are these buys, across you're important they up on relatively coming or are there that

really are And file Bill, buys depends market. basis on scripts but item. they the market like probably competition in It the market. in very high-level or those relatively it depends unchanged, are a it's what given Matt. by all all is the would a market overall on I the for say

your closing lastly --some store base, years you store be And stores your in you All stores. do are the base competitors guys you terms or over then right. have you the closing just are next Do right for of well? that largely the couple size of will that at me, there feel as expect

committed performing be on the right as heading markets we have to firmly Well, to we're us preliminary excellent and right company. going listen, make that sure to the my think always based serving are stores we're right continue I the to in locations. for view looking And a are that These geographies where we're we now. of

changes. we're back continue And so that'll we certainly to you at committed I assess be look the months lens something sort will to geographies. of a incremental we take of coming an this through now, our think on firmly report But these And to the strategy for in if anything basis. and

from Hale final have you one Do time question? Barclays. for Holden

line open. Your is

make litigation comfortable Good kind opioid lingering in a Thank that's got that how the a two. the how morning. had about you do become talk Heyward, sure follow can distraction doesn't for the company? Then you of up. the taking had you you I background bit or question. for I a

doing to help are Yes. committed opioid this crisis. I we mean, everything to absolutely with listen, can that we

enforcement difficult day the as and of difficult ways. partner to We real this try to to every are our to key they deal with us incredibly by every consumers agencies, and situation. are we a impacted affects in this law It minute

itself, But feel going will very And to. to allow our this and difficult is organization. is us opioid is that really litigation forward. with will affect distraction It's fix our managing confident. our organization. help are and It matter. I day-to-day for we our Just committed the people our not of help separate to opportunity and bigger we be not a day-to-day itself day-to-day something we're something but mission operations. crisis. to The the of The be compliance part It's going to this litigation that attorneys that in the a

given is they're color on about your an next it we but a Great. wanted thinking clinics you, to Thank announcement to just calling the do or Walmart's two. or you. ask health I broader they're But year wanted or for And footprint concern really assumption just further focusing because it. of get what issue my overlap on over then deserts, to that isn't healthcare hundreds

as a Well, don't care I all health I is see communities And now really and everybody right boats so committed mean, listen, --I a this from health their see delivery care we. to rise. and helping are perspective

deliver I think be to we're is which all seeing us, able front to healthcare setting. is community-based the to that consumers in opportunity in of a real

really don't ourselves. will destinations I I have opportunity unique And a think think minute think overlap particularly in but our they're in be the every I that just services think I everybody, our we every engaging significant. that is do everyone's community opportunity different, be clinical I this see pharmacists particular our it's delivering people to of to recognized for the day. exciting

come So more this -- that rise not on but I one. all boats on think to

Q&A End of

questions. Okay. thanks your for Well, everyone

the me Before work we And our doing welcoming I'd the the day. every great to end for call, to they're for thank associates like company.

our and we Rite not front-end communities on Envision outstanding momentum and with with leader experiences and I but to said deliver of work is important now well. and mentioned innovative And ahead the unique as build this to as Aid stores services position our Aid customers health serve. it's opportunity exciting just in us, a only but earlier, to an now be I wellness pharmacy also As and really to Rite the right

finish coming in on meet the make the importantly deliver more We sure And hard working solid weeks right its path potential months to will and company year. the be to is to full forward. heading a our

that, you. with conclude call and today's we thank So now will

earnings XXXX Aid Rite the participation. you for concludes This your second call. fiscal quarter We thank

may You disconnect. now