Walgreens Boots Alliance, Inc.

All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you. Tiffany, you may begin your conference.

Good morning. Thank you for joining us for the Walgreens Boots Alliance earnings call for the first quarter of fiscal year 2022. I'm Tiffany Kanega, Vice President of Global Investor Relations. Joining me on today's call are Roz Brewer, our Chief Executive Officer, and James Kehoe, our Chief Financial Officer. As always, during the conference call, we anticipate making projections and forward-looking statements based on our current expectations. Our actual results could differ materially due to a number of factors, including those listed on slide 2 and those outlined in our latest forms 10-K and 10-Q filed with the Securities and Exchange Commission. We undertake no obligation to publicly update any forward-looking statement after this presentation, whether as a result of new information, future events, changes in assumptions, or otherwise. You can find our press release and the slides referenced on this call in the investor section of the Walgreens Boots Alliance website. The slides and the press release also contain further information about non-GAAP financial measures that we will discuss today during this call. I will now turn the call over to Roz.

Thanks, Tiffany, and good morning, everyone. We are off to a very strong start to the fiscal year. First quarter sales increased 7.6% in constant currency, and adjusted EPS grew 53%, well ahead of our expectations. This strong performance was underpinned by enhanced execution across all of our business segments and supported by ongoing contributions from vaccinations and testing. While testing and vaccinations are tailwinds for our business, I am very proud of the continued success of our core businesses with strong growth in U.S. retail and robust recovery in our international market. We are raising our full year adjusted EPS guidance to low single digit growth versus flat previously. We are capitalizing on our first quarter performance and overall business momentum to make incremental investments of roughly $120 million in our people or two percentage points against EPS. As a reminder, building a high performance culture and winning team is one of our four key strategic priorities and is foundational to the other three. First, transform and align the core. Second, Build our next growth engine with consumer-centric health care solutions. And third, focus the portfolio and optimize capital allocation. Absent these incremental investments, our revised adjusted EPS guidance for fiscal 22 would have been 3% to 5% growth. You may recall that our original guidance already included a 4 percentage point headwind from investments to build out our health care growth engine. Investments that we strongly believe will position the company for attractive low-teens earnings growth over the long term. As we will show you today, we are delivering well against our investor day commitment as laid out in October and making meaningful progress towards our strategic priority. While it remains early days in implementing our vision, the bold steps we are taking are clear and we are committed to creating sustainable value for our shareholders. I want to take a moment to discuss our role in the fight against the pandemic, which demonstrates Walgreens' leadership in promoting the health of the consumers who live in our community. In the U.S., we administered 15.6 million COVID-19 vaccinations within the quarter. This achievement was made possible through the extraordinary work of our pharmacy team members. We recognize their dedication to supporting our patients, our customers, and our communities. as we continue to help lead the nation's efforts in combating the pandemic. Nearly one year after we began our vaccination program with one COVID shot at a long-term care facility in Columbus, Ohio, we reached an important milestone for Walgreens at the end of the first quarter. 50 million COVID vaccinations administered to members of our community. As of Monday, we have administered over 56 million COVID vaccinations, and we are not slowing down in our efforts. Walgreens began offering COVID vaccine boosters in September, and to date, we have administered over 9 million doses. As of November, we started administering COVID vaccinations to children ages 5 to 11 in thousands of stores across the U.S., just in time as many families prepare to travel and gather for the holidays and variants continue to emerge. We are particularly proud of being the largest pediatric vaccine provider, and the pharmacy channel as a powerful testament to the trust that families are placing in our Walgreens pharmacy team members. Importantly, about 40% of Walgreens stores offering the Pfizer COVID vaccine to children ages five to 11 are located in areas with a high social vulnerability index score. Our testing and diagnostic business has also accelerated with over 22.9 million COVID tests completed to date. Not only will we continue to grow this vital service as part of our pandemic efforts, we are building on this platform as we are developing a wider range of testing and diagnostic solutions for our customers. Our execution in vaccines and testing, our outperformance in first quarter, and our healthcare investments are clear steps towards fulfilling our vision to be the leading partner in reimagining local healthcare and well-being for all. we are making significant progress toward the broader commitments we established in October along our four strategic priorities. Let me provide you with some details on several important initiatives. First, we are transforming and aligning the core business and building a pharmacy of the future that will enable and support our healthcare strategy. We had an especially strong first quarter online, including buy online, pick up in store. Digital sales were up 88% in the U.S., driven by 3.6 million same-day pickup orders. Walgreens saw its biggest Cyber Monday ever. And importantly, average order value is about $30 online versus $20 in stores, expanding our overall basket size as the digital channel continues to mature. We are in the early innings of possibilities for Walgreens' digital platform. We've enrolled over 92 million, my Walgreens members up 7.2 million since the fourth quarter. Additionally, our alternative profit businesses are growing nicely, including media advertising and financial services. Second, we're building a platform of consumer centric healthcare solution, which we expect to fuel our next phase of growth. We closed in our shield and village MD majority investments in October and November, respectively. and our care-centric investment is scheduled to close by the end of the third quarter. We have 81 Village MD co-located centers now open, as the rollout has accelerated to a pace of a new opening every four to five days for calendar year 2022. Our consumer health app is live with our Blue Shield California and Clover partners for their qualifying members. We are operating 47 health quarters, including 10 recent openings in California. We're looking at a rapid cadence of adding a new health corner every week on average in 2022. Third, we are refocusing our portfolio and optimizing capital allocation. We are applying a rigorous strategic lens to our equity investments and exploring all options to unlock value. Most recently, We have agreed to acquire 100% ownership of both Alliance RX Walgreens Prime and our German Wholesale JD, creating greater agility ahead. Finally, we are building a diverse winning team that will underpin our strategic priorities. We're getting even closer to the consumer by adding Tracy Brown as our Chief Customer Officer on the back of her innovation at the American Diabetes Association and Sam's Club. Our Chief Transformation and Integration Officer, Amita Alamond, is applying her experience at Optum and CVS to drive alignment across our initiative. We're forging ahead in healthcare with Dr. Sashi Moodley as our Chief Clinical Officer and Ramita Tandon as our Chief Clinical Trials Officer, drawing on their experiences in care delivery and clinical solutions while at Anthem, ICON, and CareMore. And Holly May, as our Global Chief Human Resources Officer, is driving our high-performance culture. I'm excited to share even more news with you in the weeks to come as we continue to round out the team. As our results and progress demonstrate, we have a deep and experienced bench in place to drive our strategic priorities today, and I'm pleased to say we are in the final stages of welcoming a leader for our Walgreens health segments. To bring a little more of what I was describing to life, let me share with you an anecdote from one of our new health corners in California. On just its first day of operation in November, we saw the value proposition in action. A Blue Shield California member introduced himself and told us he's diabetic and struggles to make his visit to his primary care physician for his A1C testing. He was thrilled to learn he can do that here, along with his family. This is just one example of how we can close care gaps through our convenient offering. As the health corners roll out, I have increased confidence that when executed at scale, this innovative and consumer-centric strategy will drive significant growth and value creation ahead. We are connecting our physical health corners with our digital app and our other unique complementary assets to meaningfully reduce costs, and improve health outcomes and equity. And when you factor in the continued expansion of co-located clinics with VillageMD, nearly half of our footprint will be covered. We are building community engagement today as only Walgreens can do through our trusted customer relationships, our local knowledge, and our deep data insights. With that, I'll hand it over to James to provide more color on our results and our outlook.