Walgreens Boots Alliance, Inc.

Good morning. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Walgreens Boots Alliance second quarter 2022 earnings conference call. 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, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. Thank you. Tiffany Kanega, Vice President, Global Investor Relations. You may begin.

Good morning. Thank you for joining us for the Walgreens Boots Alliance earnings call for the second 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, James Kehoe, our Chief Financial Officer, and John Stanley, President of Walgreens. 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 Investors section of the Walgreens Boots Alliance website. The slides in 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. Walgreens Boots Alliance once again delivered strong results in the second quarter. Sales increased 3.8% in constant currency or high single digits on a core basis, excluding the negative impact of AllianceRx Walgreens and the positive M&A activity in Walgreens Health. Adjusted EPS grew 26.5%. Our good performance reflects execution across each of our business segments. Our U.S. retail sales comp of 14.7% was the highest in over 20 years, above even last quarter's record, and we are seeing significant recovery in our international markets. At the same time, we are building our next growth engine, Walgreens Health, which is on pace toward its long-term target. And of course, we continue to serve communities with COVID testing and vaccinations to fight the pandemic. During the quarter, we also undertook important actions to advance our strategic priorities and to ensure our asset portfolio is strongly aligned. We initiated a review of the Boots business and this process is progressing well. Looking ahead, we are maintaining our full year adjusted EPS guidance of low single digit growth which we raised in January. Our outlook incorporates healthy fundamentals in our core business, as demonstrated with robust sales and earnings growth year-to-date, balanced against ongoing investments in our growth initiatives and our people. We are delivering against our Investor Day commitments as laid out in October. We're moving quickly to execute our vision of consumer-centric, technology-enabled healthcare solutions, which extend well beyond the pharmacy walls. As we began to offer a care delivery experience that improves health outcomes and lowers costs for patients, providers and payers, we are well positioned to drive accelerated, sustainable value creation. Next, I want to take a moment to review Walgreens initiatives to provide local communities with access to important resources during the pandemic. And as we navigate the recovery into an endemic scenario. In the U.S., we administered 11.8 million COVID-19 vaccinations within the quarter and over 62 million to date. Our pharmacy team members are healthcare heroes. The majority of our patients and customers see their pharmacist more than they do any other healthcare provider, and we recognize their tireless dedication and contributions to the pandemic response. The Omicron wave in December and January also drove elevated levels of COVID testing, both in-store and at home. We completed 6.6 million in-store COVID tests during the quarter and over 27 million to date. In addition to our drive-through testing at no cost to patients, we've now launched convenient at-home COVID PCR test collection kits with LabCorp at no cost nationwide. This is particularly important for uninsured, socially vulnerable and medically underserved populations who continue to be among those most impacted by COVID. And as we all start to resume normal activities, Walgreens will remain a partner to our communities to ensure safer connections and improve mobility. Our leadership in vaccines and testing is just one way that we are becoming the leading partner in reimagining local health care and well being for all. The second quarter included significant progress towards each of our four strategic priorities. Let me update you on our latest initiatives and then spend a moment on the drivers of execution at Walgreens Health. 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 saw continued momentum online in the second quarter, with digital sales up 38% in the U.S. or 116% on a two-year stack basis. Same-day pickup orders accelerated sequentially to 3.9 million orders. We have also enrolled over 96 million MyWalgreens members, up nearly 11 million since the fourth quarter. We are now focused on activating members through personalized omnichannel messaging and offers. Additionally, our alternative profit streams are performing well, including our media advertising business, which launched a year ago and is running ahead of expectations. We continue to see digital media as a significant opportunity for us. Finally, we have three automated micro-fulfillment centers open. and are on pace to have 22 by the end of fiscal 24, driving significant efficiencies and cost savings over time. We expect these centers to ultimately cover 40 to 50% of prescriptions for pharmacy-served, removing routine tasks and excess inventory from the local sites. Second, we're building a platform of technology-enabled healthcare solutions with the consumer in mind, which is well positioned to fuel our next phase of growth. Nearly half of our store footprint will have a healthcare touchpoint between our organic Walgreens Health Corners and the co-located clinics with VillageMD. VillageMD has now opened 102 co-located clinics, and the rollout has accelerated to an average pace of one opening every three days for calendar year 2022. On the Health Corners front, we remain on pace to have 100 sites in operation by year end. Third, we are refocusing our portfolio and optimizing capital allocation. We continue to apply a rigorous strategic lens to our equity investments and explore all options to unlock value. Recently, we have gained full ownership of the AllianceRx Walgreens business and our German wholesale JV. creating greater agility ahead. We have also announced the strategic review of our Boots business. This process is progressing well, and we will pursue an outcome that maximizes value. Finally, we are building a diverse winning team that will underpin our strategic priorities. Our deep and experienced bench is executing our strong results today and implementing the bold steps necessary to drive growth ahead. We are making rapid progress towards building out Walgreens Health with a clear path to a run rate of more than $4 billion exiting fiscal year 2022, well on our way to our goal of $9 to $10 billion in sales by fiscal 2025. We will improve health outcomes and lower costs for payers and providers by delivering care through owned and partnered assets. The goal is to support the patient journey across the entire care continuum through omnichannel solutions. This is why you see these complimentary assets spanning primary care through VillageMD, specialty pharmacy through Shield, and post-acute care through our pending CareCentrics investment. The health corners play an important role in addressing care gaps through our health advisors. Today, Blue Shield California, and Clover members can walk in and have access to clinical services like A1C testing, colorectal cancer screening, and blood pressure monitoring. I'm particularly moved by stories of these patients receiving emotional support while navigating what can be an overwhelming and impersonal experience in U.S. healthcare. Much like our pharmacists, Our health advisors are becoming trusted neighborhood sources of education, recommendations, and connections that can help our patients to better manage their wellness. This is a transformational process to become a leader in value-based care as only Walgreens can do through our trusted customer relationships, local knowledge, and deep data insights. We will leverage our strong footprint and independent standing to offer uniquely consumer-centric solutions for our communities. We are executing on our vision today. Our partnership with VillageMD positions them to be one of the largest and most differentiated primary care providers in the U.S. The collaboration is a significant growth catalyst, driving 1,000 co-located clinics across more than 30 markets by 2027. VillageMD is in 22 markets today, most recently expanding to Boston, Jacksonville, and Tucson in February, Denver in January, and San Antonio in December. VillageMD's care delivery model is highly scalable with attractive unit economics over time. Shields continues to rapidly expand its platform. representing specialty patients across more than 30 disease states with more than 70 health system partners nationwide. In November and February, SHIELDS inks new deals with two significant health systems with geographic reach in the northwest and northeast U.S. Importantly, WBA and SHIELDS are collaborating to identify instances where their networks intersect, to combine Shield's operational expertise with WBA's robust nationwide pharmacy network. In our organic Walgreens health business, we are pleased with the rollout of our health corners with Blue Shield California and Clover, where we are gathering tremendous insights. We are in the process of signing on incremental partners, and we will initiate the next wave of nine health corners in California in April. We also continue to refine the consumer app, adding new features to increase access, engagement, and convenience. Overall, we are tracking well against our key milestones for Walgreens Health and remain very excited about our growth potential. We are executing across our balanced plans for fiscal 2022 as we build a strong foundation for sustainable low-teens EPS growth. we are reimagining healthcare and wellbeing for all with a clear path towards accelerated value creation. With that, I'll hand it over to James to provide more color on our results and our outlook.