Walgreens Boots Alliance, Inc.

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Walgreens Boots Alliance second quarter 2023 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Tiffany Kanega, Vice President of Global Investor Relations. You may begin your conference.

Good morning. Thank you for joining us for the Walgreens Boots Alliance earnings call for the second quarter of fiscal year 2023. 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 Keogh, our Chief Financial Officer. Rick Gates, Senior Vice President and Chief Pharmacy Officer at Walgreens. and John Driscoll, President of U.S. Healthcare, will participate in Q&A. Today's call will be approximately one hour in length, including Q&A. Let me note that all references to the COVID-19 headwind include U.S. vaccines, drive-through tests, and OTC tests. 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 two 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 in the press release also contain further information about the non-GAAP financial measures that we will discuss during this call. I'll now turn the call over to Roz.

Thanks, Tiffany, and good morning, everyone. WCVA has delivered a solid second quarter. Overall, results were in line with our expectations, as a slow start earlier in the quarter was offset by strong acceleration in February. The overall decline in adjusted EPS was against growth of 26.5% last year, and again, reflects the anticipated headwinds from lower COVID demand and our investments in labor and the U.S. healthcare segment. This is our final quarter of lapping last year's peak COVID contributions, and we are looking forward to accelerated growth ahead. Second quarter sales grew 4.5% in constant currency. U.S. script volume growth exceeded guidance, and our resilient retail business is successfully lapping record prior year performances. This was also a landmark quarter for our transformation to healthcare. We invested $3.5 billion to support VillageMD's acquisition of Summit Health, creating one of the leading independent provider groups in the country. At the same time, we are taking decisive action to unlock value and strengthen the company by simplifying the portfolio. Our strategy is working. We are performing against our plans and we will be relentless in driving continued progress ahead. We are maintaining our full year guidance for adjusted EPS of $4.45 to $4.65 with good visibility into the key drivers of robust and accelerated growth in the second half. Importantly, the inflection is here. We are clearly pivoting to strong projective EPS growth in the mid-20s in the second half. I am very confident in our future, enabled by our execution and the bold investments we are making today. We are making progress against each of our four strategic priorities. Let's start with the core business. U.S. pharmacy comp scripts grew 3.5% excluding immunizations, exceeding our guidance of 3% growth, and improving from 2.1% last quarter. Through our focused investments, we have returned an incremental 500 stores to normal pharmacy operating hours. Our market share trends are improving, and we saw 6% growth in stores with normal hours. While we have more work ahead of us to achieve our full year script recapture goals, I'm very encouraged by our momentum with strong acceleration into January and February. Our pharmacist team is supported by our nine micro fulfillment centers, which allow our pharmacists more time to focus on patient care and clinical services, expanding on the critical role they already provide in communities. In retail, U.S. comp sales excluding tobacco declined slightly, a very solid performance against the 15.7% growth we delivered last year. We achieved mid-single digit growth after backing out the COVID OTC test headwind from last year's Omicron surge. The convenience and real value that Walgreens offers is resonating with consumers in a challenging environment. In fact, our comp accelerated to high single digits in February, while we also drove another quarter of margin expansion. In our international segment, Boots had a stellar quarter with retail comp growth of 16% on top of 22% last year. The business achieved its eighth consecutive quarter of retail market share gains. Now, turning to our second strategic priority, we are accelerating the build-out of our healthcare growth engine. The addition of Summit Health is transformational. It creates one of the largest integrated provider platforms in the U.S., delivering quality, affordable care for all patient populations, regardless of insurance or payer type. This highly strategic transaction expands VillageMD's addressable market with primary care, multispecialty, and urgent care, and reinforces our approach across the entire care continuum. Summit will accelerate the U.S. healthcare segment to scale and profit. We see meaningful synergy potential over time, with integration activities already begun. We have also added our fourth payer partner for the organic business, Horizon Blue Cross Blue Shield of New Jersey, and now have signed five clinical trials contracts. Shield's health solutions and CareCentrics both continue to perform well, which led to the accelerated acquisition of both entities. Shields closed on December 28th, and Carecentrics is scheduled to close this quarter. On a combined basis, our best-in-class assets drove pro forma sales growth of 30% in the quarter. Investments in this growth are funded through actions we continue to take to better align our portfolio and streamline the business. We've unlocked meaningful value fiscal year to date with over $3.6 billion in after-tax proceeds. Our retail pharmacy business provides a solid foundation for our leading healthcare assets to deliver value across the full care continuum, driving our long-term growth strategy. We are able to reach across both digital and physical channels to guide consumers through the complexities in healthcare. We are building the scale and resources to help health plans and patients improve outcomes and lower costs as only Walgreens can do. There are significant opportunities for synergies, allowing us to pursue value-based care and risk arrangements, which will demonstrate the importance of an integrated approach. We are focused on expanding our risk business, supporting integrated care models, broadening our pharmacy value proposition, and driving operational efficiencies. The combination of our best-in-class healthcare assets, a physical presence through our pharmacy footprint, our trusted brand, and a scaled digital offering creates a platform that is unmatched in the industry. Walgreens will increasingly be viewed as a partner of choice. We are uniquely positioned to engage consumers to manage their individual health and wellness whenever and wherever they need. With that, I'll hand it over to James to provide more color on our results and our outlook.