Walgreens Boots Alliance, Inc.

Good day, and thank you for standing by. Welcome to the Walgreens Boots Alliance third quarter 2024 results conference call. At this time, all participants are in a listening mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference call over to your speaker today, Tiffany Kanega, Vice President of Investor Relations. Please go ahead.

Good morning. Thank you for joining us for the Walgreens Boots Alliance earnings call for the third quarter of fiscal year 2024. I'm Tiffany Kanega, Vice President of Investor Relations. Joining me on today's call are Tim Wentworth, our Chief Executive Officer, and Menmoen Mahajan, Global Chief Financial Officer. In addition, Mary Longowski, President of U.S. Healthcare, Rick Gates, Senior Vice President and Walgreens Chief Pharmacy Officer, and Tracy Brown, President of Walgreens Retail and Chief Customer Officer, will participate in Q&A. 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 Form 10-K 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. During this call, we will discuss certain non-GAAP financial measures. These measures are reconciled to the most directly comparable GAAP financial measures, and the reconciliations are set forth in the press release. You may also refer to the slides posted to the investor section of our website for reconciliations of non-GAAP measures to the most comparable GAAP measures discussed during this earnings call. We encourage you to review the comparable GAAP measures and reconciliation to non-GAAP values and the other earnings materials we provided. I will now turn the call over to Tim.

Thanks, Tiffany, and good morning, everyone. While this quarter's results were not in line with our expectations, I want to start today by sharing some reflections on what I've observed since joining WBA. I'm at Walgreens today because I believe in the future of retail pharmacy and particularly in our future. We are motivated by the trust Americans place every day in their Walgreens pharmacy And the experience we provide them in our stores and with our digital offerings is important in their lives. Over our 125 year heritage, we have earned the right to engage with patients and customers in a way that few others can rival. I believe that this human to human interaction is an imperative in healthcare and the core foundation of our business is the relationship we have with our customers. Through our nationwide footprint, we touch nearly 9 million lives a day as the leading independent integrated retail pharmacy and healthcare provider. This dynamic is why PBMs, payers, providers, and pharma choose to work with Walgreens. Looking back over the last several quarters, we've built a world-class leadership team, including five new members. We now have the right people in place who are already executing with a sense of urgency on a turnaround for our business. All of this is underscored by our 330,000 passionate and dedicated team members who differentiate us and deliver exceptional customer and patient experiences every day. The bottom line is that I'm confident WBA will be a leader in the future of healthcare with pharmacy and retail at its center. And the long-term potential of the company will be shaped by offerings built around the relationship that we've nurtured with our customers over time. But we also acknowledge where we are today and what we need to do to realize our longer-term ambitions. The severity and duration of the challenges in the operating environment have only added urgency to our strategic and operational review, and we are addressing them directly. Our review has been a significant driver of action as we assess both our existing retail pharmacy business and our collection of strategic assets. I will unpack the series of conclusions we have reached in greater detail after Momon and I review the quarterly results. For the third quarter we delivered adjusted earnings per share of 63 cents reflecting significant challenges in the US retail pharmacy business. stemming from a worse than expected consumer environment and challenging pharmacy industry trends, partially offset by strength in U.S. healthcare and international. In light of these factors, we are reducing our full year outlook, which Mamon will take you through in more detail. In U.S. retail pharmacy, we witnessed continued pressure on the U.S. consumer. Our customers have become increasingly selective and price sensitive in their purchases. In response, We invested in targeted promotion and price decisions which have driven traffic and will generate improved customer loyalty, but they weigh on near-term profitability as we refine our approach. We remain relentlessly focused on enhancing the front of store and creating the right omni-channel experience for our customers while driving in-store efficiencies. We also continue to face an incrementally challenging pharmacy industry. Recent trends such as branded mix impacts And increased regulatory and reimbursement pressures, including fluctuations in a deck pricing have negatively impacted pricing dynamics. Additionally, the script market is growing, but continues to trail below pre pandemic growth levels these headwinds have affected our performance and are materially weighing on our ability to serve patients profitably. We are at a point where the current pharmacy model is not sustainable and the challenges in our operating environment require we approach the market differently. For example, we are in active discussions with our PBM and payer partners to align incentives and ensure we are paid fairly. We are also working with our suppliers and partnering directly with pharma companies to build out specialty pharmacy, clinical trials, and other services which Walgreens is uniquely positioned to facilitate given our physical footprint and the trust we've already established with patients. In U.S. healthcare, we had another quarter of positive adjusted EBITDA and year-on-year growth, driven by continued growth and disciplined cost management at VillageMD, along with strength at Shields. Following the last quarter's actions to right-size VillageMD's footprint, the business is now on a clearer path to profitability as it continues to add lives and optimize its cost structure. In international, the business continues to perform strongly and in line with expectations. Booch UK delivered meaningful retail comp growth and achieved another sequential quarter of market share gains from strength in both physical and digital channels. We continued to execute with discipline across the organization to drive further costs out and prioritize free cash flow. We remain on track to deliver $1 billion in cost savings this year. As we look ahead to the remainder of the year, we are operating under the following assumptions. We expect the operating environment to remain challenging. We do not expect an improvement in the US retail environment. And finally, we expect script volume growth to remain muted and anticipate continued pressures on pharmacy margins. In light of these factors, we are reducing our outlook. We now expect to deliver adjusted earnings per share of $2.80 to $2.95 for the fiscal year 2024. While we acknowledge that this range is wider than normal, we believe it is prudent given fluctuations in recent pharmacy industry trends. Consistent with our historic approach, we will provide our outlook for fiscal 2025 on our fiscal year end call in October, but we expect the current trends I've outlined to persist into next year. Before going into details of our strategic review, I'll now turn it over to Memoan to review our financial results.