Rite Aid Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Rite Aid Corporation third quarter 2021 earnings call. At this time, all participants are in a listen-only 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 1 on your telephone. If you require any further assistance, please press star 0. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Trent Kruse, Senior Vice President of Investor Relations and Treasury. Please go ahead.

All right. Thank you, Carol, and good morning, everyone. We welcome you to our fiscal 2021 third quarter earnings conference call. On the call with me this morning are Hayward Donegan, Dan Robson, Jim Peters, and Matt Schroeder. As we mentioned in our release, we are providing slides related to the material we will be addressing today. These slides are provided on our website, www.rideaid.com, under the investor relations information tab. While management will not be speaking directly to the slides, these slides are meant to facilitate your review of the company's results and to be used as a reference document following the call. Before we start, I'd like to remind you that today's conference call includes certain forward-looking statements. These forward-looking statements are presented in the context of certain risks and uncertainties that can cause actual results to differ. These risks and uncertainties are described in our press release in Item 1A of our most recent annual report on Form 10-K and in other documents that we file or furnish to the SEC. Also, we will be using certain non-GAAP measures in our release and in the accompanying slides. The definition of the non-GAAP measures, along with the reconciliation to the related GAAP measure, are described in our press release and slides. And with that, let me turn the call over to Hayward. Hayward?

Hey, thanks, Trent. And good morning, everyone. We're really pleased with the results for the quarter. We continue to grow our business and achieve major milestones in our transformation through the RX evolution strategy, all the while demonstrating the essential role we play in our communities during this unprecedented global pandemic. In Q3, we drove a 12% increase in total revenue. Growth was strong at Elixir, which saw a revenue increase of 29% in Medicare Part B membership. In our retail pharmacy segment, we delivered another quarter of comp sales increases and continued growing market share in both the front end and pharmacy. We also delivered a 28% increase in flu shots from prior year's third quarter. This growth occurred even as we faced the expected headwinds from a soft, cough, cold, and flu season, since no one is out and about, and continued pressure on acute script volumes. Our teams continue to work tirelessly, as you can imagine, to serve our customers during this drawn-out pandemic, and I remain very proud of how together we're navigating this crisis and, at the same time, delivering growth in our key areas of our business. I'm also proud that our teams are not only simultaneously executing on our quarterly goals, but also on the strategic plans to revolutionize our industry and elevate our role as an indispensable health care provider. At our analyst day in March, we told you that we would be a demonstrably different company within the next year. In just nine short months, We have delivered meaningfully on that promise, making substantial changes to position our company for profitable growth. We've redefined the role, customer expectations, and even the daily workflows of our pharmacists. We've rebranded our pharmacy services segment Elixir to signal the move to crafted Rx solutions for our target customers. We're launching the first phase of our exciting new member portal for Elixir customers on January 1st. And we're well on our way with the integration of the two legacy PBM solutions and upgrading our specialty medication solutions for our customers. We also successfully introduced our new Rite Aid brand to showcase our focus on delivering the perfect fusion of traditional medicines and alternative remedies. Every day, we're introducing new products to our stores that are on trend and reinforce our commitment to whole health. We changed out or replaced thousands of products over the last nine months and adjusted our merchandising presentation standards in the stores to showcase these new products and provide customer education on their ingredient benefits. we're actively refreshing the exteriors of all of our Rite Aid stores and have completed more than 700 to date and expect to complete all stores next year. In the third quarter, we opened our first three stores of the future, which completely reimagined the drugstore experience and positioned our pharmacists for an even higher level of customer engagement. Jim will talk more about these stores, but we're encouraged by the early results. We're also lasering in on strategic markets and doubling down in markets where we want to strengthen our position, as exemplified by the acquisition of Bartels in Seattle, which we identified as a key market for Rite Aid. With these key initiatives well underway, we're becoming increasingly focused on elevating our already expanding role in healthcare. And as I've said before, we're a healthcare company. And going forward, we're going to be demonstrating this in new ways. In addition to their clinical training, our enhanced pharmacist training and certification has been expanded to now include holistic care. And our pharmacists are now actively engaging customers in key topics for their whole health, like sleep, anxiety, stress, and immunity, which are highly relevant, especially during a pandemic. and also to our new growth target customer. This engagement with our customers is already paying dividends, as we saw a lift in add-on sales in these important health categories. In addition, the COVID crisis is a great example of how we're providing additional health care services in the communities we serve. Through our partnership with the U.S. Department of Health and Human Services, we have conducted more than 1 million COVID tests with quick turnaround times averaging less than two days per result. These are PCR tests, the most reliable, and there is no charge for our customers. Although there are many details still to be worked out, we're partnering with the CDC to help administer COVID vaccines once they're made available for the second phase of the rollout, which is the general population. We expect to play a significant role in providing vaccines to the public in those communities we serve. Providing COVID vaccines could be the most important public health initiative of our lifetime. We're looking forward to this opportunity to help our communities in such a meaningful way that also showcases our essential role in healthcare. Let me now talk about ELIXIR. I recently took part in multiple executive briefings with national pharmacy benefit consulting firms. They, in many ways, validated our go-forward strategy. As we bring together and leverage Elixir, Health Dialog, and our network of retail pharmacies, we're able to craft and deliver differentiated solutions for employers and health plans that both lower costs and improve health outcomes. Speaking of health dialogue, we have an untapped asset here with strong capabilities in population health management and data analytics to support the Rite Aid and Elixir strategy. We look forward to sharing more on our vision for health dialogue at a later date. So, as a team, we're accelerating the key initiatives that will drive our transformation through the RX Evolution Strategy, which focuses on establishing Elixir as a clearly differentiated market leader in managing pharmacy spend and total cost of care for health plan and employer clients, as well as omni-channel member engagement that drives better health outcomes. And in retail, we're unlocking the value of our pharmacists and revitalizing our retail and digital experiences. And we'll continue working together to deliver the operational excellence needed to achieve strong results as we generate free cash flow, reduce our debt, and improve our leverage ratio. While important work lies ahead of us, I'm inspired by the significant progress we're making as a team and optimistic that we will achieve our goals through the RX evolution. And so I'll turn it over to Dan for an update on Elixir. Dan?