Rite Aid Corporation

Hello, and thank you for standing by, and welcome to Rite Aid Corporation Full Year 2021 Q4 Earnings Conference Call. At this time, 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 this session, you will need to press star 1 on your telephone pad. If you require any further assistance, please press star zero. Please be advised that today's conference is being recorded. I would now like to turn the call over to your speaker today, Trent Kruse, Senior Vice President of Investor Relations and Treasury. Please go ahead.

All right. Thank you, Michelle. And good morning, everyone. Welcome you to our fiscal 2021 fourth quarter and full year earnings conference call. On the call with me this morning are Hayward Donegan, Jim Peters, and Matt Schroeder. As we mentioned in our release, we are providing slides related to the material we will be discussing 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 or 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?

Thanks, Trent. And good morning, everyone. I probably don't need to say this, but this past year was truly a year like no other. And as we begin our fiscal year, we had only just heard rumblings about COVID-19. And we certainly didn't expect that one year later we'd be playing a crucial role in testing and vaccinating Americans in an effort to end this unprecedented global healthcare pandemic that's upended to all of our lives as we know it. As our teams were battling on the front lines throughout the year, COVID-19 enabled us to live our purpose of not only keeping our communities healthy, but to get them thriving. So serving our customers has never been more challenging, but as we've demonstrated, we are really up for the task. And the entire Rite Aid team is honored to play an integral role in helping bring an end to this pandemic. Before I discuss the quarterly results and some of our key accomplishments over the past year, I just want to pause and recognize all of our associates across the company. I am so proud of the way our team has stepped up to help each other, our customers, and our communities. Together, we met the many challenges this past year presented. We served our communities and neighborhoods with unmatched determination, hustle, and spirit. We supported our team members in new and inspiring ways. We pushed our strategy forward despite the incredible external challenges we face. And we will continue to focus on delivering value for all of our stakeholders. It was also a year in which our RX evolution strategy was not only validated but proven essential. I'm really eager to share more on how our strategy came to life throughout the years. But first, a few headlines on the fourth quarter results, which were clearly challenging due to COVID and on weather. As we previewed a few weeks back, a confluence of external factors impacted our performance. We experienced a nearly 37% decline in cough, cold, and flu-related categories and the resulting impact on margin, as these are high-margin categories. This decline was greater than we anticipated and was of course, you know, driven by everyone continuing to mask up and also certainly from kids not being back socializing at school. We also experienced a greater than 14% decline in acute prescriptions resulting from the continued impacts of COVID-19 on the deferral of elective procedures and doctors visits, et cetera. But despite these external factors, we continued growing share in the front end during the quarter, drove a nearly 170% increase in digital sales, and delivered an almost 4% increase in revenue at Elixir. We've seen share and revenue growth throughout the year, and that gives us confidence in our overall plan that's on track. In one of the most extraordinary times in history, the numbers certainly do not tell the whole story. Just over a year ago at our analyst day, we told you we would be a demonstrably different company within the next year. And we have delivered on that promise, making substantial changes to position us for profitable growth. We've redefined the role of the pharmacist, our customers' expectations of them, and even their daily workflows. We introduced lean tools and processes to free up our pharmacists' time to further enable their ability to proactively engage with customers and be whole health advocates. All Rite Aid pharmacists receive specialized training this year to qualify them as integrative pharmacy specialists. We introduced the new Rite Aid brand to showcase the company's focus on delivering whole health, the perfect fusion of traditional medicines and alternative remedies. We've implemented extensive changes to our merchandising, replacing thousands of products and adjusting our presentation standards to highlight the better-for-you characteristics that our growth target customer craves. We refreshed the exterior of over 1,200 Rite Aid stores and launched an all-new website and new mobile app. We opened our first three flagship store remodels, and we continue to be pleased with both the sales and margin performance in these stores. We completed the strategic acquisition of Bartels in Seattle, which we identified as a key market variety. We rebranded our pharmacy services segment, Elixir, to signal the move to crafted Rx solutions for our target customer, and we launched our exciting new member portal. We refinanced and extended the maturity to the significant portion of our debt while also executing on a number of sale leaseback opportunities to generate cash and further our debt reduction efforts. We continue to build an outstanding team and shifted our entire corporate team and call center associates to remote without missing a beat. We delivered new solutions and innovated to meet customer needs for COVID testing, and vaccine administration in the communities we serve. And importantly, we supported our associates as they were in stores, same hours, didn't close doors ever since the beginning of the pandemic. We supported them and their families by providing numerous programs such as hero bonuses for our frontline associates, pandemic pay, administrative leave for associates who didn't feel comfortable coming to work due to health concerns, and expanded resources to assist associates with the stress created by the pandemic. And we provided much-needed assistance to thousands of associates through our Rite Aid Associate Relief Fund. We doubled down our focus to support diversity, equity, and inclusion. We hired a diversity leader and are developing a long-term plan. We're proud of the leading diversity of our board, And we're making good progress in increasing diversity across our team. It's also critically important to us to ensure equity in vaccine administration. So we're using the CDC vulnerability index to prioritize underserved communities for COVID-19 testing and vaccines. We've partnered with government and nonprofit leaders from local mayors all the way up to the White House to support our efforts to keep communities healthy and thriving through events such as COVID-19 vaccine clinics. To date, we've hosted nearly 700 clinics across our footprint, which, as noted before, is in both urban and remote areas with high socially vulnerable indexes. And finally, we've progressed our ESG initiative and performance through fleet fuel reduction, decreased energy usage, and our continued management of toxic chemicals. Now, let me provide an update on Elixir. As you know, we've been working to integrate the Rite Aid and Elixir businesses, systems, and processes, as well as our management. And through this work, we identified an opportunity to further streamline the management structure at Elixir. As such, I want to let you know that Dan Robson has left the company and I will now oversee both Rite Aid and Elixir on a day-to-day basis. Just as background, so you know, I have extensive experience with the health plan business and I've been working with PBMs my whole career. My expertise will serve our Elixir business well during this important time in our turnaround. Now more than ever, we're bullish on Elixir. It's clear that the market wants a sophisticated, scalable, and nimble alternative. Following our executive briefings with key benefit consultants last year, we're experiencing an increase in opportunity within our target segment. In fact, we're seeing strong membership growth in our sales pipeline, and have recently been awarded over 200,000 new lives with an annualized script count of over 6 million, with still most decisions pending in this current sales cycle. The coming months will be very busy with both proposals, contract negotiations, and implementation. So the market is speaking very clearly to us, and we must concentrate all our efforts towards capitalizing on this great opportunity. To this end, a number of existing team members and capable leaders in key areas like marketing, communications, clinical, and customer care are stepping up to help us win new business at Elixir. We're also adding seasoned PBM leaders in sales and account management. All of these leaders know what our clients want and have been instrumental in our recent wins. We're going to give the Elixir team every tool they need to win more business. We continue to improve on our operational and technology capabilities. Our pricing and our clinical products are very competitive, and we will continue to employ every component of the Rite Aid enterprise to keep pushing forward with market innovation. In fact, we're focused on putting forward Rite Aid-anchored limited networks in relevant territories and customer-oriented health solutions with significant clinical and analytic capabilities powered now by Rite Aid and Health Dialog. This is a really exciting time at Elixir with many opportunities in front of us, and so I'll be working very closely with the Rite Aid, Elixir, and the Health Dialog team to ensure we're focused on our objectives. So before passing it over to Jim, I just want to make a few closing comments. While we've made much progress in the last year, much work remains. As we look to fiscal year 2022, there remains significant uncertainty and limited visibility to the pace and magnitude of COVID recovery, such as seen in the recent spikes we're currently dealing with in Michigan. This could lead to a range of potential financial outcomes in our retail business. Despite the short-term challenges, our teams are clear on what needs to be done. Win today and in the future by creating real healthcare value, improving the consumer engagement, and transforming our work to improve financial performance. With these initiatives well underway, we're accelerating our actions toward a more nimble, efficient, and effective Rite Aid. We have and will continue to effectively manage through this crisis. while positioning our business for current and long-term success. We will continue to partner with the government and community leaders to ensure no communities are left behind in the fight against COVID-19. And we'll likewise continue to provide fast, effective, and free COVID testing in all of our drive-thru locations. And as more doses become available, we stand ready to ramp up our vaccine efforts to help bring an end to the pandemic. Now, none of this will be or has been easy, but I have faith in the leaders we've put in place, as well as the frontline associates who have truly earned their stripes as hometown heroes throughout the pandemic. And we'll continue to work together to deliver the operational excellence needed to achieve our objectives of generating free cash flow, reducing our debt, and improving our leverage ratio. Important work lies ahead of us, but I'm inspired by the significant progress we've made as a team and optimistic that we'll achieve our goals through the Rx evolution. So now I'll turn it over to Jim for some additional comments on our overall progress in the retail pharmacy segment. Jim?

Thank you, Hayward. In a year full of challenges, the fourth quarter was certainly no exception. While we no doubt felt the impact, our teams continue to deliver significant progress on our strategies while also ramping our efforts around COVID-19 vaccine administration. And this effort is not only taking place within the four walls of our stores. As Hayward mentioned, we have continued to schedule hundreds and hundreds of off-site clinics through partnerships with government officials, church leaders, and community organizers to help meet the very real challenge of improving vaccine uptake in underserved communities. We're doing all we can to maximize the number of shots in arms we can deliver each and every day. We are maintaining a critical focus on our vaccination efforts and continuing to deliver on our strategies. We're just one year into our Rx evolution transformation, and this year has shown signs of real progress and validation of our strategy, and we're encouraged that we are focused on the right opportunities looking ahead. Just consider the critical work to truly unlock the value of our pharmacists. We deeply believe, as we've said before, that well before we even knew what COVID-19 was, that the elevated role of the pharmacist would be critical to the future success of Rite Aid and the healthcare system more broadly. This conviction has come to life over this past year as our pharmacists have risen to become indispensable in our nation's effort to defeat COVID and keep its people safe. whether around our work to stand up and administer testing across all of our drive-through locations, our pharmacists engaging with customers around the importance of both traditional medicines and alternative remedies, or the Herculean effort to administer the COVID-19 vaccine with speed, agility, and grace, it is abundantly clear how critical a role pharmacists play in improving the health of people in the neighborhoods and communities we serve. We believe and have seen that pharmacists truly are the ultimate last-mile connector in healthcare. And we believe the key role pharmacists have played on the national stage throughout this pandemic bodes well for a future that expands the scope of practice for pharmacists in ways that better support the overall healthcare system. Access and trust have long been hallmarks of our pharmacists. we will continue to emphasize the increasing menu of immunizations, diagnostics, and a wider spectrum of remedies that keep our customers thriving in between doctor's visits. Let me now take a couple minutes to provide the latest update around COVID-19 testing and vaccinations. As it pertains to testing, we have recently extended our testing contract with Health and Human Services. We administered nearly 1.9 million COVID tests in fiscal 2021 and continue to provide access to no-charge PCR self-swab pain-free testing across all of our drive-through locations. We are offering free testing to individuals ages four and up and providing same-day appointment availability in most locations. On the vaccine front, we are a proud partner in the communities and neighborhoods we serve. and are truly embracing our role in helping end this pandemic. We administered about 500,000 vaccines during Q4 and have already administered over 2 million COVID vaccines in the first quarter to date, as we've been experiencing an acceleration of both the timing and the number of doses administered. We are receiving doses of all three current FDA-approved COVID vaccines, Pfizer, Moderna, and J&J, from the federal government and are now eligible to vaccinate in all states in which we operate. We are administering COVID vaccines in the majority of our stores with room to expand volume as supply becomes available. And perhaps most emblematic of our team's hustle. Under the directive from the Biden administration to prioritize educators during the month of March, Rite Aid provided more vaccinations to educators, childcare workers, and support staff than any of the national pharmacies participating in the Federal Retail Pharmacy Partnership. Now, looking at Q4, we faced a historically soft cough, cold, and flu season that significantly impacted our results, with acute scripts associated with cough, cold, and flu down over 40%. And we were impacted by the February snowstorms that disrupted our supply chain and foot traffic, particularly in our northeast markets. However, as we look at Q1 to date results, we have seen acute script growth return to positive levels and are seeing continued strength in maintenance prescriptions, leading to quarter to date increases on 30 day adjusted comp scripts. Our neighborhood pharmacists continue to establish themselves as among the most trusted and accessible clinical touch points in their communities. And we're excited to continue our efforts to truly unlock their full potential. We're also continuing to make progress on our retail and digital experience efforts and bringing a revitalized Rite Aid to consumers. Through our re-merchandising initiative, 75% of our categories have now been reset to our new elevated merchandising standards, which support whole health and reflect on-trend products that have the attributes our target growth consumer demands. Results so far have been very encouraging. for the lines of merchandise that we focused on to appeal to this target growth customer. With several categories, categories like immunity, sleep, stress, cognitive health, clean and internal beauty, natural baby care, natural pet, are all seeing double and even triple-digit increases to prior years. We continue to enhance the categories that are core to our whole health positioning with items and brands that contain the attributes that our target growth consumer seeks, organic, non-GMO, cruelty-free, and eco-friendly, to name a few. We introduced a number of terrific new national brands to our customers in fiscal 2021, including Honest Baby, Ollie, Thayer's, Vital Proteins, and for our pet lovers, the ever-popular Blue Buffalo brand. Our efforts enabled us to once again grow front-end market share as measured by IRI in the areas we operate in. And for the fourth consecutive quarter, we grew that share in both dollars and units. Not only did we grow overall front-end market share in fiscal 2021, but we gained share with our target growth consumer. The work to reset our assortment and exit slow-moving categories allowed us to deliver a 25% improvement in front-end inventory turns in fiscal 2021 to approximately three times, which is the best levels we've seen in many, many years. This also led to an approximately $180 million reduction in inventory. These results are encouraging and we look to build on this progress as we continue to enhance our offering in fiscal 2022 and beyond. Another key merchandising opportunity for us is, of course, within our own brand portfolio. In fiscal 2021, own brand sales were up approximately $15 million, or 2%. While we grew own brand sales, penetration decreased slightly due mostly to a handful of large own brand categories that were disproportionately down due to COVID. Chiefly among them, hand-dipped ice cream and the upper respiratory categories. As we look to our own brand opportunity in fiscal 2022, we've made significant progress in our portfolio transformation initiative, which will result in a completely new own brand architecture, enhanced quality standards, new package designs, and allow us to deliver a fully refreshed own brand lineup this year. After launching over 300 new owned brand items in fiscal 2021, our new product pipeline is well underway with nearly 200 more new items in development already. We have also continued to bring our new Rite Aid corporate brand identity to life across our fleet of stores, starting with refreshed and updated exteriors, signage, and pylons featuring our new branding. And we expect to complete our exterior refresh program this year. This is truly critical work as it clearly signals to the communities that we serve there is indeed a whole new Rite Aid and they need to come and check us out. We also continue to make meaningful steps by opening our fourth and fifth flagship store remodels in March located in Virginia Beach and Meridian, Ohio. Customer feedback to all of our pilot flagship stores continues to be overwhelmingly positive, and we are seeing strong performance in these locations with both pharmacy sales and also front-end sales and margin meaningfully outperforming the rest of the stores in their respective region. Beauty, health, and personal care categories are performing particularly well in these pilot stores given our enhanced focus on these areas. As we have noted before, we will continue to upgrade our entire fleet using a test and learn approach, one that is analytical and methodical in a way that guides the type of investment, the level of investment, and the timing of investment on a market-by-market and store-by-store basis. Beyond brick and mortar, we continue to push forward with initiatives to enhance the digital experience in ways never before seen at Rite Aid. In Q4, we saw strong sales growth across our digital channels, with front-end digital revenue up approximately 170% compared to the prior year period, and up over 180% for the full year. This reflects sales not only from our elevated and redesigned website and mobile app, which now showcases our new brand and deliver an enhanced user experience, but also our partnerships with Amazon for own brand sales and Instacart and Postmates, for home delivery. Customers utilizing our new delivery services had a 120% higher average order value, demonstrating the enhanced relationship we have with these digital consumers. Our investment in scheduling, pickup, and fulfillment services positions us for future growth across both healthcare and retail by enabling us to meet our customers where they are. We expect these investments to have a continued halo effect across the rest of our business, attracting new customers, driving bigger basket sizes, increasing product availability, and improving sales across our chain. And finally, all of this work across our retail business has allowed us to achieve our highest ever customer satisfaction scores of 3.8 out of 5. In closing, This certainly has been a very challenging, yet very rewarding years for our associates. And I cannot thank our teams enough for all they're doing each and every day. For the past year, they have been sprinting America, working tirelessly with hustle and humility to best serve our communities. We're encouraged by the underlying positive signs that our strategy is taking hold. While COVID and the related historically soft peak flu season have had an outsized impact on our overall results, we are well positioned to expand the breadth of clinical services and whole health merchandise as life begins to return to normal. We are confident in our strategy, the results we are currently seeing, and energized by our efforts in our accelerated administration of COVID vaccines. We look forward to continuing to drive progress on our key strategic initiatives, and we are embracing our critical role in helping to bring the COVID pandemic to an end. Thank you so much. And with that, I'll now turn it over to Matt for some comments on our financial performance. Matt. Thanks, Jim.

And good morning, everyone. As we stated in our March 24th release, our fourth quarter did not meet our expectations. due to the soft cough, cold, and flu season, the impact of COVID on acute script levels and SG&A expenses, and the impact of weather in February on front-end sales and our supply chain. However, for as challenging as this pandemic has been, we made progress in a number of areas over the past fiscal year. We increased revenues in both the retail and pharmacy services segments. Even with pandemic-influenced acute script declines of 9%, we still managed to have a positive comparable script count growth on a 30-day adjusted basis for the year. We completed moving almost all of our bond debt out to 2025 and beyond. And in the next few weeks, we plan on paying off the remaining $91 million of our 6.8% 2023 bonds using availability under our revolving credit facility. We grew market share in both the front end and pharmacy in a highly competitive environment. We completed our acquisition of Bartell Drugs, solidifying our leadership position in the Seattle market. And finally, we ended the year with over $1.7 billion in liquidity, which gives us ample flexibility and runway to execute our strategic initiatives. Our adjusted EBITDA for fiscal 2021 was $438 million. While we benefited in the first quarter of the fiscal year from increased demand for certain front-end products and in the back half of the year from demand for COVID testing, the pandemic had a negative impact on our results due to the year-over-year decline in acute scripts of 9%, the 37% decline in cough, cold, and flu-related sales in the front-end sales in the fourth quarter, increased SG&A costs related to hero pay adjustments, hero bonuses, increased cleaning, pandemic pay, and supplies, and in an increase in medical loss ratio at Elixir Insurance, which was partially caused by additional costs from members stockpiling maintenance prescriptions. Now, I'll review our fourth quarter results in more detail. Revenues for the quarter were up $190 million, or 3.3%, from the prior year's fourth quarter. driven by the inclusion of revenues from the Bartell stores and an increase in PBM revenues. Fourth quarter net loss was $18.5 million, or 34 cents per share, compared to last year's fourth quarter net loss from continuing operations of $343.5 million, or $6.43 per share. Recall that income tax expense in the prior year's fourth quarter was impacted by a $321 million charge related to an increase in the valuation allowance against the company's deferred tax asset. Current year's results benefited from a $48 million bargain purchase gain on our acquisition of Bartell, as well as a net gain on the sale of assets of $52 million, resulting primarily from the sale-leaseback of our Lancaster and Woodland distribution centers that we completed in the fourth quarter. Fourth quarter adjusted EBITDA was $41.3 million compared to last year's fourth quarter adjusted EBITDA of $135.6 million. Now, let's discuss the key drivers of operating results in our business segments. Retail pharmacy segment revenue for the quarter was $4.1 billion, which was $121 million higher than last year's fourth quarter due primarily to the acquisition of Bartell Drug. Retail pharmacy same-store sales decreased 30 basis points, with same-store prescription count down 90 basis points due to an over 14% reduction in acute prescriptions. Front-end same-store sales, excluding cigarettes and tobacco products, decreased 5%. The decline in front-end same-store sales was driven by the decline in cough, cold, and flu-related categories and difficult weather conditions. Fourth quarter adjusted EBITDA was $6 million, or 0.2% of revenues, compared to last year's fourth quarter adjusted EBITDA of $85.2 million, or 2.1% of revenues. The decline in adjusted EBITDA is largely due to the soft cough, cold, and flu season, COVID impacts, and the challenging weather conditions that we detailed in our March 24th release. I'll now shift to our pharmacy services segment, Elixir. For the fourth quarter, Elixir sold revenues increased to $69 million, or 3.8%, to $1.9 billion. due primarily to changes in member mix and benefit packages and Medicare Part D revenue with the new calendar year. Elixir's fourth quarter adjusted EBITDA was $35.2 million, or 1.9% of revenues, versus last year's fourth quarter adjusted EBITDA of $50.4 million, or 2.8% of revenues. The decline in adjusted EBITDA is due to a decrease in gross profit associated with contract renewals, on our small group business. Going forward, we expect margins to stabilize across the book of business, along with membership growth in target segments. I'll now turn to our cash flows and balance sheet. Our cash flow statement for the quarter shows a source of cash from operating activities of $359 million. We generated positive cash flow from the sale of the remainder of our calendar 2020 CMS receivable and through a reduction in inventory levels driven by our working capital efficiency initiatives. Cash used in investing activities was $63.8 million for the quarter. The purchase of Bartell used net cash of $86 million. We completed a sale leaseback of our Lancaster and Woodland distribution centers, as well as a few additional store sale leaseback transactions that generated total proceeds of $89 million in the quarter. We continue to explore additional sale-leaseback options on owned stores, where we see attractive costs of funds to generate cash to pay down debt. Our net debt balance was approximately $2.9 billion at the end of our fiscal year. Although our leverage ratio is not as low as we would like it to be due to the reduction in EBITDA, we remain committed to reducing debt and our goal of a leverage ratio in the four times range. Now let's turn to guidance. The pandemic will continue to have an impact on several external factors in fiscal 2022. These factors include the amount of individuals that receive a COVID vaccine, demand for COVID testing, the timing and extent to which elective procedures increase to pre-pandemic levels, the demand for flu and other immunizations, and the length and severity of this year's cough, cold, and flu seasons. Due to the wide range of outcomes that could result from these factors, the company is currently only providing guidance for its first quarter fiscal 2022. Our results for the first quarter of fiscal 2022 will be significantly impacted by the amount of COVID vaccinations administered during the quarter and the related impact on revenues, gross profit, and expenses. With the high end of our first quarter guidance based upon the assumption that our COVID vaccine activity for the remainder of the quarter will be consistent with what we have seen quarter to date. Also included in our guidance assumptions are a meaningful reduction in front-end sales compared to last year's pandemic-driven surge and continued deferral of elective procedures and the related impact on acute scripts. We also expect continued reimbursement rate pressure at retail, and a return of Elixir EBITDA to recent run rate levels due to good network management and expense control initiatives. Total revenues are expected to be between $6.1 billion and $6.3 billion in the first quarter, with retail pharmacy segment same-store sales expected to range from a decline of 9% to a decline of 7% over the first quarter of fiscal 2021. Net income or loss is expected to be between a loss of $10 million and income of $10 million. And adjusted EBITDA for the quarter is expected to be between $115 million and $140 million. In addition, I want to provide some annual direction on a few key metrics. Capital expenditures are expected to be approximately $300 million, with continued focus on investments store remodels, and file buys. Interest expense is projected to be approximately $200 million, and we expect to generate a working capital benefit of $100 million from further inventory reductions. I hope this information is useful, and we plan to provide further updates on our expectations as the year progresses. In closing, we began fiscal 2022 With a newly branded and integrated PBM poised to take full advantage of its large and growing addressable market, an enhanced store footprint and merchandise assortment, more than 6,400 pharmacists that are whole health advisors serving their communities, and an incredible and energized team, we are ready to pursue the numerous growth opportunities we have ahead of us across both of our segments. This completes our prepared remarks, and we are now ready to open the phone lines for your questions.

Okay, thank you. At this time, if anybody would like to ask a question, please press star 1 on your telephone keypad. Your first question comes from George Hill from Deutsche Bank. Your line is open.

Hey, good morning, guys, and thanks for taking the question, and thanks for all the color. Matt, you started to talk a little bit about the expectations for the vaccine. I guess, could you talk, I guess, could you or Hayward provide any numbers around the expectations for the vaccine contribution? in the fiscal first quarter and maybe about how you're thinking about it for the year. And, you know, I think a question that a lot of investors are asking right now, at least as it relates to your fiscal 1Q, is, like, is that going to be peak vaccine, I guess, is the way to think about it. And then I have a follow-up.

Yeah, so, Matt?

Sure. So, George, I think try to pick off these in no particular order. You know, it's I think it's still very early to figure out exactly what the amount and trajectory of ultimate vaccine numbers are going to be, which is one of the reasons we haven't given full year guidance. I do think it's a reasonable expectation that we would do more vaccines in the first quarter than we would do in any other quarter for the rest of the year. But some of that is largely things that are out of our control based upon you know, just the pace, the supply, you know, I think kind of the ever changing goals of the administration to get people vaccinated. But having said that, I think it's our expectation at this point that the key one is the highest vaccine quarter. You know, as I said in my comments, I think our guidance, you know, is kind of, you know, based around a range of outcomes that contemplates at the high end would be that we continue on the same pace for the rest of this quarter that we've had in the first part of the quarter. And I think as far as contribution, you know, these vaccines obviously provide, you know, benefits to the bottom line. I think, you know, roughly comparable to script benefits. It's a bit of a moving target to figure that out as well because there are costs that are incremental to giving these vaccines, and they can vary even based upon the type of vaccine that we're giving, whether it's Pfizer, Moderna, or J&J. The labor costs can vary based upon the model, and there's also costs related to advertising, supplies, even costs to schedule, you know, to stand up a scheduling system and other types of things. You know, I had a lot of kind of moving pieces, George. And again, one of the reasons that we're not getting full year guidance just yet, but I hope that answers some of your questions.

Also, George, you know, we are counting on the supply chain to produce these vaccines. Unfortunately, you know, unfortunately for J&J, but fortunately, I guess for us, we aren't doing that much J&J administration. But you can see We're primarily doing Pfizer and Moderna, but you can see how a disruption in the supply chain could really affect this. And we are seeing a disruption in the supply chain. So, you know, this to some degree, the range is just also depending on the supply chain continuing to ramp up. You had a follow-up, George?

Yeah, I'll say that was super helpful. And the follow-up, and Hayward was kind of like talking about the other side of the vaccine, and maybe could you talk about what I would call the front-end attachment rate or the basket size of the customers who are coming in for the vaccine, and talk about any initiatives the company is taking to kind of use the vaccine opportunity as a way to increase customer stickiness and engagement.

Well, it's super exciting. You know, I've been to stores that are doing vaccines And it's super exciting to see the customers come out of the consultation room. You know, they are cheering and they're euphoric. And so when they get a big basket, you know, push it around the store and buy candy, Easter baskets, wine, chocolate, I mean, ice cream. So, you know, there's this wonderful sense of, you know, going back to life again. And I'll let Jim comment on the specifics.

Yeah, thanks, Hayward. George, it's really interesting. About 75% of the folks that are coming to Rite Aid for a vaccine are actually net new to Rite Aid. These are not, you know, by and large, our existing customers. So, you know, we know many of them are driving quite long distances to receive the vaccine. Others are not. But we may see them, you know, at a different location. So we're taking advantage of the opportunity in such a euphoric state to really give them as much of a Rite Aid experience as we can, a new Rite Aid experience. Many of these people who haven't been to a Rite Aid store before have been blown away by the noticeable changes that they've seen. Someone described it to me as, you know, not seeing a child, a five-year-old child, since they were two. You know, the parent doesn't always notice that growth. But, man, when you come and see a person that has grown three years in that age frame, time frame, it's similar to the impact that it had on this particular individual who had been to a Rite Aid years ago. and was blown away by the new Rite Aid that they saw with new merchandise or new storefront or new brand identity, the cleanliness of the store, the service levels that we engage in and we emphasize with our front end and pharmacy associates. And they have been buying more products in areas like beauty and candy and greeting cards. where we have not seen strong results in the last year so that's encouraging and we believe it demonstrates that our customers are starting to feel a real sense of returning to normalcy and hopefully beginning to get back to regular activities we we are absolutely setting up merchandise displays for our customers um and really focusing in on the types of products that would complement a vaccination like the COVID vaccine, like setting up displays associated with pain relief and immunity and those types of things. So we have seen attachment sales increased and we've seen the lift, particularly in our large clinic stores for obvious reasons. And we are engaging digitally in ways that consider these 75% as brand new greenfield opportunities for new long-term Rite Aid customers and doing all we can to and continue to engage with our existing 25% that we see.

That's super helpful. Thanks, guys. I'll hop back in the queue.

And your next question will come from Glenn Santagello from Guggenheim. Your line is open.

Yeah, thanks for taking my question. Hey, I just want to follow up on George's vaccine question. I think what we're all kind of struggling with is, based on your guidance, But, you know, we're midway through the quarter. You already distributed two million vaccines. So based on that current trajectory, you'll have about four million vaccines distributed in this fiscal first quarter. And based on the revenue per vaccine that people are talking about, whether it's maybe not 40 bucks, but maybe, you know, blended average of something at least close to that with pretty high gross margins. You know, it seems like these vaccines are very profitable. And so I guess what people wanted to try to understand is when you look at your 1Q adjusted EBITDA guidance of 115 to 140 million, if we assume some reasonable contribution from vaccines, it would kind of imply that the adjusted EBITDA on the core is a reasonable chunk below that EBITDA guidance range. And so we're just trying to think about that. you know, as it relates to the full year, given that the vaccine benefit is likely to be transient. Hopefully that makes sense. I know there are a lot of moving pieces.

Well, I think, you know, I think obviously the first quarter, you know, we hope we will have the continued payoff of the vaccine on the current trajectory. And yet, on the other hand, we do, you know, we have just seen what happened with J&J. So we have to be what I'll call cautious about and cautiously optimistic, but we have to be cautious because if something happened with a Moderna plant next week, you know, that would significantly impact our ability to deliver on those numbers. So that's why we're being cautious in the first quarter. The reality is as you go through the year, you know, we still believe that, you know, in the June-July timeframe, assuming the supply chain holds up, you know, as you go through the year, people will have been vaccinated. Those that want to be vaccinated will have been vaccinated. So one would assume that there will be a slowdown of some significance in the fall. And the only, you know, the question, I guess, is do they actually approve vaccinations for kids under 16, under 18, depending on the vaccine? If they do not, you know, You know, you could argue that maybe there is, you know, it turns into like a flu shot kind of episodic event. Or you say, hopefully these kids get vaccinated, but maybe not for next year. So I think, I don't know if that answers your question, so I'm going to mash and jump in, but I think that's kind of the way we're thinking about it.

I have a question. Glenn, I would add a couple other things to that, and I would focus on a couple other points besides just the vaccine gross margin contribution. First of all, there are costs to distributing these, as I laid out in both my comments and commentary to George. But I think the other thing you have to keep in mind is that kind of underneath the vaccine benefit in the first quarter, which is going to be substantial, is We are still having, you know, weak cough, cold and flu results, which is, you know, does bleed over into the first quarter. And we are still seeing pressure on acute scripts because of people continuing to defer doctor's visits, elective procedures and things like that. So I think we've got this dynamic going on right now where we've got this, you know, sizable benefit from the vaccine. But some of the negative impacts of COVID are not over yet. And that's the part that, you know, I think makes it a little hard to kind of parse through the pieces of the first quarter. And part of, honestly, the reason why we're not giving guidance for the full year, there is still a wide range of outcomes depending on how, you know, some of these factors that the pandemic has kind of put upon our retail business ultimately resolve themselves.

Okay. Thanks for the comments.

And your next question will come from Robert Jones from Goldman Sachs. Your line is open.

Hey, this is Kevin on for Bob this morning. Thanks for taking the questions. Just wanted to ask one quick on testing. If there was anything, you know, details you guys give us about what the economics might look like on testing right now, how you're thinking about, you know, the EBITDA contribution that that could have to fiscal 1Q, and just more broadly how you've seen test volumes trend just as of late as

You know, I'll just start with the last part, and then I'll turn it over to Matt on the numbers. But testing has been very unpredictable, just like everything else. So, you know, if there's one word that is the theme of last year and this year, it's unpredictable. At one point, you know, we were seeing testing volumes drop off remarkably fast because I think people just got tired of COVID and they had, you know, gotten through the holidays and didn't feel particularly at risk. And now all of a sudden, you know, you see the new variant out and Michigan is, you know, in bad shape. And so testing is going up again. So again, it's just really cyclical and highly unpredictable. Right now we're seeing a spike But, Matt, you could talk about the economics and any future, you know, predictions.

Yeah. I'll jump on and say that, you know, there are – you know, the testing brings a positive benefit to the bottom line. We haven't, you know, gone into quantifying what that benefit is. I would say it's – you know, it's a benefit. It's not anything nearly as sizable as, you know, some of the impacts that we've talked about, you know, that weigh in upon our guidance. But it does have a – you know, a positive impact for us. And I think it's something that, you know, over time, as we develop kind of the institutional muscle to do this, I think it could be, you know, something that is a net positive for us in the longer term, you know, even after, you know, the contract of HHS ultimately expires.

Got it. That's helpful. And then just one high level.

The one thing I would just say is think of testing in the future, not now. but in the future as, like, flu testing. It will be something that I think will continue to be in everyone's arsenal for the rest of our lifetimes, just not at these volumes, most likely.

No, that makes sense. And then just one other one. One of your competitors recently called out accelerated generic deflation in the market. I'm just curious what you guys have been seeing as it relates to generic pricing, if you're seeing something similar, and if there's anything in particular that might be driving that. Thanks.

Matt?

Yeah, I would say we've seen, you know, some generic deflation in the marketplace. I think it's, you know, there's in the retail, you know, carving out like specialty drugs out of this. There's really not been a lot of, you know, new generic introductions that impact retail. And so therefore, you know, I think that puts pricing on the overall, you know, generic book. You know, I would say we've got that kind of baked into our market. our guidance um you know for the year but um you know i i think what you know we've seen some deflation in the marketplace as well great thanks and your next question will come from lisa grill from jp morgan your line is open

Hey, good morning. It's Mike Minchak on for Lisa. Thanks for taking the questions. So first, just wondering if you could talk about how the pandemic may have impacted some of your key longer term turnaround initiatives. You know, has there been any delay in those initiatives just given the near term focus on vaccine administration and testing? And if we look back to the analyst day last March, you laid out some longer term targets for fiscal 23. Should we think about those targets still remaining intact at this point?

Everything is on track. I mean, I think that's one of the most remarkable things that I even kind of reflect on and can't believe is that we have executed on every strategic initiative that we set ourselves up for back at Analyst Day over a year ago. So it starts with the rebranding of both Elixir and Rite Aid, which is complete. The only thing that isn't complete on the rebranding is that we haven't finished all of the exterior rebrands, but we're halfway through the fleet, which I think is pretty remarkable in and of itself, because you can imagine how hard it was to do permitting and construction in the middle of a pandemic, and we are halfway through a 2400 store fleet. So we have executed completely on our re-merchandising strategy. We are actually, you know, we've changed out a significant amount of our merchandise fleet-wide. And we have now eliminated all that inventory that wasn't turning, wasn't relevant to our target customer. And not only have we executed on our re-merchandising, it's resulted in a 25% increase in inventory terms. which is a recent all-time high and also a significant reduction to our working capital tied to inventory. We have opened our new flagship stores, as we committed to do. In those stores, we're showing pharmacy growth of over 300 bps higher than the rest of the stores in the region, and front-end sales growth is nearly 400 bps higher than the rest of the stores. in the region, all of this while improving overall customer satisfaction and market share. We've also executed on the cost savings initiatives that we committed to both at Rite Aid but also on the initiatives of integrating both Rite Aid and Elixir. Significant work there and significant savings generated. And then, of course, the acquisition of Bartels is well underway and progressing better than planned, I guess I would say. So, you know, I think there's a lot of noise in the pandemic, but the fact that we've been able to do all of that in addition to, you know, launching COVID testing, keeping our stores clean, protecting our associates and our customers, and getting people vaccinated. It's been quite a year. And so we remain committed to, you know, everything that we had set out to do.

Yeah. Mike, it's Matt. I would say as far as the long-term financial targets, obviously those were pre-pandemic. A whole lot has happened since then. I think that the assumptions underlying, you know, the long-term growth that we see in this company, potentially seeing this company has not changed. But, you know, given that we're not even given full-year guidance for 22 yet, I think, you know, We probably need to wait until we get kind of more on the back side of pandemic impacts before we, you know, take a pen to the specific long-term assumptions. But I think we still see a lot of growth opportunity in both sides of the business.

Got it. That's helpful. And then maybe just a follow-up question on the PBM business. Can you talk about what you're seeing thus far for the selling season for calendar 22 starts and then maybe provide some color and a comment around the lower gross profit in the small group business? Has there been any sort of shift in the model there? Is there something else unique that's driving that headwind?

So a couple of things. First of all, we have, as you know, a very robust small group business formerly known as MedTrack. And, frankly, that business was very and remains very profitable. We need to make sure that we maintain those crucial customers and did execute on some competitive renewal pricing in that market that did impact our results for the quarter but was a crucial step in ensuring the continued competitive performance nature of our positioning in that business. So consider that kind of a one-time effort to ensure that we retain in a competitive environment those key clients. Our target growth segment, of course, is the mid-market and government and regional health plans. So we are really focused on maintaining and growing the small group business as a key profit lever, but it's not our core focus of future growth in the business in terms of membership. So we are seeing a very, very strong pipeline right now with significant increased membership opportunities for the 1-1-22, calendar year 22 sales cycle. We're in the very beginning of that sales cycle. We did just add, we've already sold 200,000 new lives with six million scripts and this is the sales cycle is essentially just started because you know most of these decisions won't get made until you know july august time frame so the fact that we're seeing a 30 increase in the membership in our pipeline with a material increase of our target customers in the pipeline is a big difference from last year and we're very bullish about this and excited about this because i think next year will even be better given the momentum. So still early days, but really positive side.

Got it. Appreciate comments. Thanks.

The next question will come from Elizabeth Anderson from Evercore. Your line is open.

Hi, guys. Thanks so much for the question. I was wondering if you could talk about any impact you're potentially seeing on the front end, either in the fourth quarter or in the first quarter, from the stimulus checks and anything that you have seen from like either a merchandising opportunity or just results so far. Thanks.

Jim, I'll turn that to you.

There is an interesting dynamic. We did see spike associated with the timing of the stimulus check. So we do think that that is at play for at least a short period of time. But overall, you know, I think the trends we're seeing on the front end are those that we've described earlier. So continued pressure, but improvement in areas that we saw struggle in Q4. So I think there is a dynamic at play, but, you know, that they're episodic, as are those stimulus checks.

got it and how what what shall we think about like as you progress through the year you know you obviously pointed to just guiding just to the first quarter because of the volatility and and all the different moving factors what would you need to see on your side to have sort of a longer term and perhaps potentially provide full fy 22 guidance yeah it's a good it's a good question and this is going to be a play it by ear kind of thing for sure so matt maybe you could point to some of the

the areas stabilizing that we would yeah sure sure uh and and i think it's a couple things i really kind of three things in my mind elizabeth one is really getting a sense of what you know the the vaccine kind of supply looks like in the trajectory and and and how long it takes for uh you know this this first round of of vaccinations to you know, to happen, which I think we'll have better line of sight to here in a couple months. I think the other two pieces that are maybe a little bit more unpredictable is just what point do, A, do acute strips kind of stabilize, and we get the sense that people are starting to go to the doctor and have elective procedures and put off things that they're deferring. What does that impact look like? And then the other thing is, that's probably the longest-term pull in the 10th, but we have to keep our eyes on is what kind of behavior change has happened in the way people act and what kind of influences they have on cough, cold, and flu. You know, I think those are really, in my mind, three of the biggest questions that drive just quite a bit of uncertainty around the retail business.

Okay, perfect. That's super helpful. Thanks.

And your next question will come from Jenna Jean Elliott from Goldman Sachs. Your line is open.

Hi there. Thanks for getting me in. I'm curious just on a high level, when we think about the J&J and even the AstraZeneca news, if you've seen any signs of perhaps vaccine resistance and really how you go about matching the supply and the availability with the demand. How does it work if there are certain markets where Are you running into situations where you're sitting on excess supply at the end of the day? Just given the really limited shelf life of the product, I'm curious how you go about managing that supply demand. Thanks.

We may not have enough time for that answer because as some have described, it's been the most complex logistical challenge since World War II. That all said, we really hit our stride. It's kind of like being shot out of a cannon, but we hit our stride very quickly. We were not early adopters of Pfizer because many of the concerns around kind of refrigeration and freezing happened. But we've really learned how to adapt to that and how to make it work. And, you know, up until recently, you know, we were limited to moving vaccines, you know, only within jurisdiction. And that's, you know, a lot of that has begun to change, at least in the dialogue. And so it'll become easier and easier as time goes on. We really have found a way to, you know, particularly with Pfizer, we focus a lot on large mass clinics. When I say mass, it doesn't necessarily mean off-site. Many of them are actually in our stores. And, you know, with Moderna, we tend to embed it directly within workflow. But it's been a challenge, but one that we've managed, I think, as well as Eddie has done better. So I'm very proud of the way that our team has managed what you've highlighted as a really, really complex set of variables.

Yeah, it's really interesting, so I appreciate the color. I had another one separately just on some of the supply chain disruptions that you saw in the quarter. I'm just curious if the EBITDA impact was more so in the form of perhaps mis-sales or if it was from kind of markdowns of maybe getting inventory late, or is that something that we might see linger into OneQ? Is there any kind of inventory or margin impact we could see from those supply chain disruptions? Thanks. Matt?

Yeah, Jen, I would say it's a combination of some impacts on sales and margin, but it was something that was really isolated to February and do not expect any lingering impacts from what we saw in February into the first quarter.

Okay, awesome. And actually, just finally, on the private brands, I know you mentioned that as a growth opportunity and that they're trending well. Have you said before, just remind us, if anything, of where they could go over time? I mean, granted, it's still smaller in scale, but the opportunity there and, you know, perhaps the margin pickup that you're seeing on those types of sales. And that's it for me.

Yeah, well, a couple things I'm going to just lead in with and then let Jim answer. We are engaging in a wholesale transformation of our own brand. We are... coming up with new brands, new names, new packaging across pretty much the entire own brand enterprise. So sunsetting the brands that are in the store right now that are own brand and coming up with new exciting market tested brands with packaging that is going to be appealing to our target customer. So super excited about that. See all of that rolling out this year. In addition to launching own brands in Bartell, So Jim can talk to you specifically, but this is a very, very big opportunity for us.

Yeah, it's a really exciting opportunity for us. And it's interesting, if you look at the past year, well, let me first address specifically your question. We have in the past talked about increasing penetration of own brands 23% over the next several years. So, you know, we had said that about a year ago. Now, that was before COVID. And what we saw over the past year is own brands, despite, as I mentioned in my comments earlier, big hits to own brands like our ice cream, our hand-dipped ice cream, as well as cough, cold, and flu, which is a big own brands category, we still managed to actually grow own brands on an absolute dollar basis. From a penetration standpoint, there was no way during COVID that our own brands could keep pace with things like hand sanitizers and Lysol and those types of products. So penetration came down as a result in many ways of Two things, what I've just mentioned, which was just being outpaced by these kind of stock-up items and household necessities during COVID, as well as certain limitations with some of the supply associated, you know, COVID-impacted supply issues with a few of our own brand vendors.

Thanks so much.

And your next question will come from William Roeder from Bank of America. Your line is open.

Good morning. So there were some earlier questions about the math around the revenues related to the vaccine, but what are you doing or what are you seeing in terms of additional staffing needs, additional costs, anything you can provide there that might help us once we do the gross margin math that might help us with the ultimate EBITDA impact or benefit?

Yeah, good morning, Bill.

Yeah, we, you know, we walked through some of the pieces around, you know, the incremental labor costs, supplies, advertising, you know, behind the scenes costs, you know, to kind of build a scheduling system. I think They can vary based upon the type of vaccine we're doing and the way we're administering it, whether it's a clinic or an in-store or whatnot. So I think trying to get a specific cost per shot number, it's still a little fluid to probably give that number out. You know, again, I would say that we are, that, you know, these vaccines from a kind of total EBITDA contribution compare, I would say, you know, I would probably on a high level math say they're comparable to a script, maybe a little bit better than a normal script. But there are some costs, significant costs that go against, you know, that, you know, that margin number on the top.

Right. Okay. And then just one more. You mentioned reimbursement rate pressure this year. How does the pressure you're seeing this year compare to previous years? And is there any way that you can quantify what the impact on pharmacy margins is in a, you know, a bad year, meaning a year where you're seeing a lot of reimbursement rate pressures versus a year where the pressures are more modest?

Yeah, I would say this is very general, Bill. You know, winding the clock back two, three, four years ago when we were, you know, in you know, kind of in acquisition limbo. We had years where we saw reimbursement rate pressure, you know, of several hundred million dollars. You know, that number has come down. It's still, you know, a number that gives you a headwind of margin that you have to deal with. But I think it's kind of, you know, come back to a, you know, a number that's probably more reasonable. But, you know, but still, you know, it's a significant number before you start applying generic cost savings and the work that our purchasing team does. against that.

Okay, I'll pass to others. Thank you.

We have time for one final question, and that question will come from Karu Mattinson from Jefferies. Your line is open.

Good morning. I'm a little bit surprised by the volatility of profit in Elixir. You know, with the contract renewals, you know, certainly understand the shift from Medtrak and getting that in. But when you talk about gross profit stabilizing in the book of the business, is that the new wins that you've gotten to date, given the sales cycle has begun, or when do you expect that kind of return to the run rate?

Matt, why don't you take that one?

Sure. Good morning, Karu. Yeah, I would expect the return of the run rate pretty quickly. I mean, we made these adjustments in the book, you know, based upon competitive pressure, you know, to resize this period. But I think with the opportunities that we have at Elixir, you know, to continue to do a good job of network management, continue to focus on expense control, I think that will, you know, offset the hits we've taken on some of this margin in the book of business. And, you know, I expect a return to kind of what I would call normal, you know, EBITDA run rate levels for Elixir starting this quarter.

And I think it's both in our existing book of business as well as we're still benefiting and are seeing benefits from increased membership. We're seeing benefits from our network management, and we're seeing benefits even, you know, on a weekly basis in terms of cost of running the business. So, you know, there's more at work here than just pricing, and we believe we'll start to really materially demonstrate this during the year and, of course, beginning next year as well. And we are also competitive in our bids. So we're able to drive margin and be more competitive. That's what I think is so exciting for us.

Just on the Qt scripts, can you talk to, like, what the differences you're seeing in terms of the recovery in markets that have been open versus, you know, say a market like California where we don't officially fully open until, you know, June?

Jim, you want to take that?

Yeah, I mean, I would say we're not seeing anything unusual on a market-by-market. In other words, it's kind of what you would expect based on how things are trending within that market, COVID in particular. We have seen overall and have been encouraged just over the recent weeks. of the way in which acutes, even if you take out the COVID vaccine, have been, you know, kind of returning and actually showing quite, you know, positive numbers relative to just the weeks and months and certainly year that preceded it. So again, still seeing improvement. We've seen it in March. We're seeing it in April, more and more so just over the more recent weeks. And Again, with so much uncertainty and its tie to COVID in many ways, it really is one of the main driving reasons why you heard Matt and us talk about and Hayward that we're not providing that full-year guidance at this time.

The other thing I would add is if you look at our map, we're largely in markets that have had some levels, probably more levels of restrictions overall than the nation at large. We're not in some of the markets which have been kind of less locked down, I guess is the way I would say it.

Okay. And just lastly, given the sale leasebacks of the two DCs, what's left in terms of your portfolio of owned properties?

You know, we have a couple of DCs that we still own. They're frankly older DCs. And so I think the market for those is probably a little less robust than the ones that we sold. But we also have about 100 stores that we own. And you know, I think have the ability to do sale leasebacks on. And I think that we're going to be, you know, judicious about, you know, how we approach the market with those stores and make sure that we get, you know, good economics to the extent that we do sale leasebacks on those.

Thank you very much, guys. Appreciate it. Thank you.

This brings us to the end of our Q&A session today. I turn the call back over to Hayward Donegan for closing remarks.

Hello. Thank you. Thanks, everyone, for your questions. Really appreciate it. And before we end the call, I'd like to extend one last big thank you, not only to our team, but all the healthcare workers, first responders, caregivers, frontline workers, grocery workers, for all that everyone has done to keep us safe this year and help us. All of you rose to the challenge to serve your communities with kindness and compassion under really brutal circumstances. You know, we just can't thank everyone enough for their tireless efforts over the past year. And as we move forward, we're so eager to help you, our customer, achieve whole health for life. Today that may mean vaccines just to get back to your lives, you know, see family, go to dinner, take trips, throw a big party, hug your grandchildren, or anything else that brings us back to normal. So so excited to be a part of bringing things back to normal. And thank you all for joining us, and we look forward to updating you on our progress during our next quarterly earnings call.

Thank you everyone. This will conclude today's conference call. You may now disconnect.