Walgreens Boots Alliance Reports Fiscal 2024 First Quarter Results

Sample article from our Retail & Omnichannel

DEERFIELD, Illinois , January 4, 2024 (press release) –

First quarter and recent financial highlights

  • First quarter loss per share* was $0.08 compared to a loss per share of $4.31 in the year-ago quarter; first quarter results included $278 million after-tax charge for fair value adjustments on variable prepaid forward derivatives related to the monetization of Cencora shares
  • Adjusted earnings per share (EPS**) decreased 43.1 percent to $0.66, down 43.7 percent on a constant currency basis reflecting challenging retail market trends in the U.S. and a 21 percentage point headwind from a higher tax rate
  • First quarter sales increased 10.0 percent year-over-year to $36.7 billion, up 8.7 percent on a constant currency basis


Fiscal 2024 guidance

  • Maintaining fiscal 2024 adjusted EPS guidance of $3.20 to $3.50, with underlying earnings growth more than offset by lower sale and leaseback contribution, a higher tax rate, and lower COVID-19 contribution
  • Maintaining U.S. Healthcare adjusted EBITDA to be breakeven at the midpoint of the guidance range of ($50) million to $50 million

 

Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced financial results for the first quarter of fiscal 2024, which ended November 30, 2023.

Chief Executive Officer Tim Wentworth said:

"WBA delivered fiscal first quarter results in line with overall expectations, reflecting disciplined execution in a challenging consumer backdrop. We are evaluating all strategic options to drive sustainable long-term shareholder value, focusing on swift actions to right-size costs and increase cash flow, with a balanced approach to capital allocation priorities. Today we are announcing a 48 percent reduction in our quarterly dividend payment, while maintaining a competitive yield. We are proud to be a trusted and independent partner of choice, delivering healthcare to millions of people. And, we will leverage our local, convenient presence to engage with patients and help payors, providers, and pharma companies also achieve better health outcomes at an affordable cost."

 

Overview of First Quarter Results

WBA first quarter sales increased 10.0 percent from the year-ago quarter to $36.7 billion, an increase of 8.7 percent on a constant currency basis, reflecting sales growth in the U.S. Retail Pharmacy and International segments, and sales contributions from the U.S. Healthcare segment.

First quarter operating loss was $39 million compared to an operating loss of $6.2 billion in the year-ago quarter. Year over year improvement in operating loss is due to lapping the $6.5 billion pre-tax charge for opioid-related claims and litigation recorded in the year-ago quarter. Adjusted operating income was $687 million, a decrease of 33.0 percent on a constant currency basis reflecting softer U.S. retail market trends, partly offset by improved profitability in U.S. Healthcare and International growth.

Net loss in the first quarter was $67 million compared to a net loss of $3.7 billion in the year-ago quarter. Net loss in the first quarter included $278 million after-tax charge for fair value adjustments on financial derivatives related to forward sale of Cencora shares. Year over year improvement in net loss is primarily driven by higher operating income, partially offset by lapping the $0.9 billion post-tax gain from the partial sale of the Company's equity method investment in Cencora in the year-ago quarter. Adjusted net earnings decreased 43.1 percent to $571 million, down 43.7 percent on a constant currency basis, reflecting lower adjusted operating income and a higher adjusted effective tax rate primarily due to lapping of a valuation allowance release related to capital loss carryforwards in the year-ago quarter.

Loss per share in the first quarter was $0.08 compared to loss per share of $4.31 in the year-ago quarter. Adjusted earnings per share decreased 43.1 percent to $0.66, reflecting a decrease of 43.7 percent on a constant currency basis.

Net cash used for operating activities was $281 million in the first quarter. Operating cash flow was negatively impacted by an anticipated inventory build for the U.S. and UK holiday season and timing of payor reimbursement. Free cash flow was negative $788 million, a $671 million decrease compared with the year-ago quarter primarily driven by phasing of working capital and lower earnings. Capital expenditures decreased by $104 million compared to the year-ago quarter.

 

Business Segments

U.S. Retail Pharmacy

 

 

 

 

 

 

Three months ended November 30,

 

 

 

 

 

2023

 

 

 

 

 

2022

 

 

Sales

 

 

$                        28,944 

 

 

 

 

 

$                        27,204 

 

 

Adjusted operating income ***

 

 

$                              694 

 

 

 

 

 

$                          1,105 

 

 

 

 

 

 

 

 

The U.S. Retail Pharmacy segment had first quarter sales of $28.9 billion, an increase of 6.4 percent from the year-ago quarter. Comparable sales increased 8.1 percent from the year-ago quarter.

Pharmacy sales increased 10.7 percent compared to the year-ago quarter. Comparable pharmacy sales increased 13.1 percent in the quarter compared to the year-ago quarter, benefiting from higher branded drug inflation and strong execution in pharmacy services. Comparable prescriptions filled in the first quarter increased 1.3 percent from the year-ago quarter while comparable prescriptions excluding immunizations increased 1.8 percent, impacted by lower market growth due to a weaker flu and respiratory season, and Medicaid redeterminations. Total prescriptions filled in the quarter, including immunizations, adjusted to 30-day equivalents was 311.6 million, flat versus the prior year quarter.

Retail sales decreased 6.1 percent and comparable retail sales decreased 5.0 percent compared with the year-ago quarter, reflecting macroeconomic-driven consumer trends, a 160 basis point direct impact from a weaker flu and respiratory season, and Thanksgiving holiday store closures.

Adjusted operating income decreased 37.2 percent to $694 million compared to $1.1 billion in the year-ago quarter, reflecting a weaker flu and respiratory season, lower retail sales, and continued pharmacy reimbursement pressure net of procurement savings, partly offset by execution in pharmacy services and cost savings.

 

International

 

 

 

 

 

 

Three months ended November 30,

 

 

 

 

 

2023

 

 

 

 

 

2022

 

 

Sales

 

 

$                          5,832 

 

 

 

 

 

$                          5,189 

 

 

Adjusted operating income ***

 

 

$                              142 

 

 

 

 

 

$                              116 

 

 

 

 

 

 

 

 

The International segment had first quarter sales of $5.8 billion, an increase of 12.4 percent from the year-ago quarter, including a favorable currency impact of 8.0 percent. Sales increased 4.4 percent on a constant currency basis, with Boots UK sales growing 6.2 percent, and the Germany wholesale business growing 3.7 percent.

Boots UK comparable pharmacy sales increased 0.8 percent compared with the year-ago quarter. Boots UK comparable retail sales increased 9.8 percent compared to the year-ago quarter with growth across all categories and formats, and increased total retail market share for the 11th consecutive quarter. Boots.com continued to perform strongly with sales growing 17.5 percent, representing over 19 percent of Boots total retail sales.

Adjusted operating income increased 22.3 percent to $142 million, an increase of 15.0 percent on a constant currency basis compared with the year-ago quarter, led by strong retail sales in the UK partially offset by inflationary cost pressures.

 

U.S. Healthcare

 

 

 

 

 

 

Three months ended November 30,

 

 

 

 

 

2023

 

 

 

 

 

2022

 

 

Sales

 

 

$                          1,931 

 

 

 

 

 

$                              989 

 

 

Operating loss

 

 

$                            (436)

 

 

 

 

 

$                            (436)

 

 

Adjusted operating loss ***

 

 

$                              (96)

 

 

 

 

 

$                            (152)

 

 

Adjusted EBITDA (Non-GAAP measure)

 

 

$                              (39)

 

 

 

 

 

$                            (124)

 

 

 

 

 

The U.S. Healthcare segment had first quarter sales of $1.9 billion, reflecting the acquisition of Summit Health by VillageMD, and growth in all businesses compared to the year-ago quarter. On a pro forma basis, the segment's businesses grew sales at a combined rate of 12 percent in the quarter, led by VillageMD and Shields. VillageMD grew 14 percent on a pro forma basis, reflecting same clinic growth, additional full-risk lives, and increased multi-specialty productivity. Shields grew 27 percent, driven by recent contract wins and further expansion of existing partnerships.

Operating loss was $436 million, flat versus the year-ago quarter. Adjusted operating loss, which excludes certain costs related to stock compensation expense and amortization of acquired intangible assets, was $96 million compared to $152 million in the year-ago quarter.

Adjusted EBITDA loss of $39 million improved by $84 million versus the prior year quarter reflecting growth across all businesses and cost discipline.

 

Conference Call

WBA will hold a conference call to discuss the first quarter results beginning at 8:30 a.m. Eastern time today, January 4, 2024. A live simulcast as well as related presentation materials will be available through WBA’s investor relations website at: https://investor.walgreensbootsalliance.com. A replay of the conference will be archived on the website for at least 12 months after the event.

*All references to net earnings or net loss are to net earnings or net loss attributable to WBA, and all references to EPS are to diluted EPS attributable to WBA.

**"Adjusted," "constant currency" and free cash flow amounts are non-GAAP financial measures. Measures identified as "comparable" constitute key performance indicators. See the appendix to this release for a discussion of non-GAAP financial measures, including a reconciliation to the most closely correlated GAAP measure, and key performance indicators.

*** The Company uses Adjusted operating income (loss) as its principal measure of segment performance as it enhances the Company’s ability to compare past financial performance with current performance and analyze underlying segment performance and trends. The consolidated WBA measure is not determined in accordance with GAAP and should not be considered a substitute for, or superior to, the most directly comparable GAAP measure, consolidated operating income. See the appendix to this release for a discussion of non-GAAP financial measures, including a reconciliation to the most closely correlated GAAP measure.

 

Cautionary Note Regarding Forward-Looking Statements: This release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These include, without limitation, estimates of and goals for future operating, financial and tax performance and results, including the impact of opioid related claims and litigation settlements, our fiscal year 2024 guidance, outlook and targets and related assumptions and drivers, as well as forward-looking statements concerning the expected execution and effect of our business strategies, including the potential impacts on our business of COVID-19, the impact of adverse global macroeconomic conditions caused by factors including, among others, inflation, high interest rates, labor shortages, supply chain disruptions and pandemics like COVID-19 on our operations and financial results, the financial performance of our equity method investees, including Cencora, the influence of certain holidays and seasonality, our cost-savings and growth initiatives, including statements relating to our expected cost savings under our Transformational Cost Management Program and expansion and future operating and financial results of our U.S. Healthcare segment, including our long-term sales targets and profitability expectations. All statements in the future tense and all statements accompanied by words such as “expect,” “outlook,” “forecast,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “goal,” “guidance,” “target,” “aim,” continue,” “transform,” “accelerate,” “model,” “long-term,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,” “assume,” "potential," and variations of such words and similar expressions are intended to identify such forward-looking statements.

These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, known or unknown, that could cause actual results to vary materially from those indicated or anticipated.

These risks, assumptions and uncertainties include those described in Item 1A (Risk Factors) of our Form 10-K for the fiscal year ended August 31, 2023, as amended, and in other documents that we file or furnish with the Securities and Exchange Commission (the "SEC"). If one or more of these risks or uncertainties materializes, or if underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. All forward-looking statements we make or that are made on our behalf are qualified by these cautionary statements. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made.

We do not undertake, and expressly disclaim, any duty or obligation to update publicly any forward-looking statement after the date of this release, whether as a result of new information, future events, changes in assumptions or otherwise.

Please refer to the supplemental information presented below for reconciliations of the non-GAAP financial measures used in this release to the most comparable GAAP financial measure and related disclosures.



View WBA’s Fiscal 2024 First Quarter Results Infographic
 


 

Notes to Editors:

 

About Walgreens Boots Alliance

Walgreens Boots Alliance (Nasdaq: WBA) is an integrated healthcare, pharmacy and retail leader serving millions of customers and patients every day, with a 170-year heritage of caring for communities.

A trusted, global innovator in retail pharmacy with approximately 12,500 locations across the U.S., Europe and Latin America, WBA plays a critical role in the healthcare ecosystem. The Company is reimagining local healthcare and well-being for all as part of its purpose – to create more joyful lives through better health. Through dispensing medicines, improving access to a wide range of health services, providing high quality health and beauty products and offering anytime, anywhere convenience across its digital platforms, WBA is shaping the future of healthcare.

WBA employs approximately 330,000 people and has a presence in eight countries through its portfolio of consumer brands: Walgreens, Boots, Duane Reade, the No7 Beauty Company, and Benavides in Mexico. Additionally, WBA has a portfolio of healthcare-focused investments located in several countries, including China and the U.S.

The Company is proud of its contributions to healthy communities, a healthy planet, an inclusive workplace and a sustainable marketplace. WBA has been recognized for its commitment to being an inclusive workplace. In fiscal 2023, the Company received a score of 100 from the Human Rights Campaign’s Corporate Equality Index, scored 100 percent on the Disability Equality Index for disability inclusion and was named Disability:IN’s 2023 Employer of the Year. In addition, WBA has been recognized for its commitment to operating sustainably as the company is an index component of the Dow Jones Sustainability Indices (DJSI).

More Company information is available at WalgreensBootsAlliance.com.

 

 

 

 

Media Contacts

USA / Jim Cohn
+1 224 813 9057

International
+44 (0)20 7980 8585

Investor Relations Contact

Tiffany Kanaga
+1 847 315 2922

 


WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
(in millions, except per share amounts)

 

 

 

 

Three months ended November 30,

 

 

 

 

 

2023

 

 

 

 

 

2022

 

 

Sales

 

 

$               36,707

 

 

 

 

 

$               33,382

 

 

Cost of sales

 

 

                 29,937

 

 

 

 

 

                 26,429

 

 

Gross profit

 

 

                   6,771

 

 

 

 

 

                   6,953

 

 

Selling, general and administrative expenses

 

 

                   6,851

 

 

 

 

 

                 13,158

 

 

Equity earnings in Cencora

 

 

                        42

 

 

 

 

 

                        53

 

 

Operating loss

 

 

                       (39)

 

 

 

 

 

                  (6,151)

 

 

Other (expense) income, net

 

 

                     (220)

 

 

 

 

 

                      992

 

 

Loss before interest and income tax benefit

 

 

                     (259)

 

 

 

 

 

                  (5,159)

 

 

Interest expense, net

 

 

                        99

 

 

 

 

 

                      110

 

 

Loss before income tax benefit

 

 

                     (358)

 

 

 

 

 

                  (5,270)

 

 

Income tax benefit

 

 

                       (74)

 

 

 

 

 

                  (1,447)

 

 

Post-tax earnings from other equity method investments

 

 

                           6

 

 

 

 

 

                           7

 

 

Net loss

 

 

                     (278)

 

 

 

 

 

                  (3,816)

 

 

Net loss attributable to non-controlling interests

 

 

                     (210)

 

 

 

 

 

                       (94)

 

 

Net loss attributable to Walgreens Boots Alliance, Inc.

 

 

$                     (67)

 

 

 

 

 

$               (3,721)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

$                 (0.08)

 

 

 

 

 

$                 (4.31)

 

 

Diluted

 

 

$                 (0.08)

 

 

 

 

 

$                 (4.31)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

                   863.0

 

 

 

 

 

                   863.6

 

 

Diluted

 

 

                   863.0

 

 

 

 

 

                   863.6

 

 

 

 

 

 

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(in millions)

 

 

 

 

 

 

 

November 30, 2023

 

 

 

 

 

August 31, 2023

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

$                784

 

 

 

 

 

$                739

 

 

Accounts receivable, net

 

 

 

 

 

               5,972

 

 

 

 

 

               5,381

 

 

Inventories

 

 

 

 

 

               9,454

 

 

 

 

 

               8,257

 

 

Other current assets

 

 

 

 

 

               1,134

 

 

 

 

 

               1,127

 

 

Total current assets

 

 

 

 

 

             17,345

 

 

 

 

 

             15,503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

 

 

 

             11,176

 

 

 

 

 

             11,587

 

 

Operating lease right-of-use assets

 

 

 

 

 

             21,708

 

 

 

 

 

             21,667

 

 

Goodwill

 

 

 

 

 

             28,184

 

 

 

 

 

             28,187

 

 

Intangible assets, net

 

 

 

 

 

             13,278

 

 

 

 

 

             13,635

 

 

Equity method investments

 

 

 

 

 

               3,400

 

 

 

 

 

               3,497

 

 

Other non-current assets

 

 

 

 

 

               2,732

 

 

 

 

 

               2,550

 

 

Total non-current assets

 

 

 

 

 

             80,478

 

 

 

 

 

             81,125

 

 

Total assets

 

 

 

 

 

$           97,823

 

 

 

 

 

$           96,628

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities, redeemable non-controlling interests and equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term debt

 

 

 

 

 

$             1,670

 

 

 

 

 

$                917

 

 

Trade accounts payable

 

 

 

 

 

             13,593

 

 

 

 

 

             12,635

 

 

Operating lease obligations

 

 

 

 

 

               2,350

 

 

 

 

 

               2,347

 

 

Accrued expenses and other liabilities

 

 

 

 

 

               8,226

 

 

 

 

 

               8,426

 

 

Income taxes

 

 

 

 

 

                   276

 

 

 

 

 

                   209

 

 

Total current liabilities

 

 

 

 

 

             26,116

 

 

 

 

 

             24,535

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

 

 

 

               7,585

 

 

 

 

 

               8,145

 

 

Operating lease obligations

 

 

 

 

 

             22,132

 

 

 

 

 

             22,124

 

 

Deferred income taxes

 

 

 

 

 

               1,279

 

 

 

 

 

               1,318

 

 

Accrued litigation obligations

 

 

 

 

 

               6,366

 

 

 

 

 

               6,261

 

 

Other non-current liabilities

 

 

 

 

 

               6,589

 

 

 

 

 

               5,757

 

 

Total non-current liabilities

 

 

 

 

 

             43,951

 

 

 

 

 

             43,605

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable non-controlling interests

 

 

 

 

 

                   169

 

 

 

 

 

                   167

 

 

Total equity

 

 

 

 

 

             27,588

 

 

 

 

 

             28,322

 

 

Total liabilities, redeemable non-controlling interests and equity

 

 

 

 

 

$           97,823

 

 

 

 

 

$           96,628

 

 

 

 

 

 

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)

 

 

 

 

 

 

 

 

 

Three months ended November 30,

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

2022

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

$              (278)                

 

 

 

 

 

$           (3,816)            

 

 

Adjustments to reconcile net loss to net cash (used for) provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

 

                  616

 

 

 

 

 

                  495

 

 

Deferred income taxes

 

 

 

 

 

                 (196)                

 

 

 

 

 

             (1,602)            

 

 

Stock compensation expense

 

 

 

 

 

                    51

 

 

 

 

 

                  222

 

 

Earnings from equity method investments

 

 

 

 

 

                   (48)                  

 

 

 

 

 

                   (61)                  

 

 

Impairment of intangibles and long-lived assets

 

 

 

 

 

                  165

 

 

 

 

 

                    94

 

 

Gain on sale of equity method investments

 

 

 

 

 

                 (139)                

 

 

 

 

 

                 (969)                

 

 

Gain on sale-leaseback transactions

 

 

 

 

 

                 (160)                

 

 

 

 

 

                 (189)                

 

 

Loss on variable prepaid forward contracts

 

 

 

 

 

                  366

 

 

 

 

 

                    

 

 

Other

 

 

 

 

 

                    35

 

 

 

 

 

                   (34)                  

 

 

Changes in certain assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

 

 

 

                 (618)                

 

 

 

 

 

                  151

 

 

Inventories

 

 

 

 

 

             (1,180)            

 

 

 

 

 

                 (918)                

 

 

Other current assets

 

 

 

 

 

                   (42)                  

 

 

 

 

 

                   (68)                  

 

 

Trade accounts payable

 

 

 

 

 

                  966

 

 

 

 

 

                  867

 

 

Accrued expenses and other liabilities

 

 

 

 

 

                  205

 

 

 

 

 

                 (269)                

 

 

Income taxes

 

 

 

 

 

                    96

 

 

 

 

 

                  153

 

 

Accrued litigation obligations

 

 

 

 

 

                   (54)                  

 

 

 

 

 

               6,494

 

 

Other non-current assets and liabilities

 

 

 

 

 

                   (67)                  

 

 

 

 

 

                   (58)                  

 

 

Net cash (used for) provided by operating activities

 

 

 

 

 

                 (281)                

 

 

 

 

 

                  493

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

 

 

 

                 (506)                

 

 

 

 

 

                 (610)                

 

 

Proceeds from sale-leaseback transactions

 

 

 

 

 

                  427

 

 

 

 

 

                  409

 

 

Proceeds from sale of other assets

 

 

 

 

 

                  304

 

 

 

 

 

               2,068

 

 

Business, investment and asset acquisitions, net of cash acquired

 

 

 

 

 

                 (109)                

 

 

 

 

 

                   (80)                  

 

 

Other

 

 

 

 

 

                   (31)                  

 

 

 

 

 

                    70

 

 

Net cash provided by investing activities

 

 

 

 

 

                    85

 

 

 

 

 

               1,858

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in short-term debt with maturities of 3 months or less

 

 

 

 

 

                  155

 

 

 

 

 

                    22

 

 

Proceeds from debt

 

 

 

 

 

               3,826

 

 

 

 

 

                    17

 

 

Payments of debt

 

 

 

 

 

             (3,776)            

 

 

 

 

 

                   (11)                  

 

 

Proceeds from variable prepaid forward contracts

 

 

 

 

 

                  424

 

 

 

 

 

                    

 

 

Treasury stock purchases

 

 

 

 

 

                   (69)                  

 

 

 

 

 

                 (150)                

 

 

Cash dividends paid

 

 

 

 

 

                 (415)                

 

 

 

 

 

                 (415)                

 

 

Other

 

 

 

 

 

                    41

 

 

 

 

 

                   (63)                  

 

 

Net cash provided by (used for) financing activities

 

 

 

 

 

                  186

 

 

 

 

 

                 (599)                

 

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

 

 

 

                    

 

 

 

 

 

                       4

 

 

Changes in cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

 

 

 

                   (10)                  

 

 

 

 

 

               1,756

 

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

 

 

 

                  856

 

 

 

 

 

               2,558

 

 

Cash, cash equivalents and restricted cash at end of period

 

 

 

 

 

$                846

 

 

 

 

 

$             4,314

 

 

 

 

 

 

 

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION (UNAUDITED)
REGARDING NON-GAAP FINANCIAL MEASURES

The following information provides reconciliations of the supplemental non-GAAP financial measures, as defined under the SEC rules, presented in this press release to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States (GAAP). The Company has provided the non-GAAP financial measures in the press release, which are not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP.

These supplemental non-GAAP financial measures are presented because management has evaluated the Company’s financial results both including and excluding the adjusted items or the effects of foreign currency translation, as applicable, and believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the Company from period to period and trends in the Company’s historical operating results. The Company also uses non-GAAP financial measures as a basis for certain compensation programs it sponsors. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the press release.

The Company does not provide a reconciliation for non-GAAP estimates to the most directly comparable GAAP financial measures on a forward-looking basis where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing or amount of various items that have not yet occurred, are out of the Company’s control and/or cannot be reasonably predicted, such as unusual one-time charges, tax expenses, and material litigation expenses, and that would impact diluted net earnings per share, the most directly comparable forward-looking GAAP financial measure. For the same reasons, the Company is unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

Constant currency

The Company also presents certain information related to current period operating results in “constant currency,” which is a non-GAAP financial measure. These amounts are calculated by translating current period results at the foreign currency exchange rates used in the comparable period in the prior year. The Company presents such constant currency financial information because it has significant operations outside of the U.S. reporting in currencies other than the U.S. dollar and such presentation provides a framework to assess how its business performed excluding the impact of foreign currency exchange rate fluctuations.

Comparable sales

For the Company's U.S. Retail Pharmacy and International segments, Comparable sales are defined as sales from stores that have been open for at least twelve consecutive months without closure for seven or more consecutive days, including due to looting or store damage, and without a major remodel or being subject to a natural disaster, in the past twelve months as well as e-commerce sales. E-commerce sales include digitally initiated sales online or through mobile applications. Relocated stores are not included as comparable sales for the first twelve months after the relocation. Acquired stores are not included as comparable sales for the first twelve months after acquisition or conversion, when applicable, whichever is later. Comparable sales, comparable pharmacy sales, comparable retail sales, comparable number of prescriptions and comparable number of 30-day equivalent prescriptions refer to total sales, pharmacy sales, retail sales, number of prescriptions and number of 30-day equivalent prescriptions, respectively. The method of calculating comparable sales varies across the retail industry and our method of calculating comparable sales may not be the same as other retailers’ methods.

With respect to the International segment, comparable sales, comparable pharmacy sales and comparable retail sales, are presented on a constant currency basis, which is a non-GAAP financial measure. Refer to the discussion above in "Constant currency" for further details on constant currency calculations.

Key Performance Indicators

The Company considers certain metrics, such as comparable sales (in constant currency), comparable pharmacy sales (in constant currency), comparable retail sales (in constant currency), comparable number of prescriptions, and comparable 30-day equivalent prescriptions to be key performance indicators because the Company’s management has evaluated its results of operations using these metrics and believes that these key performance indicators presented provide additional perspective and insights when analyzing the core operating performance of the Company from period to period and trends in its historical operating results. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein. These measures may not be comparable to similarly-titled performance indicators used by other companies.

 

 

 

NET LOSS TO ADJUSTED NET EARNINGS AND DILUTED NET LOSS PER SHARE

 

 

 

 

 

TO ADJUSTED DILUTED NET EARNINGS PER SHARE

 

 

 

 

 

(in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended November 30,

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

2022

 

 

 

 

 

Net loss attributable to Walgreens Boots Alliance, Inc. (GAAP)

 

 

 

 

 

$                (67)

 

 

 

 

 

$           (3,721)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to operating loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition-related amortization 1

 

 

 

 

 

                  275

 

 

 

 

 

                  330

 

 

 

 

 

Acquisition-related costs 2

 

 

 

 

 

                  163

 

 

 

 

 

                    39

 

 

 

 

 

Transformational cost management 3

 

 

 

 

 

                  109

 

 

 

 

 

                  138

 

 

 

 

 

Adjustments to equity earnings in Cencora 4

 

 

 

 

 

                    50

 

 

 

 

 

                    86

 

 

 

 

 

LIFO provision 5

 

 

 

 

 

                    48

 

 

 

 

 

                    18

 

 

 

 

 

Certain legal and regulatory accruals and settlements 6

 

 

 

 

 

                    82

 

 

 

 

 

               6,554

 

 

 

 

 

Total adjustments to operating loss

 

 

 

 

 

                  726

 

 

 

 

 

               7,166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to other (expense) income, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on certain non-hedging derivatives 7

 

 

 

 

 

                  366

 

 

 

 

 

                    

 

 

 

 

 

Gain on sale of equity method investment 8

 

 

 

 

 

                 (139)                

 

 

 

 

 

                 (969)                

 

 

 

 

 

Loss on disposal of business 9

 

 

 

 

 

                       4

 

 

 

 

 

                    

 

 

 

 

 

Total adjustments to other (expense) income, net

 

 

 

 

 

                  230

 

 

 

 

 

                 (969)                

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to income tax benefit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax impact of adjustments 10

 

 

 

 

 

                 (203)                

 

 

 

 

 

             (1,438)            

 

 

 

 

 

Equity method non-cash tax 10

 

 

 

 

 

                       4

 

 

 

 

 

                       8

 

 

 

 

 

Total adjustments to income tax benefit

 

 

 

 

 

                 (199)                

 

 

 

 

 

             (1,430)            

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to post-tax earnings from other equity method investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to earnings in other equity method investments 11

 

 

 

 

 

                       9

 

 

 

 

 

                       8

 

 

 

 

 

Total adjustments to post-tax earnings from other equity method investments

 

 

 

 

 

                       9

 

 

 

 

 

                       8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to net loss attributable to non-controlling interests:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition-related costs 2

 

 

 

 

 

                   (70)                  

 

 

 

 

 

                   (14)                  

 

 

 

 

 

Acquisition-related amortization 1

 

 

 

 

 

                   (58)                  

 

 

 

 

 

                   (37)                  

 

 

 

 

 

Total adjustments to net loss attributable to non-controlling interests

 

 

 

 

 

                 (128)                

 

 

 

 

 

                   (51)                  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure)

 

 

 

 

 

$                571

 

 

 

 

 

$             1,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net loss per common share (GAAP) 12

 

 

 

 

 

$             (0.08)

 

 

 

 

 

$             (4.31)

 

 

 

 

 

Adjustments to operating loss

 

 

 

 

 

                 0.84

 

 

 

 

 

                 8.29

 

 

 

 

 

Adjustments to other (expense) income, net

 

 

 

 

 

                 0.27

 

 

 

 

 

                (1.12)               

 

 

 

 

 

Adjustments to income tax benefit

 

 

 

 

 

                (0.23)               

 

 

 

 

 

                (1.65)               

 

 

 

 

 

Adjustments to post-tax earnings from other equity method investments

 

 

 

 

 

                 0.01

 

 

 

 

 

                 0.01

 

 

 

 

 

Adjustments to net loss attributable to non-controlling interests

 

 

 

 

 

                (0.15)               

 

 

 

 

 

                (0.06)               

 

 

 

 

 

Adjusted diluted net earnings per common share (Non-GAAP measure) 13

 

 

 

 

 

$               0.66

 

 

 

 

 

$               1.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, diluted (in millions) 13

 

 

 

 

 

               864.0

 

 

 

 

 

               864.3

 

 

 

 

 

 

 

 

 

1

 

 

Acquisition-related amortization includes amortization of acquisition-related intangible assets, inventory valuation adjustments and stock-based compensation fair valuation adjustments. Amortization of acquisition-related intangible assets includes amortization of intangible assets such as customer relationships, trade names, trademarks, developed technology and contract intangibles. Intangible asset amortization excluded from the related non-GAAP measure represents the entire amount recorded within the Company’s GAAP financial statements. The revenue generated by the associated intangible assets has not been excluded from the related non-GAAP measures. Amortization expense, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired, or the estimated useful life of an intangible asset is revised. These charges are primarily recorded within Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings. The stock-based compensation fair valuation adjustment reflects the difference between the fair value based remeasurement of awards under purchase accounting and the grant date fair valuation. Post-acquisition compensation expense recognized in excess of the original grant date fair value of acquiree awards are excluded from the related non-GAAP measures as these arise from acquisition-related accounting requirements or agreements, and are not reflective of normal operating activities.

 

 

2

 

 

Acquisition-related costs are transaction and integration costs associated with certain merger, acquisition and divestitures related activities recorded in Operating loss within the Consolidated Condensed Statement of Earnings. Examples of such costs include deal costs, severance, stock-based compensation and employee transaction success bonuses. These charges are primarily recorded within Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings. These costs are significantly impacted by the timing and complexity of the underlying merger, acquisition and divestitures related activities and do not reflect the Company’s current operating performance.

 

 

3

 

 

Transformational Cost Management Program charges are costs associated with a formal restructuring plan. These charges are primarily recorded in Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings. These costs do not reflect current operating performance and are impacted by the timing of restructuring activity.

 

 

4

 

 

Adjustments to equity earnings in Cencora consist of the Company’s proportionate share of non-GAAP adjustments reported by Cencora consistent with the Company’s non-GAAP measures.

 

 

5

 

 

The Company’s U.S. Retail Pharmacy segment inventory is accounted for using the last-in-first-out (“LIFO”) method. This adjustment represents the impact on cost of sales as if the U.S. Retail Pharmacy segment inventory is accounted for using first-in first-out (“FIFO”) method. The LIFO provision is affected by changes in inventory quantities, product mix, and manufacturer pricing practices, which may be impacted by market and other external influences. Therefore, the Company cannot control the amounts recognized or timing of these items.

 

 

6

 

 

Certain legal and regulatory accruals and settlements relate to significant charges associated with certain legal proceedings, including legal defense costs. The Company excludes these charges when evaluating operating performance because it does not incur such charges on a predictable basis and exclusion of such charges enables more consistent evaluation of the Company’s operating performance. These charges are recorded in Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings. In fiscal 2023, the Company recorded charges related to the opioid litigation settlement frameworks and certain other legal matters.

 

 

7

 

 

Includes fair value gains or losses on the variable prepaid forward derivatives and certain derivative instruments used as economic hedges of the Company’s net investments in foreign subsidiaries. These charges are recorded within Other (expense) income, net. The Company does not believe this volatility related to the mark-to-market adjustments on the underlying derivative instruments reflects the Company’s operational performance.

 

 

8

 

 

Gains on the sale of equity method investments are recorded in Other (expense) income, net within the Consolidated Condensed Statements of Earnings. The Company excludes these charges when evaluating operating performance because these do not relate to the ordinary course of the Company’s business.

 

 

9

 

 

Includes losses related to the sale of businesses. These charges are recorded in Other (expense) income, net, within the Consolidated Condensed Statements of Earnings.

 

 

10

 

 

Adjustments to income tax benefit include adjustments to the GAAP basis tax benefit commensurate with non-GAAP adjustments and certain discrete tax items and equity method non-cash tax. These charges are recorded in Income tax benefit within the Consolidated Condensed Statements of Earnings.

 

 

11

 

 

Adjustments to post-tax earnings from other equity method investments consist of the proportionate share of certain equity method investees’ non-cash items or unusual or infrequent items consistent with the Company’s non-GAAP adjustments. These charges are recorded in Post-tax earnings from other equity method investments within the Consolidated Condensed Statements of Earnings. Although the Company may have shareholder rights and board representation commensurate with its ownership interests in these equity method investees, adjustments relating to equity method investments are not intended to imply that the Company has direct control over their operations and resulting revenue and expenses. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all revenue and expenses of these equity method investees.

 

 

12

 

 

Due to the anti-dilutive effect resulting from the reported net loss, the impact of potentially dilutive securities on the per share amounts has been omitted from the calculation of weighted-average common shares outstanding for diluted net loss per common share.

 

 

13

 

 

Includes impact of potentially dilutive securities in the calculation of weighted-average common shares, diluted for adjusted diluted net earnings per common share calculation purposes.

 

 

 

 

 

 

 

NON-GAAP RECONCILIATIONS BY SEGMENT AND ON A CONSOLIDATED BASIS

 

 

 

 

 

 

 

 

(in millions)

 

 

 

 

 

 

 

 

Three months ended November 30, 2023

 

 

 

 

 

 

 

 

U.S. Retail Pharmacy1

 

 

 

 

 

International

 

 

 

 

 

U.S. Healthcare

 

 

 

 

 

Corporate and Other

 

 

 

 

 

Walgreens Boots Alliance, Inc.

 

 

Sales

 

 

 

 

 

$            28,944   

 

 

 

 

 

$               5,832   

 

 

 

 

 

$        1,931   

 

 

 

 

 

$                       

 

 

 

 

 

$            36,707   

 

 

Gross profit (GAAP)

 

 

 

 

 

$               5,434   

 

 

 

 

 

$               1,211   

 

 

 

 

 

$            126   

 

 

 

 

 

$                       

 

 

 

 

 

$               6,771   

 

 

LIFO provision

 

 

 

 

 

                      48   

 

 

 

 

 

                          

 

 

 

 

 

                     

 

 

 

 

 

                         

 

 

 

 

 

                      48   

 

 

Acquisition-related amortization

 

 

 

 

 

                         5   

 

 

 

 

 

                          

 

 

 

 

 

                21   

 

 

 

 

 

                         

 

 

 

 

 

                      26   

 

 

Transformational cost management

 

 

 

 

 

                         6   

 

 

 

 

 

                          

 

 

 

 

 

                     

 

 

 

 

 

                         

 

 

 

 

 

                         6   

 

 

Adjusted gross profit (Non-GAAP measure)

 

 

 

 

 

$               5,493   

 

 

 

 

 

$               1,211   

 

 

 

 

 

$            146   

 

 

 

 

 

$                       

 

 

 

 

 

$               6,850   

 

 

Selling, general and administrative expenses (GAAP)

 

 

 

 

 

$               5,179   

 

 

 

 

 

$               1,095   

 

 

 

 

 

$            561   

 

 

 

 

 

$                       17

 

 

 

 

 

$               6,851   

 

 

Acquisition-related amortization

 

 

 

 

 

                     (89)  

 

 

 

 

 

                     (15)  

 

 

 

 

 

            (144)  

 

 

 

 

 

                         

 

 

 

 

 

                  (249)  

 

 

Acquisition-related costs

 

 

 

 

 

                     (26)  

 

 

 

 

 

                       (4)  

 

 

 

 

 

            (173)  

 

 

 

 

 

                          41

 

 

 

 

 

                  (163)  

 

 

Transformational cost management

 

 

 

 

 

                     (91)  

 

 

 

 

 

                       (6)  

 

 

 

 

 

                 (2)  

 

 

 

 

 

                          (4)                         

 

 

 

 

 

                  (103)  

 

 

Certain legal and regulatory accruals and settlements

 

 

 

 

 

                     (82)  

 

 

 

 

 

                          

 

 

 

 

 

                     

 

 

 

 

 

                         

 

 

 

 

 

                     (82)  

 

 

Adjusted selling, general and administrative expenses (Non-GAAP measure)

 

 

 

 

 

$               4,891   

 

 

 

 

 

$               1,069   

 

 

 

 

 

$            242   

 

 

 

 

 

$                       53

 

 

 

 

 

$               6,255   

 

 

Operating income (loss) (GAAP)

 

 

 

 

 

$                  297   

 

 

 

 

 

$                  116   

 

 

 

 

 

$          (436)  

 

 

 

 

 

$                     (17)

 

 

 

 

 

$                  (39)  

 

 

Acquisition-related amortization

 

 

 

 

 

                      94   

 

 

 

 

 

                      15   

 

 

 

 

 

              165   

 

 

 

 

 

                         

 

 

 

 

 

                    275   

 

 

Acquisition-related costs

 

 

 

 

 

                      26   

 

 

 

 

 

                         4   

 

 

 

 

 

              173   

 

 

 

 

 

                        (41)                       

 

 

 

 

 

                    163   

 

 

Transformational cost management

 

 

 

 

 

                      97   

 

 

 

 

 

                         6   

 

 

 

 

 

                  2    

 

 

 

 

 

                            4

 

 

 

 

 

                    109   

 

 

Adjustments to equity earnings in Cencora

 

 

 

 

 

                      50   

 

 

 

 

 

                          

 

 

 

 

 

                     

 

 

 

 

 

                         

 

 

 

 

 

                      50   

 

 

LIFO provision

 

 

 

 

 

                      48   

 

 

 

 

 

                          

 

 

 

 

 

                     

 

 

 

 

 

                         

 

 

 

 

 

                      48   

 

 

Certain legal and regulatory accruals and settlements

 

 

 

 

 

                      82   

 

 

 

 

 

                          

 

 

 

 

 

                     

 

 

 

 

 

                         

 

 

 

 

 

                      82   

 

 

Adjusted operating income (loss) (Non-GAAP measure)

 

 

 

 

 

$                  694   

 

 

 

 

 

$                  142   

 

 

 

 

 

$            (96)  

 

 

 

 

 

$                     (53)

 

 

 

 

 

$                  687   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin (GAAP)

 

 

 

 

 

18.8 %

 

 

 

 

 

20.8 %

 

 

 

 

 

6.5 %

 

 

 

 

 

 

 

 

 

 

 

18.4 %

 

 

Adjusted gross margin (Non-GAAP measure)

 

 

 

 

 

19.0 %

 

 

 

 

 

20.8 %

 

 

 

 

 

7.6 %

 

 

 

 

 

 

 

 

 

 

 

18.7 %

 

 

Selling, general and administrative expenses percent to sales (GAAP)

 

 

 

 

 

17.9 %

 

 

 

 

 

18.8 %

 

 

 

 

 

29.1 %

 

 

 

 

 

 

 

 

 

 

 

18.7 %

 

 

Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure)

 

 

 

 

 

16.9 %

 

 

 

 

 

18.3 %

 

 

 

 

 

12.5 %

 

 

 

 

 

 

 

 

 

 

 

17.0 %

 

 

Operating Margin  2

 

 

 

 

 

0.9 %

 

 

 

 

 

2.0 %

 

 

 

 

 

(22.6) %

 

 

 

 

 

 

 

 

 

 

 

(0.2) %

 

 

Adjusted Operating Margin (Non-GAAP measure) 2

 

 

 

 

 

2.1 %

 

 

 

 

 

2.4 %

 

 

 

 

 

(5.0) %

 

 

 

 

 

 

 

 

 

 

 

1.6 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

Operating income for U.S. Retail Pharmacy includes equity earnings in Cencora. As a result of the two-month reporting lag, operating income for the three month period ended November 30, 2023 includes Cencora equity earnings for the period of July 1, 2023 through September 30, 2023.

 

 

2

 

 

Operating margins and adjusted operating margins have been calculated excluding equity earnings in Cencora and adjusted equity earnings in Cencora, respectively.

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

 

 

 

 

 

 

 

Three months ended November 30, 2022

 

 

 

 

 

 

 

 

U.S. Retail Pharmacy1

 

 

 

 

 

International

 

 

 

 

 

U.S. Healthcare

 

 

 

 

 

Corporate and Other

 

 

 

 

 

Walgreens Boots Alliance, Inc.

 

 

Sales

 

 

 

 

 

$            27,204   

 

 

 

 

 

$               5,189   

 

 

 

 

 

$           989   

 

 

 

 

 

$                       

 

 

 

 

 

$            33,382   

 

 

Gross profit (GAAP)

 

 

 

 

 

$               5,886   

 

 

 

 

 

$               1,050   

 

 

 

 

 

$             17   

 

 

 

 

 

$                       

 

 

 

 

 

$               6,953   

 

 

LIFO provision

 

 

 

 

 

                      18   

 

 

 

 

 

                          

 

 

 

 

 

                   

 

 

 

 

 

                         

 

 

 

 

 

                      18   

 

 

Acquisition-related amortization

 

 

 

 

 

                         5   

 

 

 

 

 

                          

 

 

 

 

 

                26   

 

 

 

 

 

                         

 

 

 

 

 

                      31   

 

 

Adjusted gross profit (Non-GAAP measure)

 

 

 

 

 

$               5,910   

 

 

 

 

 

$               1,050   

 

 

 

 

 

$             43   

 

 

 

 

 

$                       

 

 

 

 

 

$               7,003   

 

 

Selling, general and administrative expenses (GAAP)

 

 

 

 

 

$            11,698   

 

 

 

 

 

$                  944   

 

 

 

 

 

$           454   

 

 

 

 

 

$                       63

 

 

 

 

 

$            13,158   

 

 

Acquisition-related costs

 

 

 

 

 

                       (1)  

 

 

 

 

 

                      11   

 

 

 

 

 

              (47)  

 

 

 

 

 

                          (3)                         

 

 

 

 

 

                     (39)  

 

 

Certain legal and regulatory accruals and settlements

 

 

 

 

 

               (6,554)  

 

 

 

 

 

                          

 

 

 

 

 

                   

 

 

 

 

 

                         

 

 

 

 

 

               (6,554)  

 

 

Transformational cost management

 

 

 

 

 

                  (127)  

 

 

 

 

 

                       (7)  

 

 

 

 

 

                   

 

 

 

 

 

                          (4)                         

 

 

 

 

 

                  (138)  

 

 

Acquisition-related amortization

 

 

 

 

 

                     (73)  

 

 

 

 

 

                     (14)  

 

 

 

 

 

            (212)  

 

 

 

 

 

                         

 

 

 

 

 

                  (298)  

 

 

Adjusted selling, general and administrative expenses (Non-GAAP measure)

 

 

 

 

 

$               4,943   

 

 

 

 

 

$                  933   

 

 

 

 

 

$           195   

 

 

 

 

 

$                       56

 

 

 

 

 

$               6,128   

 

 

Operating (loss) income (GAAP)

 

 

 

 

 

$             (5,758)  

 

 

 

 

 

$                  106   

 

 

 

 

 

$         (436)  

 

 

 

 

 

$                     (63)

 

 

 

 

 

$             (6,151)  

 

 

Adjustments to equity earnings in Cencora

 

 

 

 

 

                      86   

 

 

 

 

 

                          

 

 

 

 

 

                   

 

 

 

 

 

                         

 

 

 

 

 

                      86   

 

 

Acquisition-related amortization

 

 

 

 

 

                      78   

 

 

 

 

 

                      14   

 

 

 

 

 

              238   

 

 

 

 

 

                         

 

 

 

 

 

                    330   

 

 

Transformational cost management

 

 

 

 

 

                    127   

 

 

 

 

 

                         7   

 

 

 

 

 

                   

 

 

 

 

 

                            4

 

 

 

 

 

                    138   

 

 

LIFO provision

 

 

 

 

 

                      18   

 

 

 

 

 

                          

 

 

 

 

 

                   

 

 

 

 

 

                         

 

 

 

 

 

                      18   

 

 

Certain legal and regulatory accruals and settlements

 

 

 

 

 

                 6,554   

 

 

 

 

 

                          

 

 

 

 

 

                   

 

 

 

 

 

                         

 

 

 

 

 

                 6,554   

 

 

Acquisition-related costs

 

 

 

 

 

                         1   

 

 

 

 

 

                     (11)  

 

 

 

 

 

                47   

 

 

 

 

 

                            3

 

 

 

 

 

                      39   

 

 

Adjusted operating income (loss) (Non-GAAP measure)

 

 

 

 

 

$               1,105   

 

 

 

 

 

$                  116   

 

 

 

 

 

$         (152)  

 

 

 

 

 

$                     (56)

 

 

 

 

 

$               1,014   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin (GAAP)

 

 

 

 

 

21.6 %

 

 

 

 

 

20.2 %

 

 

 

 

 

1.7 %

 

 

 

 

 

 

 

 

 

 

 

20.8 %

 

 

Adjusted gross margin (Non-GAAP measure)

 

 

 

 

 

21.7 %

 

 

 

 

 

20.2 %

 

 

 

 

 

4.4 %

 

 

 

 

 

 

 

 

 

 

 

21.0 %

 

 

Selling, general and administrative expenses percent to sales (GAAP)

 

 

 

 

 

43.0 %

 

 

 

 

 

18.2 %

 

 

 

 

 

45.9 %

 

 

 

 

 

 

 

 

 

 

 

39.4 %

 

 

Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure)

 

 

 

 

 

18.2 %

 

 

 

 

 

18.0 %

 

 

 

 

 

19.7 %

 

 

 

 

 

 

 

 

 

 

 

18.4 %

 

 

Operating margin 2

 

 

 

 

 

(21.4) %

 

 

 

 

 

2.0 %

 

 

 

 

 

(44.1) %

 

 

 

 

 

 

 

 

 

 

 

(18.6) %

 

 

Adjusted operating margin (Non-GAAP measure) 2

 

 

 

 

 

3.6 %

 

 

 

 

 

2.2 %

 

 

 

 

 

(15.3) %

 

 

 

 

 

 

 

 

 

 

 

2.6 %

 

 

 

 

 

1

 

 

Operating income for U.S. Retail Pharmacy includes equity earnings in Cencora. As a result of the two-month reporting lag, operating income for the three month period ended November 30, 2022 includes Cencora equity earnings for the period of July 1, 2022 through September 30, 2022.

 

 

2

 

 

Operating margins and adjusted operating margins have been calculated excluding equity earnings in Cencora and adjusted equity earnings in Cencora, respectively.

 

 

 

 

 

OPERATING LOSS TO ADJUSTED EBITDA FOR U.S. HEALTHCARE SEGMENT

 

 

 

 

 

 

 

 

(in millions)

 

 

 

 

 

 

 

 

Three months ended November 30,

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

2022

 

 

Operating loss (GAAP) 1

 

 

 

 

 

$                 (436)

 

 

 

 

 

$                 (436)

 

 

Acquisition-related amortization 2

 

 

 

 

 

                     165

 

 

 

 

 

                     238

 

 

Acquisition-related costs 3

 

 

 

 

 

                     173

 

 

 

 

 

                        47

 

 

Transformational cost management 4

 

 

 

 

 

                          2

 

 

 

 

 

                       

 

 

Adjusted operating loss

 

 

 

 

 

                      (96)

 

 

 

 

 

                    (152)

 

 

Depreciation expense

 

 

 

 

 

                        43

 

 

 

 

 

                        15

 

 

Stock-based compensation expense 5

 

 

 

 

 

                        13

 

 

 

 

 

                        12

 

 

Adjusted EBITDA (Non-GAAP measure)

 

 

 

 

 

$                    (39)

 

 

 

 

 

$                 (124)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

The Company reconciles Adjusted EBITDA for the U.S. Healthcare segment to Operating loss as the closest GAAP measure for the segment profitability. The Company does not measure Net earnings attributable to Walgreens Boots Alliance, Inc. for its segments.

 

 

2

 

 

Acquisition-related amortization includes amortization of acquisition-related intangible assets, inventory valuation adjustments and stock-based compensation fair valuation adjustments. Amortization of acquisition-related intangible assets includes amortization of intangible assets such as customer relationships, trade names, trademarks, developed technology and contract intangibles. Intangible asset amortization excluded from the related non-GAAP measure represents the entire amount recorded within the Company’s GAAP financial statements. The revenue generated by the associated intangible assets has not been excluded from the related non-GAAP measures. Amortization expense, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired, or the estimated useful life of an intangible asset is revised. These charges are primarily recorded within Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings. The stock-based compensation fair valuation adjustment reflects the difference between the fair value based remeasurement of awards under purchase accounting and the grant date fair valuation. Post-acquisition compensation expense recognized in excess of the original grant date fair value of acquiree awards are excluded from the related non-GAAP measures as these arise from acquisition-related accounting requirements or agreements, and are not reflective of normal operating activities.

 

 

3

 

 

Acquisition-related costs are transaction and integration costs associated with certain merger, acquisition and divestitures related activities recorded in Operating loss within the Consolidated Condensed Statement of Earnings. Examples of such costs include deal costs, severance, stock-based compensation and employee transaction success bonuses. These charges are primarily recorded within Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings. These costs are significantly impacted by the timing and complexity of the underlying merger, acquisition and divestitures related activities and do not reflect the Company’s current operating performance.

 

 

4

 

 

Transformational Cost Management Program charges are costs associated with a formal restructuring plan. These charges are primarily recorded in Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings. These costs do not reflect current operating performance and are impacted by the timing of restructuring activity.

 

 

5

 

 

Includes GAAP stock-based compensation expense excluding expenses related to acquisition-related amortization and acquisition-related costs.

 

 

 

EQUITY EARNINGS IN CENCORA

 

 

 

 

 

 

 

 

(in millions)

 

 

 

 

 

 

 

 

Three months ended November 30,

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

2022

 

 

Equity earnings in Cencora (GAAP)

 

 

 

 

 

$                          42

 

 

 

 

 

$                          53

 

 

Acquisition-related intangibles amortization

 

 

 

 

 

                             34

 

 

 

 

 

                             39

 

 

LIFO expense

 

 

 

 

 

                             11

 

 

 

 

 

                             20

 

 

Restructuring and other expenses

 

 

 

 

 

                               6

 

 

 

 

 

                            

 

 

Acquisition-related deal and integration expenses

 

 

 

 

 

                               5

 

 

 

 

 

                             18

 

 

Turkey hyperinflation impact

 

 

 

 

 

                               5

 

 

 

 

 

                               5

 

 

Tax reform

 

 

 

 

 

                               2

 

 

 

 

 

                               4

 

 

Litigation and opioid-related expenses

 

 

 

 

 

                               2

 

 

 

 

 

                               3

 

 

Amortization of basis difference in OneOncology investment

 

 

 

 

 

                               1

 

 

 

 

 

                            

 

 

Gain on remeasurement of equity investment

 

 

 

 

 

                            

 

 

 

 

 

                             (1)                            

 

 

Certain discrete tax expense

 

 

 

 

 

                            

 

 

 

 

 

                             (2)                            

 

 

Gain/Loss from divestitures

 

 

 

 

 

                             (7)                            

 

 

 

 

 

                            

 

 

Gain from antitrust litigation settlements

 

 

 

 

 

                             (9)                            

 

 

 

 

 

                            

 

 

Adjusted equity earnings in Cencora (Non-GAAP measure)

 

 

 

 

 

$                          92

 

 

 

 

 

$                        139

 

 

 

 

 

 

ADJUSTED EFFECTIVE TAX RATE

 

 

 

 

 

 

 

 

(in millions)

 

 

 

 

 

 

 

 

Three months ended November 30, 2023

 

 

 

 

 

Three months ended November 30, 2022

 

 

 

 

 

 

 

 

(Loss) Earnings before income tax benefit

 

 

 

 

 

Income tax (benefit) provision

 

 

 

 

 

Effective tax rate

 

 

 

 

 

(Loss) Earnings before income tax benefit

 

 

 

 

 

Income tax benefit

 

 

 

 

 

Effective tax rate

 

 

Effective tax rate (GAAP)

 

 

 

 

 

$            (358)

 

 

 

 

 

$              (74)

 

 

 

 

 

20.7%

 

 

 

 

 

$        (5,270)

 

 

 

 

 

$        (1,447)

 

 

 

 

 

27.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impact of non-GAAP adjustments

 

 

 

 

 

                956

 

 

 

 

 

                232

 

 

 

 

 

 

 

 

 

 

 

             6,197

 

 

 

 

 

             1,273

 

 

 

 

 

 

 

 

Equity method non-cash tax

 

 

 

 

 

                  

 

 

 

 

 

                  (4)                 

 

 

 

 

 

 

 

 

 

 

 

                  

 

 

 

 

 

                  (8)                 

 

 

 

 

 

 

 

 

Adjusted tax rate true-up

 

 

 

 

 

                  

 

 

 

 

 

                (29)               

 

 

 

 

 

 

 

 

 

 

 

                  

 

 

 

 

 

                165

 

 

 

 

 

 

 

 

Subtotal

 

 

 

 

 

$              598

 

 

 

 

 

$              125

 

 

 

 

 

 

 

 

 

 

 

$              928

 

 

 

 

 

$              (17)               

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exclude adjusted equity earnings in Cencora

 

 

 

 

 

                (92)               

 

 

 

 

 

                  

 

 

 

 

 

 

 

 

 

 

 

              (139)             

 

 

 

 

 

                  

 

 

 

 

 

 

 

 

Adjusted effective tax rate excluding adjusted equity earnings in Cencora (Non-GAAP measure)

 

 

 

 

 

$              507

 

 

 

 

 

$              125

 

 

 

 

 

24.7%

 

 

 

 

 

$              788

 

 

 

 

 

$              (17)

 

 

 

 

 

(2.2)%

 

 

 

 

 

FREE CASH FLOW

 

 

 

 

 

 

 

 

(in millions)

 

 

 

 

 

 

 

 

Three months ended November 30,

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

2022

 

 

Net cash (used for) provided by operating activities (GAAP)

 

 

 

 

 

$                           (281)

 

 

 

 

 

$                             493

 

 

Less: Additions to property, plant and equipment

 

 

 

 

 

                              (506)

 

 

 

 

 

                              (610)

 

 

Free cash flow (Non-GAAP measure) 1

 

 

 

 

 

$                           (788)

 

 

 

 

 

$                           (117)

 

 

 

 

 

 

 

 

1

 

 

Free cash flow is defined as net cash provided by operating activities in a period less additions to property, plant and equipment (capital expenditures), plus acquisition related payments made in that period. This measure does not represent residual cash flows available for discretionary expenditures as the measure does not deduct the payments required for debt service and other contractual obligations or payments for future business acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to the Consolidated Condensed Statement of Cash Flows.

 

 

 

 

 

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