Walgreens Boots Alliance Reports Fiscal 2023 Third Quarter Results
- Q3 sales increased 8.6% YoY to $35.4 billion
- Adjusted EPS grew 3.3% to $1.00
- Revised full-year adjusted EPS guidance to $4.00 to $4.05
- Immediate actions to improve profitability, including $600 million of cost savings
- None.
Company Achieved Adjusted EPS Growth on Strong Sales Growth
Revises Full-Year Guidance to Reflect Consumer Market Trends and Lower COVID-19 Demand
Immediate Actions to Improve Profitability Including
Third quarter financial highlights and recent equity sales
-
Third quarter earnings per share (EPS*) was
$0.14 $0.20 $1.00 -
Third quarter sales increased 8.6 percent year-over-year to
$35.4 billion -
Realized approximately
$1.9 billion -
Accelerated the full acquisition of CareCentrix, completed on March 31, 2023 for approximately
$380 million
Fiscal 2023 outlook and preliminary fiscal 2024 commentary
-
Revising full-year adjusted EPS guidance to
$4.00 $4.05 $4.45 $4.65 - Taking immediate actions to drive sustainable growth in adjusted operating income in fiscal 2024
-
Raising Transformational Cost Management Program target from
$3.5 billion $4.1 billion -
Optimizing the
U.S. Healthcare path to profitability, including an increased and accelerated synergy target for VillageMD/Summit Health of$200 million -
Preliminary fiscal 2024 expectation for low- to mid-single digit adjusted operating income growth, expected to be driven by
U.S. Healthcare andU.S. Retail Pharmacy; adjusted operating income growth expected to outpace adjusted EPS
Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced financial results for the third quarter of fiscal 2023, which ended May 31, 2023.
Chief Executive Officer Rosalind Brewer said:
"WBA achieved 8.9 percent constant currency sales growth in the third quarter despite a challenging operating environment. Consumers continue to appreciate the value, convenience, and range of services provided by Walgreens and Boots. However, significantly lower demand for COVID-related services, a more cautious and value-driven consumer, and a recently weaker respiratory season created margin pressures in the quarter. Our revised guidance takes an appropriately cautious forward view in light of consumer spending uncertainty, while still demonstrating clear drivers of a return to operating growth next fiscal year. We are raising our cost savings program target to
Overview of Third Quarter Results
WBA third quarter sales increased 8.6 percent from the year-ago quarter to
Operating loss was
Net earnings in the third quarter was
Earnings per share in the third quarter was
Net cash used for operating activities was
Overview of Fiscal 2023 Year-to-Date Results
Sales in the first nine months of fiscal 2023 were
Operating loss in the first nine months of fiscal 2023 was
For the first nine months of fiscal 2023, net loss was
Loss per share for the first nine months of fiscal 2023 was
Net cash provided by operating activities was
Business Highlights
WBA continues to achieve rapid progress across its four strategic priorities, including:
Transform and align the core
-
Raising Transformational Cost Management Program target from
$3.5 billion $4.1 billion - Established scalable partnership with TelePharm, part of Cardinal Health's Outcomes business, enabling a tele-pharmacy to expand access and reach more patients in local communities
-
U.S. pharmacy comparable script volume growth of 2.8 percent excluding immunizations - Addressed industry-wide pharmacist labor shortage by returning an incremental ~300 stores to normal pharmacy operating hours and optimizing hours at an additional ~500 stores
-
U.S. retail comparable sales decline of (0.2) percent, including a 40 basis point headwind from tobacco and an 80 basis point headwind from lower levels of OTC test kits - Operating nine automated microfulfillment centers at quarter-end, supporting ~3,900 stores
-
Boots
UK retail comparable sales growth of 13.4 percent, on top of robust prior year growth of 24.0 percent -
Launched world-first super peptide skincare range, in owned brand No7 Future Renew, with one product sold in the
UK every two seconds on launch day and over 500,000 transactions in the first four weeks; launched in theU.S. in June
Build our next growth engine with consumer-centric healthcare solutions
-
Service offering resonating with payers, health systems, and other partners:
- Horizon Blue Cross Blue Shield signed on as fourth payor partner for Walgreens Health
- Shields and CareCentrix recently contracted with leading national health solution and care delivery organization
- Shields added six new health system partners this year
- Clinical trials business with first eight contracts signed; achieved milestone outreach to 1 millionth patient for potential participation in trials
- Managing approximately 850,000 value-based lives under VillageMD/Summit Health
- Closed full acquisition of CareCentrix on March 31, 2023
-
Closed VillageMD's acquisition of Starling Physicians, a leading primary care and multi-specialty group in
Connecticut , on March 3, 2023
Focus the portfolio; optimize capital allocation
-
Exited Option Care Health stake with common stock sales in March and June, and combined after-tax cash proceeds of
~ ; total proceeds of$800 million $1.2 billion -
Monetized AmerisourceBergen shares for current proceeds of approximately
$1.1 billion $5.0 billion -
Announced agreement to sell Farmacias Ahumada in
Chile ; transaction expected to close in calendar 2023
Build a high-performance culture and a winning team
- Aligned enterprise B2B sales and contracting teams with healthcare expertise, to sell integrated services that improve outcomes and lower cost of care for payors/health systems
- Appointed Rich Rubino as CFO of VillageMD; formerly held CFO roles at Medco Health Solutions, Aerie Pharmaceuticals, and Cedar Gate Technologies
- Appointed Beth Leonard as SVP, Chief Communications Officer; formerly held corporate affairs roles at EmblemHealth and America’s Health Insurance Plans
Business Segments
The
Pharmacy sales increased 6.3 percent compared to the year-ago quarter, and comparable pharmacy sales increased 9.8 percent, benefiting from branded drug inflation. Comparable prescriptions filled in the quarter increased 1.6 percent, while comparable prescriptions excluding immunizations increased 2.8 percent. Total prescriptions filled in the quarter, including immunizations, adjusted to 30-day equivalents, increased 0.1 percent to 305 million. 0.8 million COVID-19 vaccinations were administered in the quarter compared to 4.7 million in the year-ago quarter.
Retail sales decreased 1.0 percent and comparable retail sales decreased 0.2 percent in the third quarter. Excluding tobacco, comparable retail sales increased 0.2 percent, led by strong results in the grocery & household and beauty categories, partly offset by a 90 basis point headwind from holiday seasonal weakness with discretionary spending pullback, and an 80 basis point headwind from lower sales of OTC test kits.
Gross profit decreased 3.1 percent compared with the year-ago quarter, and adjusted gross profit decreased 3.2 percent. Gross profit and adjusted gross profit were largely driven by a 5 percent headwind from a lower contribution from COVID-19 vaccination and testing.
Selling, general and administrative expenses (SG&A) decreased 12.7 percent to
Operating income in the third quarter was
International:
The International segment had third quarter sales of
Boots
Gross profit increased 7.1 percent compared with the year-ago quarter, including an adverse currency impact of 3.1 percentage points. Adjusted gross profit increased 10.3 percent on a constant currency basis, with solid growth across all International markets, led by strong retail sales in the
SG&A in the quarter increased 48.2 percent from the year-ago quarter to
Operating income decreased from
The
Gross profit was
Third quarter SG&A was
Operating loss was
Fiscal 2023 Outlook and Preliminary Fiscal 2024 Commentary
For the full fiscal year 2023, Walgreens Boots Alliance now expects adjusted EPS of
The fourth quarter is expected to be negatively impacted by a higher effective tax rate, shifting
For the fiscal year 2024, Walgreens Boots Alliance is providing preliminary expectations for low- to mid-single digit adjusted operating income growth, with the
The Company’s fiscal year 2024 commentary reflects views on market trends and expected performance based on information available to the management team as of the date hereof. Important factors that could cause actual results to differ from these expectations are set forth below under “Forward-Looking Statements.” The Company will provide detailed 2024 guidance when it reports fourth quarter and full year 2023 results.
The Company is taking immediate actions to drive sustainable growth including:
-
Raising the Transformational Cost Management Program target from
$3.5 billion $4.1 billion $800 million - Implemented capital and project spend reductions; working capital optimization program launched, benefiting fiscal 2024
- Advancing portfolio simplification to pay down debt and fund strategic initiatives
-
Announcing swift actions to improve the
U.S. Healthcare path to profitability, including realigned CityMD costs, accelerated VillageMD patient panel build, aggressive integration of prior Summit Health acquisitions, upgraded VillageMD management, and an increased and accelerated synergy target for VillageMD/Summit Health -
Accelerating synergies between
U.S. Healthcare and Walgreens operations
The Company's capital allocation continues to focus on core investments, debt paydown, and dividend payments.
Conference Call
WBA will hold a conference call to discuss the third quarter results beginning at 8:30 a.m. Eastern time today, June 27, 2023. 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. 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 our fiscal year 2023 guidance, our preliminary fiscal year 2024 commentary, our long-term growth algorithm, 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, 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
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, 2022, as amended, and in other documents that we file or furnish with the Securities and Exchange Commission. 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.
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 13,000 locations across the
WBA employs more than 325,000 people and has a presence in nine countries through its portfolio of consumer brands: Walgreens, Boots, Duane Reade, the No7 Beauty Company, Benavides in
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 operating sustainably: the Company is an index component of the Dow Jones Sustainability Indices (DJSI) and was named to the 100 Best Corporate Citizens 2022.
More Company information is available at www.walgreensbootsalliance.com.
(WBA-ER)
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED) (in millions, except per share amounts) |
|||||||||||||||
|
Three months ended May 31, |
|
Nine months ended May 31, |
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Sales |
$ |
35,415 |
|
|
$ |
32,597 |
|
|
$ |
103,659 |
|
|
$ |
100,254 |
|
Cost of sales |
|
28,826 |
|
|
|
26,025 |
|
|
|
83,062 |
|
|
|
78,399 |
|
Gross profit |
|
6,588 |
|
|
|
6,572 |
|
|
|
20,596 |
|
|
|
21,855 |
|
Selling, general and administrative expenses |
|
7,123 |
|
|
|
7,019 |
|
|
|
27,215 |
|
|
|
19,975 |
|
Equity earnings in AmerisourceBergen |
|
58 |
|
|
|
127 |
|
|
|
187 |
|
|
|
330 |
|
Operating (loss) income |
|
(477 |
) |
|
|
(320 |
) |
|
|
(6,431 |
) |
|
|
2,209 |
|
Other income, net |
|
268 |
|
|
|
410 |
|
|
|
1,812 |
|
|
|
2,829 |
|
(Loss) earnings before interest and income tax (benefit) provision |
|
(209 |
) |
|
|
90 |
|
|
|
(4,619 |
) |
|
|
5,038 |
|
Interest expense, net |
|
173 |
|
|
|
108 |
|
|
|
425 |
|
|
|
295 |
|
(Loss) earnings before income tax (benefit) provision |
|
(382 |
) |
|
|
(18 |
) |
|
|
(5,044 |
) |
|
|
4,743 |
|
Income tax (benefit) provision |
|
(330 |
) |
|
|
(242 |
) |
|
|
(1,707 |
) |
|
|
205 |
|
Post-tax earnings from other equity method investments |
|
4 |
|
|
|
5 |
|
|
|
18 |
|
|
|
29 |
|
Net (loss) earnings |
|
(48 |
) |
|
|
229 |
|
|
|
(3,320 |
) |
|
|
4,566 |
|
Net loss attributable to non-controlling interests |
|
(166 |
) |
|
|
(60 |
) |
|
|
(420 |
) |
|
|
(186 |
) |
Net earnings (loss) attributable to Walgreens Boots Alliance, Inc. |
$ |
118 |
|
|
$ |
289 |
|
|
$ |
(2,900 |
) |
|
$ |
4,752 |
|
|
|
|
|
|
|
|
|
||||||||
Net earnings (loss) per common share: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
0.14 |
|
|
$ |
0.33 |
|
|
$ |
(3.36 |
) |
|
$ |
5.50 |
|
Diluted |
$ |
0.14 |
|
|
$ |
0.33 |
|
|
$ |
(3.36 |
) |
|
$ |
5.49 |
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
||||||||
Basic |
|
863.1 |
|
|
|
864.0 |
|
|
|
863.1 |
|
|
|
864.4 |
|
Diluted |
|
863.8 |
|
|
|
865.3 |
|
|
|
863.1 |
|
|
|
866.0 |
|
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (in millions) |
||||||
|
|
May 31, 2023 |
|
August 31, 2022 |
||
Assets |
|
|
|
|
||
Current assets: |
|
|
|
|
||
Cash and cash equivalents |
|
$ |
871 |
|
$ |
1,358 |
Marketable securities |
|
|
99 |
|
|
1,114 |
Accounts receivable, net |
|
|
5,843 |
|
|
5,017 |
Inventories |
|
|
8,164 |
|
|
8,353 |
Other current assets |
|
|
1,565 |
|
|
1,059 |
Total current assets |
|
|
16,542 |
|
|
16,902 |
|
|
|
|
|
||
Non-current assets: |
|
|
|
|
||
Property, plant and equipment, net |
|
|
11,562 |
|
|
11,729 |
Operating lease right-of-use assets |
|
|
22,051 |
|
|
21,259 |
Goodwill |
|
|
28,371 |
|
|
22,280 |
Intangible assets, net |
|
|
13,578 |
|
|
10,730 |
Equity method investments |
|
|
3,527 |
|
|
5,495 |
Other non-current assets |
|
|
2,973 |
|
|
1,730 |
Total non-current assets |
|
|
82,063 |
|
|
73,222 |
Total assets |
|
$ |
98,605 |
|
$ |
90,124 |
|
|
|
|
|
||
Liabilities, redeemable non-controlling interests and equity |
|
|
|
|
||
Current liabilities: |
|
|
|
|
||
Short-term debt |
|
$ |
3,061 |
|
$ |
1,059 |
Trade accounts payable |
|
|
12,029 |
|
|
11,255 |
Operating lease obligations |
|
|
2,356 |
|
|
2,286 |
Accrued expenses and other liabilities |
|
|
8,578 |
|
|
7,899 |
Income taxes |
|
|
146 |
|
|
84 |
Total current liabilities |
|
|
26,170 |
|
|
22,583 |
|
|
|
|
|
||
Non-current liabilities: |
|
|
|
|
||
Long-term debt |
|
|
8,841 |
|
|
10,615 |
Operating lease obligations |
|
|
22,181 |
|
|
21,517 |
Deferred income taxes |
|
|
1,657 |
|
|
1,442 |
Accrued litigation obligations |
|
|
6,407 |
|
|
551 |
Other non-current liabilities |
|
|
3,829 |
|
|
3,009 |
Total non-current liabilities |
|
|
42,915 |
|
|
37,134 |
|
|
|
|
|
||
Redeemable non-controlling interests |
|
|
160 |
|
|
1,042 |
Total equity |
|
|
29,359 |
|
|
29,366 |
Total liabilities, redeemable non-controlling interests and equity |
|
$ |
98,605 |
|
$ |
90,124 |
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES |
||||||||
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS |
||||||||
(UNAUDITED) |
||||||||
(in millions) |
||||||||
|
|
Nine months ended May 31, |
||||||
|
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operating activities: |
|
|
|
|
||||
Net (loss) earnings |
|
$ |
(3,320 |
) |
|
$ |
4,566 |
|
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities: |
|
|
|
|
||||
Depreciation and amortization |
|
|
1,652 |
|
|
|
1,502 |
|
Deferred income taxes |
|
|
(2,098 |
) |
|
|
(168 |
) |
Stock compensation expense |
|
|
348 |
|
|
|
266 |
|
Earnings from equity method investments |
|
|
(206 |
) |
|
|
(359 |
) |
Loss on early extinguishment of debt |
|
|
— |
|
|
|
4 |
|
Gain on previously held investment interests |
|
|
— |
|
|
|
(2,576 |
) |
Gain on sale of equity method investments |
|
|
(1,691 |
) |
|
|
(421 |
) |
Gain on sale-leaseback transactions |
|
|
(825 |
) |
|
|
(410 |
) |
Impairment of intangible assets |
|
|
431 |
|
|
|
— |
|
Impairment of equity method investments and investments in debt and equity securities |
|
|
16 |
|
|
|
233 |
|
Other |
|
|
269 |
|
|
|
211 |
|
Changes in operating assets and liabilities: |
|
|
|
|
||||
Accounts receivable, net |
|
|
(411 |
) |
|
|
725 |
|
Inventories |
|
|
326 |
|
|
|
(510 |
) |
Other current assets |
|
|
(184 |
) |
|
|
(58 |
) |
Trade accounts payable |
|
|
627 |
|
|
|
767 |
|
Accrued expenses and other liabilities |
|
|
(588 |
) |
|
|
(362 |
) |
Income taxes |
|
|
216 |
|
|
|
82 |
|
Accrued litigation obligations |
|
|
6,835 |
|
|
|
— |
|
Other non-current assets and liabilities |
|
|
(179 |
) |
|
|
320 |
|
Net cash provided by operating activities |
|
|
1,219 |
|
|
|
3,813 |
|
Cash flows from investing activities: |
|
|
|
|
||||
Additions to property, plant and equipment |
|
|
(1,633 |
) |
|
|
(1,241 |
) |
Proceeds from sale-leaseback transactions |
|
|
1,549 |
|
|
|
809 |
|
Proceeds from sale of other assets |
|
|
3,798 |
|
|
|
976 |
|
Business, investment and asset acquisitions, net of cash acquired |
|
|
(7,072 |
) |
|
|
(2,040 |
) |
Other |
|
|
110 |
|
|
|
233 |
|
Net cash used for investing activities |
|
|
(3,249 |
) |
|
|
(1,262 |
) |
Cash flows from financing activities: |
|
|
|
|
||||
Net change in short-term debt with maturities of 3 months or less |
|
|
147 |
|
|
|
(10 |
) |
Proceeds from debt |
|
|
5,240 |
|
|
|
11,944 |
|
Payments of debt |
|
|
(5,232 |
) |
|
|
(7,350 |
) |
Acquisition of non-controlling interests |
|
|
(1,316 |
) |
|
|
(2,108 |
) |
Proceeds from issuance of non-controlling interests |
|
|
2,735 |
|
|
|
— |
|
Proceeds from variable prepaid forward |
|
|
644 |
|
|
|
— |
|
Stock purchases |
|
|
(150 |
) |
|
|
(187 |
) |
Proceeds related to employee stock plans, net |
|
|
34 |
|
|
|
13 |
|
Cash dividends paid |
|
|
(1,244 |
) |
|
|
(1,251 |
) |
Early debt extinguishment |
|
|
— |
|
|
|
(458 |
) |
Other |
|
|
(286 |
) |
|
|
160 |
|
Net cash provided by financing activities |
|
|
573 |
|
|
|
753 |
|
Effect of exchange rate changes on cash, cash equivalents, marketable securities and restricted cash |
|
|
17 |
|
|
|
(33 |
) |
Changes in cash, cash equivalents, marketable securities and restricted cash: |
|
|
|
|
||||
Net (decrease) increase in cash, cash equivalents, marketable securities and restricted cash |
|
|
(1,441 |
) |
|
|
3,270 |
|
Cash, cash equivalents, marketable securities and restricted cash at beginning of period |
|
|
2,558 |
|
|
|
1,270 |
|
Cash, cash equivalents, marketable securities and restricted cash at end of period |
|
$ |
1,117 |
|
|
$ |
4,541 |
|
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 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
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’s business from period to period and trends in the Company’s historical operating results. 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 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
Comparable sales
For the Company's
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, comparable pharmacy sales, comparable retail sales, comparable number of prescriptions, comparable 30-day equivalent prescriptions, number of payor/ provider partnerships at period end, number of locations with Walgreens Health Corners at period end, number of VillageMD co-located clinics at period end and number of total VillageMD/Summit/CityMD locations at period end, 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.
With respect to the total number of VillageMD locations, locations are defined as the primary care locations where the Company or the Company’s affiliates lease or license space and the providers are employed by either the Company or one of the Company’s affiliates. These locations are primarily branded as Village Medical where the Company employs the providers but, in some instances, may operate under their own brands.
NET EARNINGS (LOSS) TO ADJUSTED NET EARNINGS AND DILUTED NET EARNINGS (LOSS) PER SHARE TO ADJUSTED DILUTED NET EARNINGS PER SHARE |
|
||||||||||||||||
|
|||||||||||||||||
|
|
(in millions, except per share amounts) |
|
||||||||||||||
|
|
Three months ended May 31, |
|
Nine months ended May 31, |
|
||||||||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Net earnings (loss) attributable to Walgreens Boots Alliance, Inc. (GAAP) |
|
$ |
118 |
|
|
$ |
289 |
|
|
$ |
(2,900 |
) |
|
$ |
4,752 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Adjustments to operating (loss) income: |
|
|
|
|
|
|
|
|
|
||||||||
Certain legal and regulatory accruals and settlements 1 |
|
|
268 |
|
|
|
734 |
|
|
|
7,249 |
|
|
|
734 |
|
|
Acquisition-related amortization 2 |
|
|
274 |
|
|
|
201 |
|
|
|
851 |
|
|
|
616 |
|
|
Transformational cost management 3 |
|
|
414 |
|
|
|
185 |
|
|
|
697 |
|
|
|
458 |
|
|
Impairment of intangible assets 4 |
|
|
299 |
|
|
|
— |
|
|
|
299 |
|
|
|
— |
|
|
Acquisition-related costs 5 |
|
|
70 |
|
|
|
40 |
|
|
|
257 |
|
|
|
155 |
|
|
Adjustments to equity earnings in AmerisourceBergen 6 |
|
|
61 |
|
|
|
60 |
|
|
|
178 |
|
|
|
155 |
|
|
LIFO provision 7 |
|
|
51 |
|
|
|
55 |
|
|
|
89 |
|
|
|
64 |
|
|
Total adjustments to operating (loss) income |
|
|
1,436 |
|
|
|
1,275 |
|
|
|
9,620 |
|
|
|
2,181 |
|
|
Adjustments to other income, net: |
|
|
|
|
|
|
|
|
|
||||||||
Gain on sale of equity method investments 8 |
|
|
(179 |
) |
|
|
(421 |
) |
|
|
(1,692 |
) |
|
|
(421 |
) |
|
Gains on investments, net 9 |
|
|
(76 |
) |
|
|
— |
|
|
|
(76 |
) |
|
|
(2,576 |
) |
|
Impairment of equity method investment and investments in debt and equity securities 10 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
190 |
|
|
Adjustment to gain on disposal of discontinued operations 11 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
38 |
|
|
Loss on certain non-hedging derivatives 12 |
|
|
26 |
|
|
|
— |
|
|
|
26 |
|
|
|
1 |
|
|
Total adjustments to other income, net |
|
|
(229 |
) |
|
|
(421 |
) |
|
|
(1,742 |
) |
|
|
(2,768 |
) |
|
Adjustments to interest expense, net: |
|
|
|
|
|
|
|
|
|
||||||||
Early debt extinguishment 13 |
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
4 |
|
|
Total adjustments to interest expense, net |
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
4 |
|
|
Adjustments to income tax (benefit) provision: |
|
|
|
|
|
|
|
|
|
||||||||
Equity method non-cash tax 14 |
|
|
10 |
|
|
|
25 |
|
|
|
33 |
|
|
|
55 |
|
|
Tax impact of adjustments 14 |
|
|
(408 |
) |
|
|
(331 |
) |
|
|
(1,968 |
) |
|
|
(466 |
) |
|
Total adjustments to income tax (benefit) provision |
|
|
(397 |
) |
|
|
(306 |
) |
|
|
(1,935 |
) |
|
|
(411 |
) |
|
Adjustments to post-tax earnings from other equity method investments: |
|
|
|
|
|
|
|
|
|
||||||||
Adjustments to earnings from other equity method investments 15 |
|
|
9 |
|
|
|
24 |
|
|
|
31 |
|
|
|
49 |
|
|
Total adjustments to post-tax earnings from other equity method investments |
|
|
9 |
|
|
|
24 |
|
|
|
31 |
|
|
|
49 |
|
|
Adjustments to net loss attributable to non-controlling interests: |
|
|
|
|
|
|
|
|
|
||||||||
Transformational cost management 3 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
Early debt extinguishment 13 |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
Acquisition-related costs 5 |
|
|
(16 |
) |
|
|
2 |
|
|
|
(71 |
) |
|
|
(18 |
) |
|
Acquisition-related amortization 2 |
|
|
(61 |
) |
|
|
(31 |
) |
|
|
(139 |
) |
|
|
(119 |
) |
|
Total adjustments to net loss attributable to non-controlling interests |
|
|
(77 |
) |
|
|
(31 |
) |
|
|
(210 |
) |
|
|
(140 |
) |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure) |
|
$ |
860 |
|
|
$ |
834 |
|
|
$ |
2,864 |
|
|
$ |
3,667 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted net earnings (loss) per common share (GAAP) 16 |
|
$ |
0.14 |
|
|
$ |
0.33 |
|
|
$ |
(3.36 |
) |
|
$ |
5.49 |
|
|
Adjustments to operating (loss) income |
|
|
1.66 |
|
|
|
1.47 |
|
|
|
11.14 |
|
|
|
2.52 |
|
|
Adjustments to other income, net |
|
|
(0.27 |
) |
|
|
(0.49 |
) |
|
|
(2.02 |
) |
|
|
(3.20 |
) |
|
Adjustments to interest expense, net |
|
|
— |
|
|
|
0.01 |
|
|
|
— |
|
|
|
0.01 |
|
|
Adjustments to income tax (benefit) provision |
|
|
(0.46 |
) |
|
|
(0.35 |
) |
|
|
(2.24 |
) |
|
|
(0.47 |
) |
|
Adjustments to post-tax earnings from other equity method investments |
|
|
0.01 |
|
|
|
0.03 |
|
|
|
0.04 |
|
|
|
0.06 |
|
|
Adjustments to net loss attributable to non-controlling interests |
|
|
(0.09 |
) |
|
|
(0.04 |
) |
|
|
(0.24 |
) |
|
|
(0.16 |
) |
|
Adjusted diluted net earnings per common share (Non-GAAP measure) 17 |
|
$ |
1.00 |
|
|
$ |
0.96 |
|
|
$ |
3.32 |
|
|
$ |
4.23 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding, diluted (in millions) 17 |
|
|
863.8 |
|
|
|
865.3 |
|
|
|
863.8 |
|
|
|
866.0 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
1 |
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 within Selling, general and administrative expenses. During the three and nine months ended May 31, 2023, the Company recorded charges related to the previously announced opioid litigation settlement frameworks and certain other legal matters. |
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. 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 |
Transformational Cost Management Program charges are costs associated with a formal restructuring plan. These charges are primarily recorded within Selling, general and administrative expenses. These costs do not reflect current operating performance and are impacted by the timing of restructuring activity. |
4 |
Impairment of intangible assets do not relate to the ordinary course of the Company’s business. 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 within Selling, general and administrative expenses. During the three months ended May 31, 2023, the Company recognized a |
5 |
Acquisition-related costs are transaction and integration costs associated with certain merger, acquisition and divestitures related activities. These costs include charges incurred related to certain mergers, acquisition and divestitures related activities recorded in operating income, for example, costs related to integration efforts for merger, acquisition and divestitures activities. Examples of such costs include deal costs, severance, stock compensation and employee transaction success bonuses. These charges are primarily recorded within Selling, general and administrative expenses. 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. |
6 |
Adjustments to equity earnings in AmerisourceBergen consist of the Company’s proportionate share of non-GAAP adjustments reported by AmerisourceBergen consistent with the Company’s non-GAAP measures. |
7 |
The Company’s |
8 |
Includes significant gains on the sale of equity method investments. During the three and nine months ended May 31, 2023, the Company recorded a gain of |
9 |
Includes significant gains resulting from the change in classification of investments as well as the fair value adjustments recorded to Other income, net. During the three months ended May 31, 2023, the Company recorded pre-tax gains of |
10 |
Impairment of equity method investment and investments in debt and equity securities includes impairment of certain investments. The Company excludes these charges when evaluating operating performance because these do not relate to the ordinary course of the Company’s business and it does not incur such charges on a predictable basis. Exclusion of such charges enables more consistent evaluation of the Company’s operating performance. These charges are recorded within Other income, net. |
11 |
During the three months ended February 28, 2022, the Company finalized the working capital adjustments with AmerisourceBergen related to the sale of the Alliance Healthcare business, resulting in a |
12 |
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 income, net. The Company does not believe the volatility related to the mark-to-market adjustments on the underlying derivative instruments reflects the Company’s operational performance. |
13 |
During the three months ended May 31, 2022, the Company incurred a |
14 |
Adjustments to income tax (benefit) provision include adjustments to the GAAP basis tax (benefit) provision commensurate with non-GAAP adjustments and certain discrete tax items including |
15 |
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 within post-tax earnings from other equity method investments. 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. |
16 |
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 EPS for the nine months ended May 31, 2023. |
17 |
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
|
|
(in millions) |
||||||||||||||||||
|
|
Three months ended May 31, 2023 |
||||||||||||||||||
|
|
|
|
International |
|
|
|
Corporate and Other |
|
Walgreens Boots Alliance, Inc. |
||||||||||
Sales |
|
$ |
27,866 |
|
|
$ |
5,573 |
|
|
$ |
1,975 |
|
|
$ |
— |
|
|
$ |
35,415 |
|
Gross profit (GAAP) |
|
$ |
5,327 |
|
|
$ |
1,173 |
|
|
$ |
89 |
|
|
$ |
— |
|
|
$ |
6,588 |
|
Acquisition-related amortization |
|
|
5 |
|
|
|
— |
|
|
|
25 |
|
|
|
— |
|
|
|
31 |
|
LIFO provision |
|
|
51 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
51 |
|
Adjusted gross profit (Non-GAAP measure) |
|
$ |
5,383 |
|
|
$ |
1,173 |
|
|
$ |
114 |
|
|
$ |
— |
|
|
$ |
6,670 |
|
Selling, general and administrative expenses (GAAP) |
|
$ |
4,990 |
|
|
$ |
1,475 |
|
|
$ |
611 |
|
|
$ |
48 |
|
|
$ |
7,123 |
|
Certain legal and regulatory accruals and settlements |
|
|
(268 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(268 |
) |
Acquisition-related amortization |
|
|
(76 |
) |
|
|
(15 |
) |
|
|
(152 |
) |
|
|
— |
|
|
|
(243 |
) |
Transformational cost management |
|
|
(103 |
) |
|
|
(194 |
) |
|
|
(113 |
) |
|
|
(3 |
) |
|
|
(414 |
) |
Impairment of intangible assets |
|
|
— |
|
|
|
(299 |
) |
|
|
— |
|
|
|
— |
|
|
|
(299 |
) |
Acquisition-related costs |
|
|
(3 |
) |
|
|
(2 |
) |
|
|
(59 |
) |
|
|
(6 |
) |
|
|
(70 |
) |
Adjusted selling, general and administrative expenses (Non-GAAP measure) |
|
$ |
4,540 |
|
|
$ |
965 |
|
|
$ |
286 |
|
|
$ |
39 |
|
|
$ |
5,830 |
|
Operating income (loss) (GAAP) |
|
$ |
395 |
|
|
$ |
(302 |
) |
|
$ |
(522 |
) |
|
$ |
(48 |
) |
|
$ |
(477 |
) |
Certain legal and regulatory accruals and settlements |
|
|
268 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
268 |
|
Acquisition-related amortization |
|
|
81 |
|
|
|
15 |
|
|
|
178 |
|
|
|
— |
|
|
|
274 |
|
Transformational cost management |
|
|
103 |
|
|
|
194 |
|
|
|
113 |
|
|
|
3 |
|
|
|
414 |
|
Impairment of intangible assets |
|
|
— |
|
|
|
299 |
|
|
|
— |
|
|
|
— |
|
|
|
299 |
|
Acquisition-related costs |
|
|
3 |
|
|
|
2 |
|
|
|
59 |
|
|
|
6 |
|
|
|
70 |
|
Adjustments to equity earnings in AmerisourceBergen |
|
|
61 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
61 |
|
LIFO provision |
|
|
51 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
51 |
|
Adjusted operating income (loss) (Non-GAAP measure) |
|
$ |
962 |
|
|
$ |
208 |
|
|
$ |
(172 |
) |
|
$ |
(39 |
) |
|
$ |
959 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross margin (GAAP) |
|
|
19.1 |
% |
|
|
21.0 |
% |
|
|
4.5 |
% |
|
|
|
|
18.6 |
% |
||
Adjusted gross margin (Non-GAAP measure) |
|
|
19.3 |
% |
|
|
21.0 |
% |
|
|
5.8 |
% |
|
|
|
|
18.8 |
% |
||
Selling, general and administrative expenses percent to sales (GAAP) |
|
|
17.9 |
% |
|
|
26.5 |
% |
|
|
30.9 |
% |
|
|
|
|
20.1 |
% |
||
Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure) |
|
|
16.3 |
% |
|
|
17.3 |
% |
|
|
14.5 |
% |
|
|
|
|
16.5 |
% |
||
Operating margin2 |
|
|
1.20 |
% |
|
|
(5.4 |
) % |
|
|
(26.4 |
) % |
|
|
|
|
(1.5 |
) % |
||
Adjusted operating margin (Non-GAAP measure)2 |
|
|
3.0 |
% |
|
|
3.7 |
% |
|
|
(8.7 |
) % |
|
|
|
|
2.4 |
% |
||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
1 |
Operating income for |
2 |
Operating margins and adjusted operating margins have been calculated excluding equity earnings in AmerisourceBergen and adjusted equity earnings in AmerisourceBergen, respectively. |
|
|
(in millions) |
||||||||||||||||||
|
|
Three months ended May 31, 2022 |
||||||||||||||||||
|
|
|
|
International |
|
|
|
Corporate and Other |
|
Walgreens Boots Alliance, Inc. |
||||||||||
Sales |
|
$ |
26,695 |
|
|
$ |
5,305 |
|
|
$ |
596 |
|
|
$ |
1 |
|
|
$ |
32,597 |
|
Gross profit (GAAP) |
|
$ |
5,499 |
|
|
$ |
1,095 |
|
|
$ |
(21 |
) |
|
$ |
— |
|
|
$ |
6,572 |
|
LIFO provision |
|
|
55 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
55 |
|
Acquisition-related amortization |
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Adjusted gross profit (Non-GAAP measure) |
|
$ |
5,559 |
|
|
$ |
1,095 |
|
|
$ |
(21 |
) |
|
$ |
— |
|
|
$ |
6,633 |
|
Selling, general and administrative expenses (GAAP) |
|
$ |
5,716 |
|
|
$ |
995 |
|
|
$ |
213 |
|
|
$ |
95 |
|
|
$ |
7,019 |
|
Acquisition-related costs |
|
|
(1 |
) |
|
|
(11 |
) |
|
|
— |
|
|
|
(28 |
) |
|
|
(40 |
) |
Transformational cost management |
|
|
(127 |
) |
|
|
(47 |
) |
|
|
— |
|
|
|
(11 |
) |
|
|
(185 |
) |
Acquisition-related amortization |
|
|
(74 |
) |
|
|
(16 |
) |
|
|
(106 |
) |
|
|
— |
|
|
|
(196 |
) |
Certain legal and regulatory accruals and settlements |
|
|
(734 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(734 |
) |
Adjusted selling, general and administrative expenses (Non-GAAP measure) |
|
$ |
4,781 |
|
|
$ |
921 |
|
|
$ |
108 |
|
|
$ |
56 |
|
|
$ |
5,865 |
|
Operating (loss) income (GAAP) |
|
$ |
(90 |
) |
|
$ |
100 |
|
|
$ |
(234 |
) |
|
$ |
(95 |
) |
|
$ |
(320 |
) |
Certain legal and regulatory accruals and settlements |
|
|
734 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
734 |
|
Acquisition-related amortization |
|
|
79 |
|
|
|
16 |
|
|
|
106 |
|
|
|
— |
|
|
|
201 |
|
Transformational cost management |
|
|
127 |
|
|
|
47 |
|
|
|
— |
|
|
|
11 |
|
|
|
185 |
|
Adjustments to equity earnings in AmerisourceBergen |
|
|
60 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
60 |
|
Acquisition-related costs |
|
|
1 |
|
|
|
11 |
|
|
|
— |
|
|
|
28 |
|
|
|
40 |
|
LIFO provision |
|
|
55 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
55 |
|
Adjusted operating income (loss) (Non-GAAP measure) |
|
$ |
966 |
|
|
$ |
174 |
|
|
$ |
(129 |
) |
|
$ |
(56 |
) |
|
$ |
955 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross margin (GAAP) |
|
|
20.6 |
% |
|
|
20.6 |
% |
|
|
(3.5 |
) % |
|
|
|
|
20.2 |
% |
||
Adjusted gross margin (Non-GAAP measure) |
|
|
20.8 |
% |
|
|
20.6 |
% |
|
|
(3.5 |
) % |
|
|
|
|
20.3 |
% |
||
Selling, general and administrative expenses percent to sales (GAAP) |
|
|
21.4 |
% |
|
|
18.8 |
% |
|
|
35.7 |
% |
|
|
|
|
21.5 |
% |
||
Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure) |
|
|
17.9 |
% |
|
|
17.4 |
% |
|
|
18.0 |
% |
|
|
|
|
18.0 |
% |
||
Operating margin2 |
|
|
(0.8 |
) % |
|
|
1.9 |
% |
|
|
(39.3 |
) % |
|
|
|
|
(1.4 |
) % |
||
Adjusted operating margin (Non-GAAP measure)2 |
|
|
2.9 |
% |
|
|
3.3 |
% |
|
|
(21.6 |
) % |
|
|
|
|
2.4 |
% |
||
1 |
Operating loss for |
2 |
Operating margins and adjusted operating margins have been calculated excluding equity earnings in AmerisourceBergen and adjusted equity earnings in AmerisourceBergen, respectively. |
|
|
(in millions) |
||||||||||||||||||
|
|
Nine months ended May 31, 2023 |
||||||||||||||||||
|
|
|
|
International |
|
|
|
Corporate and Other |
|
Walgreens Boots Alliance, Inc. |
||||||||||
Sales |
|
$ |
82,648 |
|
|
$ |
16,414 |
|
|
$ |
4,597 |
|
|
$ |
— |
|
|
$ |
103,659 |
|
Gross profit (GAAP) |
|
$ |
17,038 |
|
|
$ |
3,421 |
|
|
$ |
138 |
|
|
$ |
— |
|
|
$ |
20,596 |
|
Acquisition-related amortization |
|
|
16 |
|
|
|
— |
|
|
|
69 |
|
|
|
— |
|
|
|
85 |
|
Acquisition-related costs |
|
|
— |
|
|
|
— |
|
|
|
60 |
|
|
|
— |
|
|
|
60 |
|
LIFO provision |
|
|
89 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
89 |
|
Adjusted gross profit (Non-GAAP measure) |
|
$ |
17,143 |
|
|
$ |
3,421 |
|
|
$ |
267 |
|
|
$ |
— |
|
|
$ |
20,831 |
|
Selling, general and administrative expenses (GAAP) |
|
$ |
22,215 |
|
|
$ |
3,264 |
|
|
$ |
1,569 |
|
|
$ |
167 |
|
|
$ |
27,215 |
|
Certain legal and regulatory accruals and settlements |
|
|
(7,249 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,249 |
) |
Acquisition-related amortization |
|
|
(221 |
) |
|
|
(45 |
) |
|
|
(501 |
) |
|
|
— |
|
|
|
(766 |
) |
Transformational cost management |
|
|
(368 |
) |
|
|
(206 |
) |
|
|
(113 |
) |
|
|
(10 |
) |
|
|
(697 |
) |
Impairment of intangible assets |
|
|
— |
|
|
|
(299 |
) |
|
|
— |
|
|
|
— |
|
|
|
(299 |
) |
Acquisition-related costs |
|
|
(4 |
) |
|
|
29 |
|
|
|
(205 |
) |
|
|
(18 |
) |
|
|
(197 |
) |
Adjusted selling, general and administrative expenses (Non-GAAP measure) |
|
$ |
14,373 |
|
|
$ |
2,745 |
|
|
$ |
750 |
|
|
$ |
139 |
|
|
$ |
18,007 |
|
Operating (loss) income (GAAP) |
|
$ |
(4,990 |
) |
|
$ |
156 |
|
|
$ |
(1,431 |
) |
|
$ |
(167 |
) |
|
$ |
(6,431 |
) |
Certain legal and regulatory accruals and settlements |
|
|
7,249 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,249 |
|
Acquisition-related amortization |
|
|
236 |
|
|
|
45 |
|
|
|
570 |
|
|
|
— |
|
|
|
851 |
|
Transformational cost management |
|
|
368 |
|
|
|
206 |
|
|
|
113 |
|
|
|
10 |
|
|
|
697 |
|
Impairment of intangible assets |
|
|
— |
|
|
|
299 |
|
|
|
— |
|
|
|
— |
|
|
|
299 |
|
Acquisition-related costs |
|
|
4 |
|
|
|
(29 |
) |
|
|
265 |
|
|
|
18 |
|
|
|
257 |
|
Adjustments to equity earnings in AmerisourceBergen |
|
|
178 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
178 |
|
LIFO provision |
|
|
89 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
89 |
|
Adjusted operating income (loss) (Non-GAAP measure) |
|
$ |
3,134 |
|
|
$ |
676 |
|
|
$ |
(483 |
) |
|
$ |
(139 |
) |
|
$ |
3,188 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross margin (GAAP) |
|
|
20.6 |
% |
|
|
20.8 |
% |
|
|
3.0 |
% |
|
|
|
|
19.9 |
% |
||
Adjusted gross margin (Non-GAAP measure) |
|
|
20.7 |
% |
|
|
20.8 |
% |
|
|
5.8 |
% |
|
|
|
|
20.1 |
% |
||
Selling, general and administrative expenses percent to sales (GAAP) |
|
|
26.9 |
% |
|
|
19.9 |
% |
|
|
34.1 |
% |
|
|
|
|
26.3 |
% |
||
Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure) |
|
|
17.4 |
% |
|
|
16.7 |
% |
|
|
16.3 |
% |
|
|
|
|
17.4 |
% |
||
Operating margin2 |
|
|
(6.3 |
) % |
|
|
1.0 |
% |
|
|
(31.1 |
) % |
|
|
|
|
(6.4 |
) % |
||
Adjusted operating margin (Non-GAAP measure)2 |
|
|
3.4 |
% |
|
|
4.1 |
% |
|
|
(10.5 |
) % |
|
|
|
|
2.7 |
% |
||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
1 |
Operating loss for |
2 |
Operating margins and adjusted operating margins have been calculated excluding equity earnings in AmerisourceBergen and adjusted equity earnings in AmerisourceBergen, respectively. |
|
|
(in millions) |
||||||||||||||||||
|
|
Nine months ended May 31, 2022 |
||||||||||||||||||
|
|
|
|
International |
|
|
|
Corporate and Other |
|
Walgreens Boots Alliance, Inc. |
||||||||||
Sales |
|
$ |
82,394 |
|
|
$ |
16,686 |
|
|
$ |
1,173 |
|
|
$ |
— |
|
|
$ |
100,254 |
|
Gross profit (GAAP) |
|
$ |
18,332 |
|
|
$ |
3,508 |
|
|
$ |
15 |
|
|
$ |
— |
|
|
$ |
21,855 |
|
LIFO provision |
|
|
64 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
64 |
|
Acquisition-related amortization |
|
|
18 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18 |
|
Adjusted gross profit (Non-GAAP measure) |
|
$ |
18,414 |
|
|
$ |
3,508 |
|
|
$ |
15 |
|
|
$ |
— |
|
|
$ |
21,936 |
|
Selling, general and administrative expenses (GAAP) |
|
$ |
16,006 |
|
|
$ |
3,182 |
|
|
$ |
505 |
|
|
$ |
283 |
|
|
$ |
19,975 |
|
Acquisition-related costs |
|
|
2 |
|
|
|
(73 |
) |
|
|
(24 |
) |
|
|
(60 |
) |
|
|
(155 |
) |
Transformational cost management |
|
|
(319 |
) |
|
|
(114 |
) |
|
|
— |
|
|
|
(25 |
) |
|
|
(458 |
) |
Acquisition-related amortization |
|
|
(300 |
) |
|
|
(50 |
) |
|
|
(249 |
) |
|
|
— |
|
|
|
(598 |
) |
Certain legal and regulatory accruals and settlements |
|
|
(734 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(734 |
) |
Adjusted selling, general and administrative expenses (Non-GAAP measure) |
|
$ |
14,655 |
|
|
$ |
2,945 |
|
|
$ |
233 |
|
|
$ |
198 |
|
|
$ |
18,031 |
|
Operating income (loss) (GAAP) |
|
$ |
2,656 |
|
|
$ |
326 |
|
|
$ |
(491 |
) |
|
$ |
(283 |
) |
|
$ |
2,209 |
|
Certain legal and regulatory accruals and settlements |
|
|
734 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
734 |
|
Acquisition-related amortization |
|
|
317 |
|
|
|
50 |
|
|
|
249 |
|
|
|
— |
|
|
|
616 |
|
Transformational cost management |
|
|
319 |
|
|
|
114 |
|
|
|
— |
|
|
|
25 |
|
|
|
458 |
|
Adjustments to equity earnings in AmerisourceBergen |
|
|
155 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
155 |
|
Acquisition-related costs |
|
|
(2 |
) |
|
|
73 |
|
|
|
24 |
|
|
|
60 |
|
|
|
155 |
|
LIFO provision |
|
|
64 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
64 |
|
Adjusted operating income (loss) (Non-GAAP measure) |
|
$ |
4,243 |
|
|
$ |
563 |
|
|
$ |
(218 |
) |
|
$ |
(198 |
) |
|
$ |
4,389 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross margin (GAAP) |
|
|
22.2 |
% |
|
|
21.0 |
% |
|
|
1.2 |
% |
|
|
|
|
21.8 |
% |
||
Adjusted gross margin (Non-GAAP measure) |
|
|
22.3 |
% |
|
|
21.0 |
% |
|
|
1.2 |
% |
|
|
|
|
21.9 |
% |
||
Selling, general and administrative expenses percent to sales (GAAP) |
|
|
19.4 |
% |
|
|
19.1 |
% |
|
|
43.1 |
% |
|
|
|
|
19.9 |
% |
||
Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure) |
|
|
17.8 |
% |
|
|
17.6 |
% |
|
|
19.9 |
% |
|
|
|
|
18.0 |
% |
||
Operating margin2 |
|
|
2.8 |
% |
|
|
2.0 |
% |
|
|
(41.8 |
) % |
|
|
|
|
1.9 |
% |
||
Adjusted operating margin (Non-GAAP measure)2 |
|
|
4.6 |
% |
|
|
3.4 |
% |
|
|
(18.6 |
) % |
|
|
|
|
3.9 |
% |
||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
1 |
Operating income for |
2 |
Operating margins and adjusted operating margins have been calculated excluding equity earnings in AmerisourceBergen and adjusted equity earnings in AmerisourceBergen, respectively. |
OPERATING LOSS TO ADJUSTED EBITDA FOR THE
|
|
(in millions) |
||||||||||||||
|
|
Three months ended May 31, |
|
Nine months ended May 31, |
||||||||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Operating loss (GAAP) 1 |
|
$ |
(522 |
) |
|
$ |
(234 |
) |
|
$ |
(1,431 |
) |
|
$ |
(491 |
) |
Acquisition-related amortization 2 |
|
|
178 |
|
|
|
106 |
|
|
|
570 |
|
|
|
249 |
|
Acquisition-related costs 3 |
|
|
59 |
|
|
|
— |
|
|
|
265 |
|
|
|
24 |
|
Transformational cost management 4 |
|
|
113 |
|
|
|
— |
|
|
|
113 |
|
|
|
— |
|
Adjusted operating loss (Non-GAAP measure) |
|
|
(172 |
) |
|
|
(129 |
) |
|
|
(483 |
) |
|
|
(218 |
) |
Depreciation expense |
|
|
43 |
|
|
|
9 |
|
|
|
92 |
|
|
|
23 |
|
Stock-based compensation expense 5 |
|
|
16 |
|
|
|
13 |
|
|
|
45 |
|
|
|
17 |
|
Adjusted EBITDA (Non-GAAP measure) |
|
$ |
(113 |
) |
|
$ |
(106 |
) |
|
$ |
(346 |
) |
|
$ |
(178 |
) |
|
|
|
|
|
|
|
|
|
||||||||
1 |
The Company reconciles Adjusted EBITDA for the |
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. 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. These costs include charges incurred related to certain mergers, acquisition and divestitures related activities recorded in operating income, for example, costs related to integration efforts for merger, acquisition and divestitures activities. Examples of such costs include deal costs, severance, stock compensation and employee transaction success bonuses. These charges are primarily recorded within Selling, general and administrative expenses. 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 within Selling, general and administrative expenses. 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 AMERISOURCEBERGEN
|
|
(in millions) |
|||||||||||||
|
|
Three months ended May 31, |
|
Nine months ended May 31, |
|||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Equity earnings in AmerisourceBergen (GAAP) |
|
$ |
58 |
|
$ |
127 |
|
|
$ |
187 |
|
|
$ |
330 |
|
Gain from antitrust litigation settlements |
|
|
— |
|
|
— |
|
|
|
(8 |
) |
|
|
3 |
|
|
|
|
1 |
|
|
— |
|
|
|
6 |
|
|
|
— |
|
LIFO expense / (credit) |
|
|
7 |
|
|
(3 |
) |
|
|
31 |
|
|
|
(13 |
) |
Acquisition-related intangibles amortization |
|
|
32 |
|
|
39 |
|
|
|
98 |
|
|
|
114 |
|
Litigation and opioid-related expenses |
|
|
2 |
|
|
— |
|
|
|
4 |
|
|
|
— |
|
Acquisition integration and restructuring expenses |
|
|
10 |
|
|
— |
|
|
|
15 |
|
|
|
— |
|
Tax reform |
|
|
— |
|
|
3 |
|
|
|
4 |
|
|
|
7 |
|
Employee severance, litigation, and other |
|
|
— |
|
|
18 |
|
|
|
21 |
|
|
|
45 |
|
Restructuring and other expenses |
|
|
10 |
|
|
— |
|
|
|
10 |
|
|
|
— |
|
Impairment of non-customer note receivable |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
4 |
|
Impairment of assets |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Goodwill impairment |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
2 |
|
Certain discrete tax expense |
|
|
— |
|
|
4 |
|
|
|
(2 |
) |
|
|
7 |
|
Gain on remeasurement of equity investment |
|
|
— |
|
|
— |
|
|
|
(1 |
) |
|
|
(18 |
) |
Adjusted equity earnings in AmerisourceBergen (Non-GAAP measure) |
|
$ |
119 |
|
$ |
188 |
|
|
$ |
365 |
|
|
$ |
484 |
|
ADJUSTED EFFECTIVE TAX RATE
|
|
(in millions) |
||||||||||||||||||||
|
|
Three months ended May 31, 2023 |
|
Three months ended May 31, 2022 |
||||||||||||||||||
|
|
(Loss) earnings before income tax provision |
|
Income tax (benefit) provision |
|
Effective tax rate |
|
(Loss) earnings before income tax provision |
|
Income tax (benefit) provision |
|
Effective tax rate |
||||||||||
Effective tax rate (GAAP) |
|
$ |
(382 |
) |
|
$ |
(330 |
) |
|
86.3 |
% |
|
$ |
(18 |
) |
|
$ |
(242 |
) |
|
NM |
|
Impact of non-GAAP adjustments |
|
|
1,207 |
|
|
|
417 |
|
|
|
|
|
858 |
|
|
|
339 |
|
|
|
||
Adjusted tax rate true-up |
|
|
— |
|
|
|
(10 |
) |
|
|
|
|
— |
|
|
|
(8 |
) |
|
|
||
Equity method non-cash tax |
|
|
— |
|
|
|
(10 |
) |
|
|
|
|
— |
|
|
|
(25 |
) |
|
|
||
Subtotal |
|
$ |
825 |
|
|
$ |
68 |
|
|
|
|
$ |
841 |
|
|
$ |
65 |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Exclude adjusted equity earnings in AmerisourceBergen |
|
|
(119 |
) |
|
|
— |
|
|
|
|
|
(188 |
) |
|
|
— |
|
|
|
||
Adjusted effective tax rate excluding adjusted equity earnings in AmerisourceBergen (Non-GAAP measure) |
|
$ |
706 |
|
|
$ |
68 |
|
|
9.6 |
% |
|
$ |
653 |
|
|
$ |
65 |
|
|
9.9 |
% |
NM - Not meaningful. Percentage increases above |
|
|
(in millions) |
||||||||||||||||||||
|
|
Nine months ended May 31, 2023 |
|
Nine months ended May 31, 2022 |
||||||||||||||||||
|
|
(Loss) earnings before income tax provision |
|
Income tax (benefit) provision |
|
Effective tax rate |
|
Earnings before income tax provision |
|
Income tax provision |
|
Effective tax rate |
||||||||||
Effective tax rate (GAAP) |
|
$ |
(5,044 |
) |
|
$ |
(1,707 |
) |
|
33.8 |
% |
|
$ |
4,743 |
|
|
$ |
205 |
|
|
4.3 |
% |
Impact of non-GAAP adjustments |
|
|
7,878 |
|
|
|
1,787 |
|
|
|
|
|
(583 |
) |
|
|
398 |
|
|
|
||
Adjusted tax rate true-up |
|
|
— |
|
|
|
181 |
|
|
|
|
|
— |
|
|
|
68 |
|
|
|
||
Equity method non-cash tax |
|
|
— |
|
|
|
(33 |
) |
|
|
|
|
— |
|
|
|
(55 |
) |
|
|
||
Subtotal |
|
$ |
2,833 |
|
|
$ |
228 |
|
|
|
|
$ |
4,160 |
|
|
$ |
617 |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Exclude adjusted equity earnings in AmerisourceBergen |
|
|
(365 |
) |
|
|
— |
|
|
|
|
|
(484 |
) |
|
|
— |
|
|
|
||
Adjusted effective tax rate excluding adjusted equity earnings in AmerisourceBergen (Non-GAAP measure) |
|
$ |
2,468 |
|
|
$ |
228 |
|
|
9.2 |
% |
|
$ |
3,676 |
|
|
$ |
617 |
|
|
16.8 |
% |
FREE CASH FLOW
|
|
(in millions) |
||||||||||||||
|
|
Three months ended May 31, |
|
Nine months ended May 31, |
||||||||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net cash (used for) provided by operating activities (GAAP) |
|
$ |
(20 |
) |
|
$ |
1,629 |
|
|
$ |
1,219 |
|
|
$ |
3,813 |
|
Less: Additions to property, plant and equipment |
|
$ |
(525 |
) |
|
$ |
(371 |
) |
|
|
(1,633 |
) |
|
|
(1,241 |
) |
Plus: Acquisition related payments 2 |
|
$ |
101 |
|
|
$ |
— |
|
|
|
530 |
|
|
|
— |
|
Free cash flow (Non-GAAP measure) 1 |
|
$ |
(444 |
) |
|
$ |
1,258 |
|
|
$ |
116 |
|
|
$ |
2,572 |
|
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 our entire statements of cash flows. |
2 |
During the three months ended February 28, 2023, the Company paid |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230627567051/en/
Media Relations
+1 224 813 9057
International
+44 (0)20 7980 8585
Investor Relations
Tiffany Kanaga
+1 847 315 2922
Source: Walgreens Boots Alliance
FAQ
What were the Q3 sales for Walgreens Boots Alliance, Inc.?
What was the adjusted EPS growth for Q3?
What is the revised full-year adjusted EPS guidance?
What immediate actions are being taken to improve profitability?
