Walgreens Boots Alliance Reports Fiscal 2024 Third Quarter Results
Walgreens Boots Alliance (WBA) reported its fiscal 2024 third-quarter results, revealing a complex financial landscape. The company posted a Q3 earnings per share (EPS) of $0.40, up from $0.14 in the previous year, but adjusted EPS decreased by 36.6% to $0.63 due to lower sale-leaseback gains and a challenging U.S. retail environment. Sales grew 2.6% year-over-year to $36.4 billion. However, fiscal 2024 adjusted EPS guidance has been lowered to $2.80-$2.95, reflecting ongoing challenges in the pharmacy sector and U.S. consumer market.
WBA is finalizing a multiyear footprint optimization program to close underperforming U.S. stores and plans to enhance the U.S. Retail Pharmacy experience. Despite a 2.3% increase in U.S. Retail Pharmacy sales to $28.5 billion, adjusted operating income declined by 47.9%, impacted by reimbursement pressures. The International segment saw a 2.8% sales increase to $5.7 billion, while U.S. Healthcare sales rose by 7.6% to $2.1 billion.
Year-to-date results show a 6.2% sales increase to $110.1 billion, but WBA faced a net loss of $5.6 billion, up from a $2.9 billion loss in the previous year, mainly due to significant impairment charges.
- Q3 sales increased by 2.6% to $36.4 billion.
- Net earnings increased to $344 million from $118 million year-over-year.
- Sales in the first nine months of fiscal 2024 grew by 6.2% to $110.1 billion.
- U.S. Healthcare segment improved adjusted EBITDA to $23 million.
- Adjusted EPS for Q3 decreased by 36.6% to $0.63.
- Fiscal 2024 adjusted EPS guidance lowered to $2.80-$2.95.
- Adjusted operating income for the U.S. Retail Pharmacy segment declined by 47.9%.
- Year-to-date net loss increased to $5.6 billion, up from $2.9 billion.
- Operating loss for the first nine months was $13.1 billion, up from $6.4 billion.
Insights
The financial results reflect a mixed performance. While sales increased 2.6 percent year-over-year to
The cost-saving initiatives and free cash flow increase of
Overall, the company's financial health appears stable in terms of total sales growth, yet the significant drop in adjusted operating income and downward revision of earnings forecasts could weigh heavily on investor sentiment in the short term.
Retail investors should be aware of the broader market challenges that WBA is facing, such as reimbursement pressure and lower leaseback gains, which may persist and continue to impact profitability.
The U.S. Retail Pharmacy segment shows both strengths and weaknesses. Pharmacy sales grew by
Interestingly, the International segment and the U.S. Healthcare segment present more promising developments. The International segment's performance, particularly in the UK, indicates growth in both pharmacy and retail sales, benefiting from favorable currency impacts. The U.S. Healthcare segment's reduced operating loss and improved adjusted EBITDA reflect strategic efforts to optimize this part of the business, with VillageMD and Shields showing strong growth.
However, the broader macroeconomic conditions, such as inflationary pressures and consumer spending trends, present continuous challenges. The strategic steps to close underperforming stores and optimize the footprint seem necessary but may not yield immediate positive results. Investors should watch for more granular data on these initiatives' effectiveness in upcoming quarters.
Investors should stay informed about how WBA's strategic actions align with the evolving landscape of healthcare and retail pharmacy, as this alignment will be key to long-term growth and stability.
Lowering Guidance in Continued Challenging Environment; Provides Strategic Update
Third quarter financial highlights
-
Third quarter earnings per share (EPS)* was
$0.40 $0.14 UK -
Adjusted EPS** was
$0.63 $0.24 U.S. retail environment, and recent pharmacy industry trends -
Third quarter sales increased 2.6 percent year-over-year to
$36.4 billion
Fiscal 2024 guidance
-
Lowering fiscal 2024 adjusted EPS** guidance to
$2.80 $2.95 U.S. consumer environment
Update on strategic review
-
Finalizing significant multiyear footprint optimization program to close certain underperforming
U.S. stores -
Launching
U.S. Retail Pharmacy action plan to invest in and deliver an improved customer and patient experience across channels -
Aligning
U.S. Pharmacy and Healthcare organizations for enhanced go-to-market capabilities -
Simplifying and focusing the
U.S. Healthcare portfolio
Chief Executive Officer Tim Wentworth said:
"We continue to face a difficult operating environment, including persistent pressures on the
Informed by our strategic review, we are focused on improving our core business: retail pharmacy, which is central to the future of healthcare. We are addressing critical issues with urgency and working to unlock opportunities for growth. Many of these actions will take time, but I am confident that we have the right team and the right strategy to lead a business turnaround for the Walgreens that our customers and patients need.”
Overview of Third Quarter Results
WBA third quarter sales increased 2.6 percent from the year-ago quarter to
Third quarter operating income was
Net earnings in the third quarter were
EPS in the third quarter was
Net cash provided by operating activities was
Overview of Fiscal 2024 Year-to-Date Results
Sales in the first nine months of fiscal 2024 increased 6.2 percent from the year-ago period to
Operating loss in the first nine months of fiscal 2024 was
Net loss for the first nine months of fiscal 2024 was
Loss per share for the first nine months of fiscal 2024 was
Net cash used for operating activities was
Business Segments
|
Three months ended May 31, |
|
Nine months ended May 31, |
||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Sales |
$ |
28,503 |
|
$ |
27,866 |
|
$ |
86,308 |
|
$ |
82,648 |
Adjusted operating income *** |
$ |
501 |
|
$ |
962 |
|
$ |
1,947 |
|
$ |
3,134 |
The
Pharmacy sales increased 4.4 percent and comparable pharmacy sales increased 5.7 percent compared to the year-ago quarter, benefiting from higher branded drug inflation and script growth. Comparable prescriptions filled in the third quarter, adjusted to 30-day equivalents increased 1.6 percent from the year-ago quarter while comparable prescriptions excluding immunizations increased 1.7 percent. Total prescriptions filled in the quarter, including immunizations, adjusted to 30-day equivalents was 306.4 million, an increase of 0.5 percent versus the prior year quarter. Pharmacy margin was negatively impacted by brand mix impacts and reimbursement pressure.
Retail sales decreased 4.0 percent and comparable retail sales decreased 2.3 percent compared with the year-ago quarter, reflecting a challenging retail environment and continued channel shift. Retail margin was negatively affected by increased promotional activity and higher shrink levels.
Adjusted operating income** decreased 47.9 percent to
International
|
Three months ended May 31, |
|
Nine months ended May 31, |
||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Sales |
$ |
5,727 |
|
$ |
5,573 |
|
$ |
17,581 |
|
$ |
16,414 |
Adjusted operating income *** |
$ |
175 |
|
$ |
208 |
|
$ |
562 |
|
$ |
676 |
The International segment had third quarter sales of
Boots
Adjusted operating income decreased 15.8 percent to
|
Three months ended May 31, |
|
Nine months ended May 31, |
||||||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Sales |
$ |
2,125 |
|
|
$ |
1,975 |
|
|
$ |
6,232 |
|
|
$ |
4,597 |
|
Operating loss |
$ |
(220 |
) |
|
$ |
(522 |
) |
|
$ |
(13,715 |
) |
|
$ |
(1,431 |
) |
Adjusted operating loss *** |
$ |
(22 |
) |
|
$ |
(172 |
) |
|
$ |
(151 |
) |
|
$ |
(483 |
) |
Adjusted EBITDA (Non-GAAP measure) |
$ |
23 |
|
|
$ |
(113 |
) |
|
$ |
1 |
|
|
$ |
(346 |
) |
The
Operating loss was
Adjusted EBITDA** of
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, 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 breadth, timing and impact of the actions related to our strategic review, our ability to successfully turn around the business and return to growth and 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 amount of our goodwill impairment charge (which is based in part on estimates of future performance), 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
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.
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
WBA employs more than 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
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 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, |
||||||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Sales |
$ |
36,351 |
|
|
$ |
35,415 |
|
|
$ |
110,111 |
|
|
$ |
103,659 |
|
Cost of sales |
|
29,892 |
|
|
|
28,826 |
|
|
|
89,840 |
|
|
|
83,062 |
|
Gross profit |
|
6,460 |
|
|
|
6,588 |
|
|
|
20,271 |
|
|
|
20,596 |
|
Selling, general and administrative expenses |
|
6,393 |
|
|
|
7,123 |
|
|
|
21,165 |
|
|
|
27,215 |
|
Impairment of goodwill |
|
— |
|
|
|
— |
|
|
|
12,369 |
|
|
|
— |
|
Equity earnings in Cencora |
|
44 |
|
|
|
58 |
|
|
|
164 |
|
|
|
187 |
|
Operating income (loss) |
|
111 |
|
|
|
(477 |
) |
|
|
(13,099 |
) |
|
|
(6,431 |
) |
Other income, net |
|
254 |
|
|
|
268 |
|
|
|
229 |
|
|
|
1,812 |
|
Earnings (loss) before interest and income tax provision (benefit) |
|
365 |
|
|
|
(209 |
) |
|
|
(12,870 |
) |
|
|
(4,619 |
) |
Interest expense, net |
|
113 |
|
|
|
173 |
|
|
|
351 |
|
|
|
425 |
|
Earnings (loss) before income tax provision (benefit) |
|
251 |
|
|
|
(382 |
) |
|
|
(13,221 |
) |
|
|
(5,044 |
) |
Income tax provision (benefit) |
|
20 |
|
|
|
(330 |
) |
|
|
(836 |
) |
|
|
(1,707 |
) |
Post-tax (loss) earnings from other equity method investments |
|
(1 |
) |
|
|
4 |
|
|
|
15 |
|
|
|
18 |
|
Net earnings (loss) |
|
230 |
|
|
|
(48 |
) |
|
|
(12,370 |
) |
|
|
(3,320 |
) |
Net loss attributable to non-controlling interests |
|
(114 |
) |
|
|
(166 |
) |
|
|
(6,739 |
) |
|
|
(420 |
) |
Net earnings (loss) attributable to Walgreens Boots Alliance, Inc. |
$ |
344 |
|
|
$ |
118 |
|
|
$ |
(5,631 |
) |
|
$ |
(2,900 |
) |
|
|
|
|
|
|
|
|
||||||||
Net earnings (loss) per common share: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
0.40 |
|
|
$ |
0.14 |
|
|
$ |
(6.53 |
) |
|
$ |
(3.36 |
) |
Diluted |
$ |
0.40 |
|
|
$ |
0.14 |
|
|
$ |
(6.53 |
) |
|
$ |
(3.36 |
) |
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
||||||||
Basic |
|
863.1 |
|
|
|
863.1 |
|
|
|
862.9 |
|
|
|
863.1 |
|
Diluted |
|
864.3 |
|
|
|
863.8 |
|
|
|
862.9 |
|
|
|
863.1 |
|
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (in millions) |
||||||
|
|
May 31, 2024 |
|
August 31, 2023 |
||
Assets |
|
|
|
|
||
Current assets: |
|
|
|
|
||
Cash and cash equivalents |
|
$ |
703 |
|
$ |
739 |
Accounts receivable, net |
|
|
5,949 |
|
|
5,381 |
Inventories |
|
|
8,578 |
|
|
8,257 |
Other current assets |
|
|
1,107 |
|
|
1,127 |
Total current assets |
|
|
16,337 |
|
|
15,503 |
|
|
|
|
|
||
Non-current assets: |
|
|
|
|
||
Property, plant and equipment, net |
|
|
9,952 |
|
|
11,587 |
Operating lease right-of-use assets |
|
|
21,020 |
|
|
21,667 |
Goodwill |
|
|
15,821 |
|
|
28,187 |
Intangible assets, net |
|
|
12,836 |
|
|
13,635 |
Equity method investments |
|
|
2,961 |
|
|
3,497 |
Other non-current assets |
|
|
4,059 |
|
|
2,550 |
Total non-current assets |
|
|
66,648 |
|
|
81,125 |
Total assets |
|
$ |
82,985 |
|
$ |
96,628 |
|
|
|
|
|
||
Liabilities, redeemable non-controlling interests and equity |
|
|
|
|
||
Current liabilities: |
|
|
|
|
||
Short-term debt |
|
$ |
1,506 |
|
$ |
917 |
Trade accounts payable |
|
|
13,100 |
|
|
12,635 |
Operating lease obligations |
|
|
2,384 |
|
|
2,347 |
Accrued expenses and other liabilities |
|
|
7,753 |
|
|
8,426 |
Income taxes |
|
|
292 |
|
|
209 |
Total current liabilities |
|
|
25,034 |
|
|
24,535 |
|
|
|
|
|
||
Non-current liabilities: |
|
|
|
|
||
Long-term debt |
|
|
7,407 |
|
|
8,145 |
Operating lease obligations |
|
|
21,379 |
|
|
22,124 |
Deferred income taxes |
|
|
1,221 |
|
|
1,318 |
Accrued litigation obligations |
|
|
5,890 |
|
|
6,261 |
Other non-current liabilities |
|
|
6,624 |
|
|
5,757 |
Total non-current liabilities |
|
|
42,521 |
|
|
43,605 |
|
|
|
|
|
||
Redeemable non-controlling interests |
|
|
173 |
|
|
167 |
Total equity |
|
|
15,257 |
|
|
28,322 |
Total liabilities, redeemable non-controlling interests and equity |
|
$ |
82,985 |
|
$ |
96,628 |
WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES |
||||||||
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS |
||||||||
(UNAUDITED) |
||||||||
(in millions) |
||||||||
|
|
Nine months ended May 31, |
||||||
|
|
2024 |
|
2023 |
||||
Cash flows from operating activities: |
|
|
|
|
||||
Net loss |
|
$ |
(12,370 |
) |
|
$ |
(3,320 |
) |
Adjustments to reconcile net loss to net cash (used for) provided by operating activities: |
|
|
|
|
||||
Depreciation and amortization |
|
|
1,837 |
|
|
|
1,652 |
|
Deferred income taxes |
|
|
(1,242 |
) |
|
|
(2,098 |
) |
Stock compensation expense |
|
|
143 |
|
|
|
348 |
|
Earnings from equity method investments |
|
|
(179 |
) |
|
|
(206 |
) |
Impairment of goodwill, intangibles and long-lived assets |
|
|
13,618 |
|
|
|
815 |
|
Gain on sale of equity method investments |
|
|
(847 |
) |
|
|
(1,691 |
) |
Gain on sale-leaseback transactions |
|
|
(268 |
) |
|
|
(825 |
) |
Loss on variable prepaid forward contracts |
|
|
733 |
|
|
|
26 |
|
Other |
|
|
(151 |
) |
|
|
(124 |
) |
Changes in certain assets and liabilities: |
|
|
|
|
||||
Accounts receivable, net |
|
|
(592 |
) |
|
|
(411 |
) |
Inventories |
|
|
(315 |
) |
|
|
326 |
|
Other current assets |
|
|
58 |
|
|
|
(184 |
) |
Trade accounts payable |
|
|
446 |
|
|
|
627 |
|
Accrued expenses and other liabilities |
|
|
(474 |
) |
|
|
(588 |
) |
Income taxes |
|
|
167 |
|
|
|
216 |
|
Accrued litigation obligations |
|
|
(330 |
) |
|
|
6,835 |
|
Other non-current assets and liabilities |
|
|
(548 |
) |
|
|
(179 |
) |
Net cash (used for) provided by operating activities |
|
|
(314 |
) |
|
|
1,219 |
|
Cash flows from investing activities: |
|
|
|
|
||||
Additions to property, plant and equipment |
|
|
(1,135 |
) |
|
|
(1,633 |
) |
Proceeds from sale-leaseback transactions |
|
|
773 |
|
|
|
1,549 |
|
Proceeds from sale of other assets |
|
|
1,726 |
|
|
|
3,798 |
|
Business, investment and asset acquisitions, net of cash acquired |
|
|
(206 |
) |
|
|
(7,072 |
) |
Other |
|
|
(53 |
) |
|
|
110 |
|
Net cash provided by (used for) investing activities |
|
|
1,106 |
|
|
|
(3,249 |
) |
Cash flows from financing activities: |
|
|
|
|
||||
Net change in short-term debt with maturities of 3 months or less |
|
|
(1 |
) |
|
|
147 |
|
Proceeds from debt |
|
|
23,074 |
|
|
|
5,240 |
|
Payments of debt |
|
|
(23,128 |
) |
|
|
(5,232 |
) |
Acquisition of non-controlling interests |
|
|
— |
|
|
|
(1,316 |
) |
Proceeds from issuance of non-controlling interests |
|
|
— |
|
|
|
2,735 |
|
Proceeds from variable prepaid forward contracts |
|
|
424 |
|
|
|
644 |
|
Treasury stock purchases |
|
|
(69 |
) |
|
|
(150 |
) |
Cash dividends paid |
|
|
(1,044 |
) |
|
|
(1,244 |
) |
Other |
|
|
(168 |
) |
|
|
(251 |
) |
Net cash (used for) provided by financing activities |
|
|
(912 |
) |
|
|
573 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
3 |
|
|
|
17 |
|
Changes in cash, cash equivalents and restricted cash: |
|
|
|
|
||||
Net decrease in cash, cash equivalents and restricted cash |
|
|
(117 |
) |
|
|
(1,441 |
) |
Cash, cash equivalents and restricted cash at beginning of period |
|
|
856 |
|
|
|
2,558 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
740 |
|
|
$ |
1,117 |
|
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
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
Comparable sales
The nine months ended May 31, 2024 comparable sales and prescriptions filled figures for the Company exclude the benefit of this year's leap day.
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 (in constant currency), comparable pharmacy sales (in constant currency), comparable retail sales (in constant currency), comparable number of prescriptions, comparable prescriptions excluding immunizations, 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 EARNINGS (LOSS) TO ADJUSTED NET EARNINGS AND DILUTED NET EARNINGS (LOSS)
|
||||||||||||||||
|
|
(in millions, except per share amounts) |
||||||||||||||
|
|
|||||||||||||||
|
|
Three months ended May 31, |
|
Nine months ended May 31, |
||||||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Net earnings (loss) attributable to Walgreens Boots Alliance, Inc. (GAAP) |
|
$ |
344 |
|
|
$ |
118 |
|
|
$ |
(5,631 |
) |
|
$ |
(2,900 |
) |
|
|
|
|
|
|
|
|
|
||||||||
Adjustments to operating income (loss): |
|
|
|
|
|
|
|
|
||||||||
Impairment of goodwill, intangibles and long-lived assets 1 |
|
|
— |
|
|
|
299 |
|
|
|
13,091 |
|
|
|
299 |
|
Acquisition-related costs 2 |
|
|
68 |
|
|
|
70 |
|
|
|
480 |
|
|
|
257 |
|
Acquisition-related amortization 3 |
|
|
266 |
|
|
|
274 |
|
|
|
811 |
|
|
|
851 |
|
Certain legal and regulatory accruals and settlements 4 |
|
|
52 |
|
|
|
268 |
|
|
|
376 |
|
|
|
7,249 |
|
Transformational cost management 5 |
|
|
95 |
|
|
|
414 |
|
|
|
401 |
|
|
|
697 |
|
Adjustments to equity earnings in Cencora 6 |
|
|
57 |
|
|
|
61 |
|
|
|
129 |
|
|
|
178 |
|
LIFO provision 7 |
|
|
(36 |
) |
|
|
51 |
|
|
|
11 |
|
|
|
89 |
|
Total adjustments to operating income (loss) |
|
|
502 |
|
|
|
1,436 |
|
|
|
15,299 |
|
|
|
9,620 |
|
|
|
|
|
|
|
|
|
|
||||||||
Adjustments to other income, net: |
|
|
|
|
|
|
|
|
||||||||
(Gain) loss on certain non-hedging derivatives 8 |
|
|
(155 |
) |
|
|
26 |
|
|
|
733 |
|
|
|
26 |
|
Gain on sale of equity method investment 9 |
|
|
(88 |
) |
|
|
(179 |
) |
|
|
(940 |
) |
|
|
(1,692 |
) |
Gain on investments, net 10 |
|
|
— |
|
|
|
(76 |
) |
|
|
— |
|
|
|
(76 |
) |
Loss on disposal of business 11 |
|
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
Total adjustments to other income, net |
|
|
(244 |
) |
|
|
(229 |
) |
|
|
(203 |
) |
|
|
(1,742 |
) |
|
|
|
|
|
|
|
|
|
||||||||
Adjustments to interest expense, net: |
|
|
|
|
|
|
|
|
||||||||
Interest expense on debt 12 |
|
|
6 |
|
|
|
— |
|
|
|
12 |
|
|
|
— |
|
Total adjustments to interest expense, net |
|
|
6 |
|
|
|
— |
|
|
|
12 |
|
|
|
— |
|
Adjustments to income tax provision (benefit): |
|
|
|
|
|
|
|
|
||||||||
Equity method non-cash tax 13 |
|
|
6 |
|
|
|
10 |
|
|
|
20 |
|
|
|
33 |
|
Tax impact of adjustments 13 |
|
|
(23 |
) |
|
|
(408 |
) |
|
|
(821 |
) |
|
|
(1,968 |
) |
Total adjustments to income tax provision (benefit) |
|
|
(17 |
) |
|
|
(397 |
) |
|
|
(800 |
) |
|
|
(1,935 |
) |
|
|
|
|
|
|
|
|
|
||||||||
Adjustments to post-tax (loss) earnings from other equity method investments: |
|
|
|
|
|
|
|
|
||||||||
Adjustments to earnings in other equity method investments 14 |
|
|
6 |
|
|
|
9 |
|
|
|
25 |
|
|
|
31 |
|
Total adjustments to post-tax (loss) earnings from other equity method investments |
|
|
6 |
|
|
|
9 |
|
|
|
25 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
||||||||
Adjustments to net loss attributable to non-controlling interests: |
|
|
|
|
|
|
|
|
||||||||
Transformational cost management 5 |
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
Impairment of goodwill, intangibles and long-lived assets 1 |
|
|
— |
|
|
|
— |
|
|
|
(6,195 |
) |
|
|
— |
|
Acquisition-related costs 2 |
|
|
(14 |
) |
|
|
(16 |
) |
|
|
(200 |
) |
|
|
(71 |
) |
Acquisition-related amortization 3 |
|
|
(37 |
) |
|
|
(61 |
) |
|
|
(153 |
) |
|
|
(139 |
) |
Total adjustments to net loss attributable to non-controlling interests |
|
|
(52 |
) |
|
|
(77 |
) |
|
|
(6,549 |
) |
|
|
(210 |
) |
Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure) |
|
$ |
545 |
|
|
$ |
860 |
|
|
$ |
2,152 |
|
|
$ |
2,864 |
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted net earnings (loss) per common share (GAAP) 15 |
|
$ |
0.40 |
|
|
$ |
0.14 |
|
|
$ |
(6.53 |
) |
|
$ |
(3.36 |
) |
Adjustments to operating income (loss) |
|
|
0.58 |
|
|
|
1.66 |
|
|
|
17.70 |
|
|
|
11.14 |
|
Adjustments to other income, net |
|
|
(0.28 |
) |
|
|
(0.27 |
) |
|
|
(0.23 |
) |
|
|
(2.02 |
) |
Adjustments to interest expense, net |
|
|
0.01 |
|
|
|
— |
|
|
|
0.01 |
|
|
|
— |
|
Adjustments to income tax provision (benefit) |
|
|
(0.02 |
) |
|
|
(0.46 |
) |
|
|
(0.93 |
) |
|
|
(2.24 |
) |
Adjustments to post-tax (loss) earnings from other equity method investments |
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.03 |
|
|
|
0.04 |
|
Adjustments to net loss attributable to non-controlling interests |
|
|
(0.06 |
) |
|
|
(0.09 |
) |
|
|
(7.58 |
) |
|
|
(0.24 |
) |
Adjusted diluted net earnings per common share (Non-GAAP measure) 16 |
|
$ |
0.63 |
|
|
$ |
1.00 |
|
|
$ |
2.49 |
|
|
$ |
3.32 |
|
Weighted average common shares outstanding, diluted (in millions) 16 |
|
|
864.3 |
|
|
|
863.8 |
|
|
|
864.3 |
|
|
|
863.8 |
|
1 |
Impairment of goodwill, intangibles and long-lived assets recognized in the nine months ended May 31, 2024 resulted from the interim goodwill impairment assessment for the VillageMD reporting unit. These charges 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 in Selling, general and administrative expenses and Impairment of goodwill within the Consolidated Condensed Statements of Earnings. |
2 |
Acquisition-related costs are transaction and integration costs associated with certain merger, acquisition and divestitures related activities recorded in Operating income (loss) within the Consolidated Condensed Statement of Earnings. Examples of such costs include deal costs, severance, stock-based compensation, employee transaction success bonuses, and other integration related exit and disposal charges. 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 |
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 in 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. |
4 |
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. |
5 |
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. |
6 |
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. |
7 |
The Company’s |
8 |
Includes fair value gains or losses on the VPF 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 this volatility related to the mark-to-market adjustments on the underlying derivative instruments reflects the Company’s operational performance. |
9 |
Gains on the sale of equity method investments are recorded in Other 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. |
10 |
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 |
11 |
Includes losses related to the sale of businesses. These charges are recorded in Other income net, within the Consolidated Condensed Statements of Earnings. |
12 |
Includes interest expense on external debt to fund incremental contributions to the Boots Plan required to complete the Trustee's acquisition of a bulk annuity policy (the "Buy-In") from Legal & General. The payments and related incremental interest expense are not indicative of normal operating performance. |
13 |
Adjustments to income tax provision (benefit) include adjustments to the GAAP basis tax benefit commensurate with non-GAAP adjustments and certain discrete tax items including |
14 |
Adjustments to post-tax (loss) 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 (loss) 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. |
15 |
Due to the anti-dilutive effect resulting from periods where the Company reports a 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. |
16 |
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 May 31, 2024 |
||||||||||||||||||
|
|
|
|
International |
|
|
|
Corporate and Other |
|
Walgreens Boots Alliance, Inc. |
||||||||||
Sales |
|
$ |
28,503 |
|
|
$ |
5,727 |
|
|
$ |
2,125 |
|
|
$ |
(3 |
) |
|
$ |
36,351 |
|
Gross profit (GAAP) |
|
$ |
5,033 |
|
|
$ |
1,222 |
|
|
$ |
181 |
|
|
$ |
23 |
|
|
$ |
6,460 |
|
Acquisition-related amortization |
|
|
5 |
|
|
|
— |
|
|
|
22 |
|
|
|
— |
|
|
|
27 |
|
Transformational cost management |
|
|
21 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21 |
|
LIFO provision |
|
|
(36 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(36 |
) |
Adjusted gross profit (Non-GAAP measure) |
|
$ |
5,022 |
|
|
$ |
1,222 |
|
|
$ |
203 |
|
|
$ |
23 |
|
|
$ |
6,471 |
|
Selling, general and administrative expenses (GAAP) |
|
$ |
4,840 |
|
|
$ |
1,079 |
|
|
$ |
402 |
|
|
$ |
73 |
|
|
$ |
6,393 |
|
Acquisition-related amortization |
|
|
(92 |
) |
|
|
(16 |
) |
|
|
(132 |
) |
|
|
— |
|
|
|
(239 |
) |
Transformational cost management |
|
|
(59 |
) |
|
|
(14 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(75 |
) |
Acquisition-related costs |
|
|
(15 |
) |
|
|
(2 |
) |
|
|
(44 |
) |
|
|
(7 |
) |
|
|
(68 |
) |
Certain legal and regulatory accruals and settlements |
|
|
(52 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(52 |
) |
Adjusted selling, general and administrative expenses (Non-GAAP measure) |
|
$ |
4,622 |
|
|
$ |
1,047 |
|
|
$ |
225 |
|
|
$ |
65 |
|
|
$ |
5,959 |
|
Operating income (loss) (GAAP) |
|
$ |
237 |
|
|
$ |
143 |
|
|
$ |
(220 |
) |
|
$ |
(50 |
) |
|
$ |
111 |
|
Acquisition-related amortization |
|
|
97 |
|
|
|
16 |
|
|
|
154 |
|
|
|
— |
|
|
|
266 |
|
Transformational cost management |
|
|
80 |
|
|
|
14 |
|
|
|
1 |
|
|
|
1 |
|
|
|
95 |
|
Acquisition-related costs |
|
|
15 |
|
|
|
2 |
|
|
|
44 |
|
|
|
7 |
|
|
|
68 |
|
Adjustments to equity earnings in Cencora |
|
|
57 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
57 |
|
Certain legal and regulatory accruals and settlements |
|
|
52 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
52 |
|
LIFO provision |
|
|
(36 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(36 |
) |
Adjusted operating income (loss) (Non-GAAP measure) |
|
$ |
501 |
|
|
$ |
175 |
|
|
$ |
(22 |
) |
|
$ |
(42 |
) |
|
$ |
613 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross margin (GAAP) |
|
|
17.7 |
% |
|
|
21.3 |
% |
|
|
8.5 |
% |
|
|
|
|
17.8 |
% |
||
Adjusted gross margin (Non-GAAP measure) |
|
|
17.6 |
% |
|
|
21.3 |
% |
|
|
9.6 |
% |
|
|
|
|
17.8 |
% |
||
Selling, general and administrative expenses percent to sales (GAAP) |
|
|
17.0 |
% |
|
|
18.8 |
% |
|
|
18.9 |
% |
|
|
|
|
17.6 |
% |
||
Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure) |
|
|
16.2 |
% |
|
|
18.3 |
% |
|
|
10.6 |
% |
|
|
|
|
16.4 |
% |
||
Operating margin 2 |
|
|
0.7 |
% |
|
|
2.5 |
% |
|
|
(10.4 |
)% |
|
|
|
|
0.2 |
% |
||
Adjusted operating margin (Non-GAAP measure) 2 |
|
|
1.4 |
% |
|
|
3.1 |
% |
|
|
(1.0 |
)% |
|
|
|
|
1.4 |
% |
||
|
|
|
|
1 |
Operating income for |
| 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 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 |
|
LIFO provision |
|
|
51 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
51 |
|
Acquisition-related amortization |
|
|
5 |
|
|
|
— |
|
|
|
25 |
|
|
|
— |
|
|
|
31 |
|
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 |
|
Transformational cost management |
|
|
(103 |
) |
|
|
(194 |
) |
|
|
(113 |
) |
|
|
(3 |
) |
|
|
(414 |
) |
Impairment of intangible assets |
|
|
— |
|
|
|
(299 |
) |
|
|
— |
|
|
|
— |
|
|
|
(299 |
) |
Certain legal and regulatory accruals and settlements |
|
|
(268 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(268 |
) |
Acquisition-related amortization |
|
|
(76 |
) |
|
|
(15 |
) |
|
|
(152 |
) |
|
|
— |
|
|
|
(243 |
) |
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 |
) |
Transformational cost management |
|
|
103 |
|
|
|
194 |
|
|
|
113 |
|
|
|
3 |
|
|
|
414 |
|
Impairment of intangible assets |
|
|
— |
|
|
|
299 |
|
|
|
— |
|
|
|
— |
|
|
|
299 |
|
Acquisition-related amortization |
|
|
81 |
|
|
|
15 |
|
|
|
178 |
|
|
|
— |
|
|
|
274 |
|
Certain legal and regulatory accruals and settlements |
|
|
268 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
268 |
|
Acquisition-related costs |
|
|
3 |
|
|
|
2 |
|
|
|
59 |
|
|
|
6 |
|
|
|
70 |
|
Adjustments to equity earnings in Cencora |
|
|
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 margin 2 |
|
|
1.2 |
% |
|
|
(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 Cencora and adjusted equity earnings in Cencora, respectively. |
|
|
(in millions) |
||||||||||||||||||
|
|
Nine months ended May 31, 2024 |
||||||||||||||||||
|
|
|
|
International |
|
|
|
Corporate and Other |
|
Walgreens Boots Alliance, Inc. |
||||||||||
Sales |
|
$ |
86,308 |
|
|
$ |
17,581 |
|
|
$ |
6,232 |
|
|
$ |
(9 |
) |
|
$ |
110,111 |
|
Gross profit (GAAP) |
|
$ |
16,030 |
|
|
$ |
3,720 |
|
|
$ |
498 |
|
|
$ |
23 |
|
|
$ |
20,271 |
|
Acquisition-related amortization |
|
|
16 |
|
|
|
— |
|
|
|
62 |
|
|
|
— |
|
|
|
78 |
|
Transformational cost management |
|
|
29 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
29 |
|
LIFO provision |
|
|
11 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11 |
|
Adjusted gross profit (Non-GAAP measure) |
|
$ |
16,086 |
|
|
$ |
3,720 |
|
|
$ |
560 |
|
|
$ |
23 |
|
|
$ |
20,389 |
|
Selling, general and administrative expenses (GAAP) 3 |
|
$ |
15,957 |
|
|
$ |
3,252 |
|
|
$ |
14,212 |
|
|
$ |
114 |
|
|
$ |
33,534 |
|
Impairment of goodwill, intangibles and long-lived assets |
|
|
(478 |
) |
|
|
— |
|
|
|
(12,579 |
) |
|
|
(34 |
) |
|
|
(13,091 |
) |
Acquisition-related amortization |
|
|
(271 |
) |
|
|
(47 |
) |
|
|
(416 |
) |
|
|
— |
|
|
|
(733 |
) |
Acquisition-related costs |
|
|
(75 |
) |
|
|
(11 |
) |
|
|
(502 |
) |
|
|
108 |
|
|
|
(480 |
) |
Certain legal and regulatory accruals and settlements |
|
|
(376 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(376 |
) |
Transformational cost management |
|
|
(325 |
) |
|
|
(37 |
) |
|
|
(5 |
) |
|
|
(6 |
) |
|
|
(373 |
) |
Adjusted selling, general and administrative expenses (Non-GAAP measure) |
|
$ |
14,432 |
|
|
$ |
3,158 |
|
|
$ |
711 |
|
|
$ |
182 |
|
|
$ |
18,482 |
|
Operating income (loss) (GAAP) |
|
$ |
238 |
|
|
$ |
468 |
|
|
$ |
(13,715 |
) |
|
$ |
(90 |
) |
|
$ |
(13,099 |
) |
Impairment of goodwill, intangibles and long-lived assets |
|
|
478 |
|
|
|
— |
|
|
|
12,579 |
|
|
|
34 |
|
|
|
13,091 |
|
Acquisition-related amortization |
|
|
287 |
|
|
|
47 |
|
|
|
478 |
|
|
|
— |
|
|
|
811 |
|
Acquisition-related costs |
|
|
75 |
|
|
|
11 |
|
|
|
502 |
|
|
|
(108 |
) |
|
|
480 |
|
Certain legal and regulatory accruals and settlements |
|
|
376 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
376 |
|
Transformational cost management |
|
|
354 |
|
|
|
37 |
|
|
|
5 |
|
|
|
6 |
|
|
|
401 |
|
Adjustments to equity earnings in Cencora |
|
|
129 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
129 |
|
LIFO provision |
|
|
11 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11 |
|
Adjusted operating income (loss) (Non-GAAP measure) |
|
$ |
1,947 |
|
|
$ |
562 |
|
|
$ |
(151 |
) |
|
$ |
(158 |
) |
|
$ |
2,200 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross margin (GAAP) |
|
|
18.6 |
% |
|
|
21.2 |
% |
|
|
8.0 |
% |
|
|
|
|
18.4 |
% |
||
Adjusted gross margin (Non-GAAP measure) |
|
|
18.6 |
% |
|
|
21.2 |
% |
|
|
9.0 |
% |
|
|
|
|
18.5 |
% |
||
Selling, general and administrative expenses percent to sales (GAAP) 3 |
|
|
18.5 |
% |
|
|
18.5 |
% |
|
|
NM |
|
|
|
|
|
30.5 |
% |
||
Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure) |
|
|
16.7 |
% |
|
|
18.0 |
% |
|
|
11.4 |
% |
|
|
|
|
16.8 |
% |
||
Operating margin 2 |
|
|
0.1 |
% |
|
|
2.7 |
% |
|
|
NM |
|
|
|
|
|
(12.0 |
)% |
||
Adjusted operating margin (Non-GAAP measure) 2 |
|
|
1.9 |
% |
|
|
3.2 |
% |
|
|
(2.4 |
)% |
|
|
|
|
1.7 |
% |
||
|
|
NM - Not meaningful. Percentage increases above |
|
| 1 |
Operating income for |
| 2 | Operating margins and adjusted operating margins have been calculated excluding equity earnings in Cencora and adjusted equity earnings in Cencora, respectively. |
| 3 |
Includes goodwill impairment of |
|
|
(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 |
|
LIFO provision |
|
|
89 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
89 |
|
Acquisition-related amortization |
|
|
16 |
|
|
|
— |
|
|
|
69 |
|
|
|
— |
|
|
|
85 |
|
Acquisition-related costs |
|
|
— |
|
|
|
— |
|
|
|
60 |
|
|
|
— |
|
|
|
60 |
|
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 Cencora |
|
|
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 margin 2 |
|
|
(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 Cencora and adjusted equity earnings in Cencora, respectively. |
OPERATING LOSS TO ADJUSTED EBITDA FOR
|
|
(in millions) |
||||||||||||||
|
|
Three months ended May 31, |
|
Nine months ended May 31, |
||||||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Operating loss (GAAP) 1 |
|
$ |
(220 |
) |
|
$ |
(522 |
) |
|
$ |
(13,715 |
) |
|
$ |
(1,431 |
) |
Impairment of goodwill, intangibles and long-lived assets 2 |
|
|
— |
|
|
|
— |
|
|
|
12,579 |
|
|
|
— |
|
Acquisition-related amortization 3 |
|
|
154 |
|
|
|
178 |
|
|
|
478 |
|
|
|
570 |
|
Acquisition-related costs 4 |
|
|
44 |
|
|
|
59 |
|
|
|
502 |
|
|
|
265 |
|
Transformational cost management 5 |
|
|
1 |
|
|
|
113 |
|
|
|
5 |
|
|
|
113 |
|
Adjusted operating loss |
|
|
(22 |
) |
|
|
(172 |
) |
|
|
(151 |
) |
|
|
(483 |
) |
Depreciation expense |
|
|
32 |
|
|
|
43 |
|
|
|
113 |
|
|
|
92 |
|
Stock-based compensation expense 6 |
|
|
13 |
|
|
|
16 |
|
|
|
39 |
|
|
|
45 |
|
Adjusted EBITDA (Non-GAAP measure) |
|
$ |
23 |
|
|
$ |
(113 |
) |
|
$ |
1 |
|
|
$ |
(346 |
) |
|
|
|
|
|
|
|
|
|
||||||||
1 |
The Company reconciles Adjusted EBITDA for the |
2 |
Impairment of goodwill, intangibles and long-lived assets recognized in the nine months ended May 31, 2024 resulted from the interim goodwill impairment assessment for the VillageMD reporting unit. These charges 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 in Selling, general and administrative expenses and Impairment of goodwill within the Consolidated Condensed Statements of Earnings. |
3 |
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 in 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. |
4 |
Acquisition-related costs are transaction and integration costs associated with certain merger, acquisition and divestitures related activities recorded in Operating income (loss) within the Consolidated Condensed Statement of Earnings. Examples of such costs include deal costs, severance, stock-based compensation, employee transaction success bonuses, and other integration related exit and disposal charges. 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. |
5 |
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. |
| 6 | 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 May 31, |
|
Nine months ended May 31, |
|||||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|||||||
Equity earnings in Cencora (GAAP) |
|
$ |
44 |
|
|
$ |
58 |
|
$ |
164 |
|
|
$ |
187 |
|
Acquisition-related intangibles amortization |
|
|
27 |
|
|
|
32 |
|
|
93 |
|
|
|
98 |
|
Restructuring and other expenses |
|
|
8 |
|
|
|
10 |
|
|
19 |
|
|
|
10 |
|
|
|
|
3 |
|
|
|
1 |
|
|
10 |
|
|
|
6 |
|
Acquisition-related deal and integration expenses |
|
|
2 |
|
|
|
10 |
|
|
9 |
|
|
|
15 |
|
Tax reform |
|
|
(4 |
) |
|
|
— |
|
|
(1 |
) |
|
|
4 |
|
Amortization of basis difference in OneOncology investment |
|
|
1 |
|
|
|
— |
|
|
2 |
|
|
|
— |
|
Gain on remeasurement of equity investment |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
(1 |
) |
Certain discrete tax expense |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
(2 |
) |
Gain/Loss from divestitures |
|
|
— |
|
|
|
— |
|
|
(7 |
) |
|
|
— |
|
LIFO expense |
|
|
(2 |
) |
|
|
7 |
|
|
3 |
|
|
|
31 |
|
Gain from antitrust litigation settlements |
|
|
(1 |
) |
|
|
— |
|
|
(15 |
) |
|
|
(8 |
) |
Litigation and opioid-related expenses |
|
|
23 |
|
|
|
2 |
|
|
14 |
|
|
|
4 |
|
Employee severance, litigation, and other |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
21 |
|
Adjusted equity earnings in Cencora (Non-GAAP measure) |
|
$ |
101 |
|
|
$ |
119 |
|
$ |
293 |
|
|
$ |
365 |
|
ADJUSTED EFFECTIVE TAX RATE
|
|
(in millions) |
||||||||||||||||||||
|
|
Three months ended May 31, 2024 |
|
Three months ended May 31, 2023 |
||||||||||||||||||
|
|
Earnings before income tax provision |
|
Income tax provision |
|
Effective tax rate |
|
(Loss) Earnings before income tax (benefit) provision |
|
Income tax (benefit) provision |
|
Effective tax rate |
||||||||||
Effective tax rate (GAAP) |
|
$ |
251 |
|
|
$ |
20 |
|
|
8.0 |
% |
|
$ |
(382 |
) |
|
$ |
(330 |
) |
|
86.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Impact of non-GAAP adjustments |
|
|
264 |
|
|
|
37 |
|
|
|
|
|
1,207 |
|
|
|
417 |
|
|
|
||
Equity method non-cash tax |
|
|
— |
|
|
|
(6 |
) |
|
|
|
|
— |
|
|
|
(10 |
) |
|
|
||
Adjusted tax rate true-up |
|
|
— |
|
|
|
(15 |
) |
|
|
|
|
— |
|
|
|
(10 |
) |
|
|
||
Subtotal |
|
$ |
516 |
|
|
$ |
37 |
|
|
|
|
$ |
825 |
|
|
$ |
68 |
|
|
|
||
Exclude adjusted equity earnings in Cencora |
|
|
(101 |
) |
|
|
— |
|
|
|
|
|
(119 |
) |
|
|
— |
|
|
|
||
Adjusted effective tax rate excluding adjusted equity earnings in Cencora (Non-GAAP measure) |
|
$ |
415 |
|
|
$ |
37 |
|
|
9.0 |
% |
|
$ |
706 |
|
|
$ |
68 |
|
|
9.6 |
% |
|
|
(in millions) |
||||||||||||||||||||
|
|
Nine months ended May 31, 2024 |
|
Nine months ended May 31, 2023 |
||||||||||||||||||
|
|
(Loss) Earnings before income tax benefit |
|
Income tax benefit |
|
Effective tax rate |
|
(Loss) Earnings before income tax (benefit) provision |
|
Income tax (benefit) provision |
|
Effective tax rate |
||||||||||
Effective tax rate (GAAP) |
|
$ |
(13,221 |
) |
|
$ |
(836 |
) |
|
6.3 |
% |
|
$ |
(5,044 |
) |
|
$ |
(1,707 |
) |
|
33.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Impact of non-GAAP adjustments |
|
|
15,108 |
|
|
|
969 |
|
|
|
|
|
7,878 |
|
|
|
1,787 |
|
|
|
||
Equity method non-cash tax |
|
|
— |
|
|
|
(20 |
) |
|
|
|
|
— |
|
|
|
(33 |
) |
|
|
||
Adjusted tax rate true-up |
|
|
— |
|
|
|
(148 |
) |
|
|
|
|
— |
|
|
|
181 |
|
|
|
||
Subtotal |
|
$ |
1,887 |
|
|
$ |
(35 |
) |
|
|
|
$ |
2,833 |
|
|
$ |
228 |
|
|
|
||
Exclude adjusted equity earnings in Cencora |
|
|
(293 |
) |
|
|
— |
|
|
|
|
|
(365 |
) |
|
|
— |
|
|
|
||
Adjusted effective tax rate excluding adjusted equity earnings in Cencora (Non-GAAP measure) |
|
$ |
1,594 |
|
|
$ |
(35 |
) |
|
(2.2 |
)% |
|
$ |
2,468 |
|
|
$ |
228 |
|
|
9.2 |
% |
FREE CASH FLOW
|
|
(in millions) |
||||||||||||||
|
|
Three months ended May 31, |
|
Nine months ended May 31, |
||||||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Net cash provided (used for) by operating activities (GAAP) |
|
$ |
605 |
|
|
$ |
(20 |
) |
|
$ |
(314 |
) |
|
$ |
1,219 |
|
Less: Additions to property, plant and equipment |
|
|
(278 |
) |
|
|
(525 |
) |
|
|
(1,135 |
) |
|
|
(1,633 |
) |
Plus: Acquisition related payments 2 |
|
|
— |
|
|
|
101 |
|
|
|
— |
|
|
|
530 |
|
Plus: Bulk Purchase Annuity premium contributions 3 |
|
|
7 |
|
|
|
— |
|
|
|
386 |
|
|
|
— |
|
Free cash flow (Non-GAAP measure) 1 |
|
$ |
334 |
|
|
$ |
(444 |
) |
|
$ |
(1,063 |
) |
|
$ |
116 |
|
| 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 and incremental pension 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. |
| 2 |
During the three months ended May 31, 2023, the Company paid |
| 3 |
During the three and nine months ended May 31, 2024, the Company made incremental pension contributions of |
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Media Relations
International,+44 (0)20 7980 8585
Investor Relations
Tiffany Kanaga, +1 847 315 2922
Source: Walgreens Boots Alliance
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