Delivering Progress on Strategic Priorities;
Maintaining Full Year Adjusted EPS Guidance
First quarter financial results
- First quarter loss per share1 was $0.31 versus loss per share
of $0.08 in the year-ago quarter. Loss per share in the current
quarter includes costs related to the Footprint Optimization
Program and an after-tax charge for fair value adjustments on
variable prepaid forward derivatives related to the monetization of
Cencora shares
- Adjusted earnings per share (EPS)2 was $0.51 versus adjusted
earnings per share of $0.66 in the year-ago quarter driven by lower
U.S. retail sales and prior year sale-leaseback gains, partly
offset by cost savings and growth in U.S. Healthcare
- First quarter sales increased 7.5 percent year-over-year to
$39.5 billion, up 6.9 percent on a constant currency basis
Fiscal 2025 guidance
- Maintaining fiscal 2025 adjusted EPS2 guidance of $1.40 to
$1.80, with growth in U.S. Healthcare and International more than
offset by a decline in U.S. Retail Pharmacy, a higher adjusted
effective tax rate, and lower contributions from sale-leaseback and
Cencora earnings
Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced
financial results for the first quarter of fiscal 2025, which ended
November 30, 2024.
Chief Executive Officer Tim Wentworth said:
"Our first quarter results reflect our disciplined execution
against our 2025 priorities: stabilizing the retail pharmacy by
optimizing our footprint, controlling operating costs, improving
cash flow and continuing to address reimbursement models,” said Tim
Wentworth, Chief Executive Officer, Walgreens Boots Alliance.
“While our turnaround will take time, our early progress reinforces
our belief in a sustainable, retail pharmacy-led operating
model."
Overview of First Quarter Results
WBA first quarter sales increased 7.5 percent from the year-ago
quarter to $39.5 billion, an increase of 6.9 percent on a constant
currency basis, reflecting sales growth across all business
segments.
First quarter operating loss was $245 million compared to an
operating loss of $39 million in the year-ago quarter. Adjusted
operating income2 was $593 million compared to adjusted operating
income of $687 million in the year-ago quarter. The increase in
operating loss reflects higher costs related to the Footprint
Optimization Program in the U.S. Retail Pharmacy segment, and both
operating loss and adjusted operating income2 reflect lower U.S.
retail sales and lapping prior year sale-leaseback gains, partly
offset by cost savings initiatives and growth in the U.S.
Healthcare segment.
Net loss in the first quarter was $265 million compared to a net
loss of $67 million in the year-ago quarter, primarily driven by
higher operating loss. Adjusted net earnings2 decreased 23.0
percent to $440 million, down 23.2 percent on a constant currency
basis, reflecting lower adjusted operating income.
Loss per share in the first quarter was $0.31 compared to loss
per share of $0.08 in the year-ago quarter. Adjusted EPS2 was $0.51
compared to adjusted EPS2 of $0.66 in the year-ago quarter
reflecting a decrease of 23.4 percent on a constant currency
basis.
Net cash used for operating activities was $140 million in the
first quarter, a $141 million improvement compared with the
year-ago quarter. Operating cash flow was negatively impacted by
seasonal inventory build in the U.S., UK and Germany, and legal
payments of $137 million. Free cash flow2 was negative $424
million, a $363 million improvement compared with the year-ago
quarter primarily driven by a decrease in capital expenditures of
$223 million and higher adjusted operating income excluding
sale-leaseback, which does not impact free cash flow.
Business Segments
U.S. Retail Pharmacy
Three months ended November
30,
2024
2023
Sales
$
30,866
$
28,944
Adjusted operating income3
$
441
$
694
The U.S. Retail Pharmacy segment had first quarter sales of
$30.9 billion, an increase of 6.6 percent from the year-ago
quarter. Comparable sales increased 8.5 percent from the year-ago
quarter.
Pharmacy sales increased 10.4 percent and comparable pharmacy
sales increased 12.7 percent in the quarter, each benefiting from
higher branded drug inflation and prescription volume. Comparable
prescriptions filled in the first quarter increased 2.3 percent
from the year-ago quarter while comparable prescriptions excluding
immunizations increased 3.5 percent. Total prescriptions filled in
the quarter, including immunizations, adjusted to 30-day
equivalents increased 1.5 percent to 316.3 million.
Retail sales decreased 6.2 percent and comparable retail sales
decreased 4.6 percent compared with the year-ago quarter,
reflecting a weaker cough cold flu season and lower sales in
discretionary categories.
Adjusted operating income decreased 36.4 percent to $441 million
compared to $694 million in the year-ago quarter, driven primarily
by lower retail sales and lapping prior year sale-leaseback gains,
partially offset by cost savings.
International
Three months ended November
30,
2024
2023
Sales
$
6,425
$
5,832
Adjusted operating income3
$
168
$
142
The International segment had first quarter sales of $6.4
billion, an increase of 10.2 percent from the year-ago quarter,
including a favorable currency impact of 3.6 percent. Sales
increased 6.5 percent on a constant currency basis, with the
Germany wholesale business growing 11.3 percent and Boots UK sales
growing 4.5 percent.
Boots UK comparable pharmacy sales increased 10.9 percent
compared with the year-ago quarter. Boots UK comparable retail
sales increased 8.1 percent compared to the year-ago quarter with
growth across all categories. Boots.com sales grew 30 percent, or
23 percent on a constant currency basis, aided by strong Black
Friday performance and representing 22 percent of Boots total
retail sales.
Adjusted operating income increased 17.9 percent to $168
million, an increase of 16.1 percent on a constant currency basis
compared with the year-ago quarter, led by strong retail
performance in Boots UK and growth in Germany, partly offset by
cost inflation and technology investments.
U.S. Healthcare
Three months ended November
30,
2024
2023
Sales
$
2,172
$
1,931
Operating loss
$
(325
)
$
(436
)
Adjusted operating income/(loss)3
$
25
$
(96
)
Adjusted EBITDA (Non-GAAP measure)
$
70
$
(39
)
The U.S. Healthcare segment had first quarter sales of $2.2
billion with growth in all businesses compared to the year-ago
quarter. VillageMD sales increased 9 percent, CareCentrix increased
16 percent and Shields increased 30 percent.
Operating loss was $325 million compared to $436 million in the
prior year period reflecting improved performance at VillageMD and
Shields. Adjusted operating income, which excludes certain costs
related to stock compensation expense and amortization of acquired
intangible assets, was $25 million compared to a loss of $96
million in the year-ago quarter. Adjusted EBITDA of $70 million
improved by $109 million versus the prior year quarter reflecting
higher contribution from VillageMD risk-based and fee-for-service
business and growth at Shields.
Conference Call
WBA will hold a conference call to discuss the first quarter
results beginning at 8:30 a.m. Eastern time today, January 10,
2025. 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.
1 All references to net earnings or net loss are to net earnings
or net loss attributable to WBA, and all references to EPS or loss
per share are to diluted EPS or diluted loss per share attributable
to WBA.
2 "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.
3 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 2025 outlook, our long-term
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, our ability to reverse valuation allowances on deferred tax
assets, 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 investments, 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 the
Footprint Optimization Program, our 2025 priorities, including
those related to the U.S. Retail Pharmacy segment, addressing
reimbursement models with our partners, and monetization efforts,
and expansion and future operating and financial results of our
U.S. Healthcare segment, including our long-term sales targets and
profitability expectations. All statements in the future tense and
all statements accompanied by words such as “expect,” “outlook,”
“forecast,” “would,” “could,” “should,” “can,” “will,” “project,”
“intend,” “plan,” “goal,” “opportunity,” “guidance,” “projection,”
“target,” “aim,” “continue,” “extend,” “transform,” “strive,”
“enable,” “create,” “position,” “accelerate,” “model,” “long-term,”
“believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,”
“assume,” “potential,” “preliminary,” “trend,” “future,” “predict,”
“assumption,” “commentary,” “focus on,” “ambition,” “vision,”
“belief,” “hypothetical,” “aspire,” “confident,” “remains,” “on
track,” “priorities,” and variations of such words and similar
expressions are intended to identify such forward-looking
statements.
These forward-looking statements are not guarantees of future
performance and are subject to risks, uncertainties and
assumptions, known or unknown, that could cause actual results to
vary materially from those indicated or anticipated.
These risks, assumptions and uncertainties include those
described in Item 1A (Risk Factors) of our Form 10-K for the fiscal
year ended August 31, 2024, 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 175-year heritage of
caring for communities.
A trusted, global innovator in retail pharmacy with
approximately 12,500 locations across the U.S., Europe and Latin
America, WBA plays a critical role in the healthcare ecosystem.
Through dispensing medicines, improving access to pharmacy and
health services, providing high quality health and beauty products
and offering anytime, anywhere convenience across its digital
platforms, WBA is shaping the future of healthcare in the thousands
of communities it serves and beyond.
WBA employs approximately 312,000 people, with a presence in
eight countries and consumer brands including: Walgreens, Boots,
Duane Reade, No7 Beauty Company and Benavides. The Company is proud
of its contributions to healthy communities, a healthy planet, an
inclusive workplace and a sustainable marketplace. In fiscal 2024,
WBA scored 100% on the Disability Equality Index for disability
inclusion.
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 November
30,
2024
2023
Sales
$
39,459
$
36,707
Cost of sales
32,680
29,937
Gross profit
6,779
6,771
Selling, general and administrative
expenses
7,015
6,851
Equity earnings (loss) in Cencora
(9
)
42
Operating loss
(245
)
(39
)
Other expense, net
(171
)
(220
)
Loss before interest and income tax
provision (benefit)
(415
)
(259
)
Interest expense, net
122
99
Loss before income tax provision
(benefit)
(538
)
(358
)
Income tax provision (benefit)
66
(74
)
Post-tax earnings (loss) from other equity
method investments
(1
)
6
Net loss
(605
)
(278
)
Net loss attributable to non-controlling
interests
(340
)
(210
)
Net loss attributable to Walgreens
Boots Alliance, Inc.
$
(265
)
$
(67
)
Net loss per common share:
Basic
$
(0.31
)
$
(0.08
)
Diluted
$
(0.31
)
$
(0.08
)
Weighted average common shares
outstanding:
Basic
863.8
863.0
Diluted
863.8
863.0
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE
SHEETS
(UNAUDITED)
(in millions)
November 30, 2024
August 31, 2024
Assets
Current assets:
Cash and cash equivalents
$
859
$
1,319
Marketable securities
332
1,790
Accounts receivable, net
6,191
5,851
Inventories
9,119
8,320
Other current assets
977
1,055
Total current assets
17,478
18,335
Non-current assets:
Property, plant and equipment, net
9,382
9,772
Operating lease right-of-use assets
19,631
20,335
Goodwill
15,453
15,506
Intangible assets, net
12,557
12,973
Equity method investments
2,172
2,269
Other non-current assets
1,863
1,846
Total non-current assets
61,058
62,702
Total assets
$
78,536
$
81,037
Liabilities, redeemable non-controlling
interests and equity
Current liabilities:
Short-term debt
$
446
$
1,505
Trade accounts payable
14,551
14,082
Operating lease obligations
2,389
2,382
Accrued expenses and other liabilities
9,675
8,673
Income taxes
392
312
Total current liabilities
27,453
26,953
Non-current liabilities:
Long-term debt
7,611
8,044
Operating lease obligations
20,262
20,921
Deferred income taxes
1,119
1,195
Accrued litigation obligations
5,982
6,008
Other non-current liabilities
4,839
5,736
Total non-current liabilities
39,813
41,905
Redeemable non-controlling interests
106
174
Total equity
11,165
12,005
Total liabilities, redeemable
non-controlling interests and equity
$
78,536
$
81,037
WALGREENS BOOTS ALLIANCE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Three months ended November
30,
2024
2023
Cash flows from operating
activities:
Net loss
$
(605
)
$
(278
)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization
625
616
Deferred income taxes
(23
)
(196
)
Stock compensation expense
38
51
(Earnings) loss from equity method
investments
10
(48
)
Impairment of intangibles and long-lived
assets
281
165
Gain on sale of equity method
investments
(32
)
(139
)
Gain on sale-leaseback transactions
—
(160
)
Loss on variable prepaid forward
contracts
200
366
Other
13
35
Changes in certain assets and
liabilities:
Accounts receivable, net
(414
)
(618
)
Inventories
(904
)
(1,180
)
Other current assets
36
(42
)
Trade accounts payable
563
966
Accrued expenses and other liabilities
37
205
Income taxes
93
96
Accrued litigation obligations
(20
)
(54
)
Other non-current assets and
liabilities
(39
)
(67
)
Net cash used for operating activities
(140
)
(281
)
Cash flows from investing
activities:
Additions to property, plant and
equipment
(284
)
(506
)
Proceeds from sale-leaseback
transactions
—
427
Proceeds from sale of other assets
164
304
Business, investment and asset
acquisitions, net of cash acquired
(18
)
(109
)
Other
62
(31
)
Net cash provided by (used for) investing
activities
(76
)
85
Cash flows from financing
activities:
Net change in short-term debt with
maturities of 3 months or less
12
155
Proceeds from debt
3,229
3,826
Payments of debt
(4,679
)
(3,776
)
Proceeds from variable prepaid forward
contracts
—
424
Treasury stock purchases
(36
)
(69
)
Cash dividends paid
(216
)
(415
)
Other
4
41
Net cash provided by (used for) financing
activities
(1,685
)
186
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(8
)
—
Changes in cash, cash equivalents and
restricted cash:
Net decrease in cash, cash equivalents and
restricted cash
(1,910
)
(10
)
Cash, cash equivalents and restricted cash
at beginning of period
3,218
856
Cash, cash equivalents and restricted
cash at end of period
$
1,309
$
846
WALGREENS BOOTS ALLIANCE, INC. AND
SUBSIDIARIES SUPPLEMENTAL INFORMATION (UNAUDITED)
REGARDING NON-GAAP FINANCIAL MEASURES
The following information provides reconciliations of the
supplemental non-GAAP financial measures, as defined under the SEC
rules, presented in this press release to the most directly
comparable financial measures calculated and presented in
accordance with generally accepted accounting principles in the
United States (GAAP). The Company has provided the non-GAAP
financial measures in the press release, which are not calculated
or presented in accordance with GAAP, as supplemental information
and in addition to the financial measures that are calculated and
presented in accordance with GAAP.
These supplemental non-GAAP financial measures are presented
because management has evaluated the Company’s financial results
both including and excluding the adjusted items or the effects of
foreign currency translation, as applicable, and believes that the
supplemental non-GAAP financial measures presented provide
additional perspective and insights when analyzing the core
operating performance of the Company from period to period and
trends in the Company’s historical operating results. The Company
also uses non-GAAP financial measures as a basis for certain
compensation programs it sponsors. These supplemental non-GAAP
financial measures should not be considered superior to, as a
substitute for or as an alternative to, and should be considered in
conjunction with, the GAAP financial measures presented in the
press release.
The Company does not provide a reconciliation for non-GAAP
estimates to the most directly comparable GAAP financial measures
on a forward-looking basis where it is unable to provide a
meaningful or accurate calculation or estimation of reconciling
items and the information is not available without unreasonable
effort. This is due to the inherent difficulty of forecasting the
timing or amount of various items that have not yet occurred, are
out of the Company’s control and/or cannot be reasonably predicted,
such as unusual one-time charges, tax expenses, and material
litigation expenses, and that would impact diluted net earnings per
share, the most directly comparable forward-looking GAAP financial
measure. For the same reasons, the Company is unable to address the
probable significance of the unavailable information.
Forward-looking non-GAAP financial measures provided without the
most directly comparable GAAP financial measures may vary
materially from the corresponding GAAP financial measures.
Constant currency
The Company also presents certain information related to current
period operating results in “constant currency,” which is a
non-GAAP financial measure. These amounts are calculated by
translating current period results at the foreign currency exchange
rates used in the comparable period in the prior year. The Company
presents such constant currency financial information because it
has significant operations outside of the U.S. reporting in
currencies other than the U.S. dollar and such presentation
provides a framework to assess how its business performed excluding
the impact of foreign currency exchange rate fluctuations.
Comparable sales
For the Company's U.S. Retail Pharmacy and International
segments, comparable sales are defined as sales from stores that
have been open for at least twelve consecutive months without
closure for seven or more consecutive days, including due to
looting or store damage, and without a major remodel or being
subject to a natural disaster, in the past twelve months as well as
e-commerce sales. Comparable sales in constant currency exclude
wholesale sales in Germany and sales from dispositions. E-commerce
sales include digitally initiated sales online or through mobile
applications. Relocated stores are not included as comparable sales
for the first twelve months after the relocation. Acquired stores
are not included as comparable sales for the first twelve months
after acquisition or conversion, when applicable, whichever is
later. Comparable sales, comparable pharmacy sales, comparable
retail sales, comparable number of prescriptions and comparable
number of 30-day equivalent prescriptions refer to total sales,
pharmacy sales, retail sales, number of prescriptions and number of
30-day equivalent prescriptions, respectively. The method of
calculating comparable sales varies across the retail industry and
our method of calculating comparable sales may not be the same as
other retailers’ methods.
With respect to the International segment, comparable sales,
comparable pharmacy sales and comparable retail sales, are
presented on a constant currency basis, which is a non-GAAP
financial measure. Refer to the discussion above in "Constant
currency" for further details on constant currency
calculations.
Key Performance Indicators
The Company considers certain metrics, such as comparable sales
(in constant currency), comparable pharmacy sales (in constant
currency), comparable retail sales (in constant currency),
comparable number of prescriptions, comparable 30-day equivalent
prescriptions, and comparable prescriptions excluding immunizations
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.
Amounts may not add due to rounding. All percentages and ratios
have been calculated using unrounded amounts.
NET LOSS TO ADJUSTED NET EARNINGS AND
DILUTED NET LOSS PER SHARE
TO ADJUSTED DILUTED NET EARNINGS PER
SHARE
(in millions, except per share
amounts)
Three months ended November
30,
2024
2023
Net loss attributable to Walgreens
Boots Alliance, Inc. (GAAP)
$
(265
)
$
(67
)
Adjustments to operating loss
Footprint optimization 1
333
—
Acquisition-related amortization 2
269
275
Acquisition and disposition-related costs
3
104
163
Adjustments to equity earnings (loss) in
Cencora 4
76
50
Certain legal and regulatory accruals and
settlements 5
59
82
LIFO provision 6
12
48
Transformational cost management 7
(15
)
109
Total adjustments to operating loss 8
838
726
Adjustments to other expense,
net:
Gain on sale of equity method investment
9
(32
)
(139
)
Loss on disposal of business 10
—
4
Loss on certain non-hedging derivatives
11
200
366
Total adjustments to other expense,
net
168
230
Adjustments to interest expense,
net
Interest expense on debt 12
9
—
Total adjustments to interest expense,
net
9
—
Adjustments to income tax provision
(benefit):
Discrete tax items and tax impact of
adjustments 13
(45
)
(203
)
Equity method non-cash tax 13
(5
)
4
Total adjustments to income tax provision
(benefit)
(49
)
(199
)
Adjustments to post-tax earnings (loss)
from other equity method investments:
Adjustments to earnings (loss) in other
equity method investments 14
7
9
Total adjustments to post-tax earnings
(loss) from other equity method investments
7
9
Adjustments to net loss attributable to
non-controlling interests:
Impact of VillageMD debt amendment 15
(137
)
—
Acquisition and disposition-related costs
3
(65
)
(70
)
Acquisition-related amortization 2
(46
)
(58
)
Certain legal and regulatory accruals and
settlements 5
(19
)
—
Total adjustments to net loss attributable
to non-controlling interests
(268
)
(128
)
Adjusted net earnings attributable to
Walgreens Boots Alliance, Inc. (Non-GAAP measure)
$
440
$
571
Diluted net loss per common share
(GAAP) 16
$
(0.31
)
$
(0.08
)
Adjustments to operating loss
0.97
0.84
Adjustments to other expense, net
0.19
0.27
Adjustments to interest expense, net
0.01
—
Adjustments to income tax provision
(benefit)
(0.06
)
(0.23
)
Adjustments to post-tax earnings (loss)
from other equity method investments
0.01
0.01
Adjustments to net loss attributable to
non-controlling interests
(0.31
)
(0.15
)
Adjusted diluted net earnings per
common share (Non-GAAP measure) 17
$
0.51
$
0.66
Weighted average common shares
outstanding, diluted (in millions) 17
865.6
864.0
1
Footprint Optimization 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.
2
Acquisition-related amortization includes
amortization of acquisition-related intangible assets 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.
3
Acquisition and disposition-related costs
are transaction and integration costs associated with certain
merger, acquisition and divestitures related activities recorded in
Operating loss within the Consolidated Condensed Statements 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. As part of the amendment to the VillageMD Secured Loan
executed in the three months ended November 30, 2024, Walgreen Co.
and VillageMD agreed to terminate certain intercompany leases
resulting in an early termination charge of $107 million incurred
by VillageMD within the U.S. Healthcare segment and a corresponding
gain recognized within the U.S. Retail Pharmacy segment. The
impacts of the intercompany lease termination eliminate in
consolidation.
4
Adjustments to equity earnings (loss) in
Cencora consist of the Company’s proportionate share of non-GAAP
adjustments reported by Cencora consistent with the Company’s
non-GAAP measures. Adjustments are recorded to Equity earnings
(loss) in Cencora within the Consolidated Condensed Statements of
Earnings.
5
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.
6
The Company’s U.S. Retail Pharmacy segment
inventory is accounted for using the last-in-first-out (“LIFO”)
method. This adjustment represents the impact on Cost of sales as
if the U.S. Retail Pharmacy segment inventory is accounted for
using first-in first-out (“FIFO”) method. The LIFO provision is
affected by changes in inventory quantities, product mix, and
manufacturer pricing practices, which may be impacted by market and
other external influences. Therefore, the Company cannot control
the amounts recognized or timing of these items. These charges are
recorded within Cost of sales within the Consolidated Condensed
Statements of Earnings.
7
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.
8
Total impairment charges for long-lived
assets that were adjusted from Operating loss were $279 million in
the three months ended November 30, 2024 and were $162 million in
the three months ended November 30, 2023.
9
Gains on the sale of equity method
investments are recorded in Other expense, 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 gains or losses related to the
sale of businesses. These charges are recorded to Other expense,
net, in 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.
11
Includes fair value gains or losses on the
VPF derivatives. These charges are recorded within Other expense,
net, in the Consolidated Condensed Statements of Earnings. The
Company does not believe this volatility related to the non-cash
mark-to-market adjustments on the underlying derivative instruments
reflects the Company’s operational performance.
12
Primarily 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 provision
(benefit) commensurate with non-GAAP adjustments and certain
discrete tax items including U.S. and UK tax law changes and equity
method non-cash tax. These charges are recorded within Income tax
provision (benefit) within the Consolidated Condensed Statements of
Earnings.
14
Adjustments to post-tax earnings (loss)
from other equity method investments consist of the proportionate
share of certain equity method investees’ non-cash items or unusual
or infrequent items consistent with the Company’s non-GAAP
adjustments. These charges are recorded in Post-tax earnings (loss)
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
In the three months ended November 30,
2024, the Company and VillageMD executed an amendment to the
VillageMD Secured Loan that consolidated certain VillageMD
obligations to the Company, modified certain interest and fee
terms, and provided VillageMD with additional borrowing capacity.
These intercompany credit facilities eliminate in consolidation.
The Company applies the legal claim approach to the attribution of
intercompany transactions to non-controlling interests. The
amendment of the VillageMD Secured Loan increased the Company’s
claim on VillageMD’s net assets resulting in a pre-tax
non-controlling interest benefit. The amendment and related
one-time benefit to the Company are not indicative of normal
operating performance.
16
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.
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 AND
ON A CONSOLIDATED BASIS
(in millions)
Three months ended November
30, 2024
U.S. Retail Pharmacy 1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
30,866
$
6,425
$
2,172
$
(4
)
$
39,459
Gross profit (GAAP)
$
5,232
$
1,303
$
240
$
4
$
6,779
Acquisition-related amortization
5
—
14
—
19
LIFO provision
12
—
—
—
12
Footprint optimization
2
—
—
—
2
Adjusted gross profit (Non-GAAP
measure)
$
5,251
$
1,303
$
253
$
4
$
6,812
Selling, general and administrative
expenses (GAAP)
$
5,207
$
1,162
$
565
$
82
$
7,015
Footprint optimization
(321
)
(3
)
(4
)
(3
)
(331
)
Acquisition-related amortization
(108
)
(16
)
(126
)
—
(251
)
Acquisition and disposition-related
costs
96
(4
)
(163
)
(33
)
(104
)
Certain legal and regulatory accruals and
settlements
(14
)
—
(45
)
—
(59
)
Transformational cost management
18
(3
)
1
(1
)
15
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,877
$
1,136
$
228
$
45
$
6,286
Operating income (loss)
$
17
$
141
$
(325
)
$
(78
)
$
(245
)
Footprint optimization
323
3
4
3
333
Acquisition-related amortization
114
16
140
—
269
Acquisition and disposition-related
costs
(96
)
4
163
33
104
Adjustments to equity earnings (loss) in
Cencora
76
—
—
—
76
Certain legal and regulatory accruals and
settlements
14
—
45
—
59
LIFO provision
12
—
—
—
12
Transformational cost management
(18
)
3
(1
)
1
(15
)
Adjusted operating income (loss)
(Non-GAAP measure)
$
441
$
168
$
25
$
(41
)
$
593
Gross margin (GAAP)
17.0
%
20.3
%
11.0
%
17.2
%
Adjusted gross margin (Non-GAAP
measure)
17.0
%
20.3
%
11.7
%
17.3
%
Selling, general and administrative
expenses percent to sales (GAAP)
16.9
%
18.1
%
26.0
%
17.8
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
15.8
%
17.7
%
10.5
%
15.9
%
Operating margin 2
0.1
%
2.2
%
(15.0
)%
(0.6
)%
Adjusted operating margin (Non-GAAP
measure) 2
1.2
%
2.6
%
1.2
%
1.3
%
1
Operating income for U.S. Retail Pharmacy
includes equity earnings in Cencora. As a result of the two-month
reporting lag, operating income for the three month period ended
November 30, 2024 includes Cencora equity earnings for the period
of July 1, 2024 through September 30, 2024.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in Cencora
and adjusted equity earnings in Cencora, respectively.
(in millions)
Three months ended November
30, 2023
U.S. Retail Pharmacy 1
International
U.S. Healthcare
Corporate and Other
Walgreens Boots Alliance,
Inc.
Sales
$
28,944
$
5,832
$
1,931
$
—
$
36,707
Gross profit (GAAP)
$
5,434
$
1,211
$
126
$
—
$
6,771
LIFO provision
48
—
—
—
48
Acquisition-related amortization
5
—
21
—
26
Transformational cost management
6
—
—
—
6
Adjusted gross profit (Non-GAAP
measure)
$
5,493
$
1,211
$
146
$
—
$
6,850
Selling, general and administrative
expenses (GAAP)
$
5,179
$
1,095
$
561
$
17
$
6,851
Acquisition-related amortization
(89
)
(15
)
(144
)
—
(249
)
Acquisition-related costs
(26
)
(4
)
(173
)
41
(163
)
Transformational cost management
(91
)
(6
)
(2
)
(4
)
(103
)
Certain legal and regulatory accruals and
settlements
(82
)
—
—
—
(82
)
Adjusted selling, general and
administrative expenses (Non-GAAP measure)
$
4,891
$
1,069
$
242
$
53
$
6,255
Operating income (loss) (GAAP)
$
297
$
116
$
(436
)
$
(17
)
$
(39
)
Acquisition-related amortization
94
15
165
—
275
Acquisition-related costs
26
4
173
(41
)
163
Transformational cost management
97
6
2
4
109
Certain legal and regulatory accruals and
settlements
82
—
—
—
82
Adjustments to equity earnings in
Cencora
50
—
—
—
50
LIFO provision
48
—
—
—
48
Adjusted operating income (loss)
(Non-GAAP measure)
$
694
$
142
$
(96
)
$
(53
)
$
687
Gross margin (GAAP)
18.8
%
20.8
%
6.5
%
18.4
%
Adjusted gross margin (Non-GAAP
measure)
19.0
%
20.8
%
7.6
%
18.7
%
Selling, general and administrative
expenses percent to sales (GAAP)
17.9
%
18.8
%
29.1
%
18.7
%
Adjusted selling, general and
administrative expenses percent to sales (Non-GAAP measure)
16.9
%
18.3
%
12.5
%
17.0
%
Operating margin 2
0.9
%
2.0
%
(22.6
)%
(0.2
)%
Adjusted operating margin (Non-GAAP
measure) 2
2.1
%
2.4
%
(5.0
)%
1.6
%
1
Operating income for U.S. Retail Pharmacy
includes equity earnings in Cencora. As a result of the two-month
reporting lag, operating income for the three month period ended
November 30, 2023 includes Cencora equity earnings for the period
of July 1, 2023 through September 30, 2023.
2
Operating margins and adjusted operating
margins have been calculated excluding equity earnings in Cencora
and adjusted equity earnings in Cencora, respectively.
OPERATING LOSS TO ADJUSTED EBITDA FOR
U.S. HEALTHCARE SEGMENT
(in millions)
Three months ended November
30,
2024
2023
Operating loss (GAAP) 1
$
(325
)
$
(436
)
Acquisition and disposition-related costs
2
163
173
Acquisition-related amortization 3
140
165
Certain legal and regulatory accruals and
settlements 4
45
—
Footprint optimization 5
4
—
Transformational cost management 6
(1
)
2
Adjusted operating income
(loss)
25
(96
)
Depreciation expense
34
43
Stock-based compensation expense 7
11
13
Adjusted EBITDA (Non-GAAP
measure)
$
70
$
(39
)
1
The Company reconciles Adjusted EBITDA for
the U.S. Healthcare segment to Operating loss as the closest GAAP
measure for the segment profitability. The Company does not measure
Net earnings attributable to Walgreens Boots Alliance, Inc. for its
segments.
2
Acquisition and disposition-related costs
are transaction and integration costs associated with certain
merger, acquisition and divestitures related activities recorded in
Operating loss within the Consolidated Condensed Statements 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. As part of the amendment to the VillageMD Secured Loan
executed in the three months ended November 30, 2024, Walgreen Co.
and VillageMD agreed to terminate certain intercompany leases
resulting in an early termination charge of $107 million incurred
by VillageMD within the U.S. Healthcare segment and a corresponding
gain recognized within the U.S. Retail Pharmacy segment. The
impacts of the intercompany lease termination eliminate in
consolidation.
3
Acquisition-related amortization includes
amortization of acquisition-related intangible assets 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.
5
Footprint Optimization 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
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.
7
Includes GAAP stock-based compensation
expense excluding expenses related to acquisition-related
amortization and acquisition-related costs.
EQUITY EARNINGS (LOSS) IN
CENCORA
(in millions)
Three months ended November
30,
2024
2023
Equity earnings (loss) in Cencora
(GAAP)
$
(9
)
$
42
Goodwill impairment
42
—
Acquisition-related intangibles
amortization
23
34
Restructuring and other expenses
7
6
Litigation and opioid-related expenses
6
2
Acquisition-related integration and
restructuring expenses
3
5
LIFO expense
1
11
Turkey hyperinflation impact
1
5
Amortization of basis difference in
OneOncology investment
—
1
Gain from divestitures
—
(7
)
Remeasurement of equity investment
(1
)
—
Tax reform
(2
)
2
Gain from antitrust litigation
settlements
(5
)
(9
)
Adjusted equity earnings in Cencora
(Non-GAAP measure)
$
67
$
92
ADJUSTED EFFECTIVE TAX
RATE
(in millions)
Three months ended November
30, 2024
Three months ended November
30, 2023
Loss before income tax
provision
Income tax provision
Effective tax rate
Loss before income tax
benefit
Income tax (benefit)
provision
Effective tax rate
Effective tax rate (GAAP)
$
(538
)
$
66
(12.2
)%
$
(358
)
$
(74
)
20.7
%
Impact of non-GAAP adjustments and
discrete tax items
1,015
204
956
232
Equity method non-cash tax
—
5
—
(4
)
Adjusted tax rate true-up
—
(160
)
—
(29
)
Subtotal
$
477
$
115
$
598
$
125
Exclude adjusted equity earnings in
Cencora
(67
)
—
(92
)
—
Adjusted effective tax rate excluding
adjusted equity earnings (loss) in Cencora (Non-GAAP
measure)
$
410
$
115
28.0
%
$
507
$
125
24.7
%
FREE CASH FLOW
(in millions)
Three months ended November
30,
2024
2023
Net cash used for operating activities
(GAAP)
$
(140
)
$
(281
)
Less: Additions to property, plant and
equipment
(284
)
(506
)
Free cash flow (Non-GAAP measure)
1
$
(424
)
$
(788
)
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20250110827801/en/
Media Relations U.S. / Jim Cohn, +1 224 813 9057
International, +44 (0)20 7980 8585 Investor Relations Eric
Wasserstrom, +1 847 315 2922
Walgreens Boots Alliance (NASDAQ:WBA)
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Walgreens Boots Alliance (NASDAQ:WBA)
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De Jan 2024 à Jan 2025
