Walgreens Boots Alliance Reports Fiscal 2025 First Quarter Results

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

DEERFIELD, Ill.--Jan. 10, 2025-- 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

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

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

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.

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.

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.

NON-GAAP RECONCILIATIONS BY SEGMENT AND ON A CONSOLIDATED BASIS

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

EQUITY EARNINGS (LOSS) IN CENCORA

ADJUSTED EFFECTIVE TAX RATE

FREE CASH FLOW

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