Second quarter operational results in line with expectations, U.S. Healthcare achieved adjusted EBITDA profitability, narrowing full-year adjusted EPS guidance range

Second quarter financial highlights

• Second quarter loss per share was $6.85 compared to earnings per share of $0.81 in the year-ago quarter; Second quarter results included a $5.8 billion after-tax non-cash impairment charge related to VillageMD goodwill
• Adjusted earnings per share (EPS) increased 3.4 percent to $1.20, up 2.8 percent on a constant currency basis reflecting lower adjusted effective tax rate and improved profitability in U.S. Healthcare
• Second quarter sales increased 6.3 percent year-over-year to $37.1 billion, up 5.7 percent on a constant currency basis

Fiscal 2024 guidance

• Narrowing fiscal 2024 adjusted EPS guidance to $3.20 to $3.35, reflecting challenging retail environment in the U.S., early wind-down of sale-leaseback program, and lower earnings due to Cencora share sales, offset by execution in pharmacy services and a lower adjusted effective tax rate
• Maintaining U.S. Healthcare adjusted EBITDA to be breakeven at the midpoint of the guidance range of ($50) million to $50 million

DEERFIELD, Ill.–(BUSINESS WIRE)–Mar. 28, 2024– Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced financial results for the second quarter of fiscal 2024, which ended February 29, 2024.

Chief Executive Officer Tim Wentworth said:

“We’re encouraged by our first quarter of U.S. Healthcare positive adjusted EBITDA and continued topline growth alongside another quarter of strong execution in pharmacy, as we look to re-energize and evolve its impact both at Walgreens and at large. As we continue to operate in a challenging retail environment, we are taking actions to focus on customer engagement and value.

We remain confident in our goal of achieving $1 billion in cost savings this year. We are continuing to strategically review our portfolio over the next three months in an effort to ensure it drives growth and delivers value. Our team members, led by WBA’s new executive committee with a track record of operational excellence, are powering our progress as we map growth opportunities, aim to create long-term value across our businesses and execute the hard work to simplify and strengthen WBA.”

Overview of Second Quarter Results

WBA second quarter sales increased 6.3 percent from the year-ago quarter to $37.1 billion, an increase of 5.7 percent on a constant currency basis, reflecting sales growth across all segments.

Second quarter operating loss was $13.2 billion compared to an operating income of $197 million in the year-ago quarter. Operating loss in the quarter includes a $12.4 billion non-cash impairment charge related to VillageMD goodwill, which resulted in a $5.8 billion charge attributable to WBA, net of tax and non-controlling interest. Operating loss also reflects a $455 million non-cash impairment charge related to certain long-lived assets in the U.S. Retail Pharmacy segment. Adjusted operating income was $900 million, a decrease of 26.5 percent on a constant currency basis reflecting lower sale-leaseback gains and softer U.S. retail performance, partly offset by improved profitability in the U.S. Healthcare segment.

Net loss in the second quarter was $5.9 billion compared to net earnings of $703 million in the year-ago quarter, reflecting non-cash impairment charges. Adjusted net earnings increased 3.5 percent to $1.0 billion, up 3.0 percent on a constant currency basis, as lower adjusted operating income was more than offset by the lower adjusted effective tax rate compared to the year-ago quarter due to the recognition of deferred tax assets in foreign jurisdictions.

Loss per share in the second quarter was $6.85 compared to earnings per share of $0.81 in the year-ago quarter. Adjusted EPS increased 3.4 percent to $1.20, reflecting an increase of 2.8 percent on a constant currency basis.

Net cash used for operating activities was $637 million in the second quarter. Operating cash flow was negatively impacted by $615 million in payments related to legal matters, a $379 million Boots Pension Plan Annuity premium, and underlying seasonality. Year-over-year cash flow was negatively impacted by payments related to legal matters, phasing of working capital, and lower earnings. Free cash flow was negative $610 million, a $1.3 billion decrease compared with the year-ago quarter. Capital expenditures decreased by $146 million compared to the year-ago quarter.

Overview of Fiscal 2024 Year-to-Date Results

Sales in the first six months of fiscal 2024 increased 8.1 percent from the year-ago period to $73.8 billion, an increase of 7.2 percent on a constant currency basis, reflecting growth across all segments.

Operating loss in the first six months of fiscal 2024 was $13.2 billion compared to an operating loss of $6.0 billion in the year-ago period. Operating loss reflects a $12.4 billion non-cash impairment charge related to VillageMD goodwill, which resulted in a $5.8 billion charge attributable to WBA, net of tax and non-controlling interest. Operating loss in the current period also reflects a $455 million non-cash impairment charge related to certain long-lived assets in the U.S. Retail Pharmacy segment. Prior year operating loss reflects a $6.8 billion pre-tax charge for opioid-related claims and litigation. Adjusted operating income was $1.6 billion, a decrease of 29.5 percent on a constant currency basis reflecting softer U.S. retail performance and lower sale-leaseback gains, partly offset by improved profitability in the U.S. Healthcare segment.

Net loss for the first six months of fiscal 2024 was $6.0 billion compared to net loss of $3.0 billion in the year-ago period, reflecting the non-cash impairment charges. Adjusted net earnings decreased 19.8 percent to $1.6 billion, down 20.4 percent on a constant currency basis, reflecting lower adjusted operating income partly offset by a lower adjusted effective tax** rate due to the recognition of deferred tax assets in foreign jurisdictions.

Loss per share for the first six months of fiscal 2024 was $6.93 compared to loss per share of $3.50 in the year-ago period. Adjusted EPS decreased 19.9 percent to $1.86, reflecting a decrease of 20.5 percent on a constant currency basis.

Net cash used for operating activities was negative $918 million in the first six months of fiscal 2024. Operating cash flow was negatively impacted by $699 million in payments related to legal matters, a $379 million Boots Pension Plan Annuity premium, and underlying seasonality. Year-over-year cash flow was adversely impacted by phasing of working capital, lower earnings, and payments related to legal matters. Free cash flow was negative $1.4 billion, a $2.0 billion decrease compared with the year-ago period. Capital expenditures decreased by $250 million compared to the year-ago period.

About Walgreens Boots Alliance

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

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

WBA employs more than 315,000 people and has a presence in eight countries through its portfolio of consumer brands: Walgreens, Boots, Duane Reade, the No7 Beauty Company and Benavides in Mexico. Additionally, WBA has a portfolio of healthcare-focused investments located in several countries, including China and the U.S.

The Company is proud of its contributions to healthy communities, a healthy planet, an inclusive workplace and a sustainable marketplace. WBA has been recognized for its commitment to operating sustainably: the Company is an index component of the Dow Jones Sustainability Indices (DJSI) and was named to the 100 Best Corporate Citizens 2022.