Q4 2023 Walgreens Boots Alliance Inc Earnings Call

Good morning, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to the Walgreens.

Speaker 1: Good morning. My name is Krista and I'll be your conference operator today. At this time, I would like to welcome everyone to the Walgreens Rootboots Alliance Incorporated fourth quarter and fiscal year 2023 earnings conference call.

Boots Alliance incorporated fourth quarter and fiscal year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.

Speaker 1: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, please press star one. Thank you. Tiffany Kanaga, Vice President of Global Investor Relations, you may begin your conference.

The speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad and if you would like to withdraw your question. Please press star one. Thank you Tiffany Canaigre, Vice President of Global Investor Relations.

<unk> you may begin your conference.

Good morning, Thank you for joining us for the Walgreens Boots Alliance earnings call for the fourth quarter of fiscal year 2023, I'm Tiffany can egger, Vice President of Global Investor Relations. Joining me on today's call are Ginger Graham our interim Chief Executive Officer Manuel in Manhattan, Our interim global Chi.

Speaker 2: joining us for the Walgreens Boots Alliance earnings call for the fourth quarter of fiscal year 2023. I'm Tiffany Conega, Vice President of Global Investor Relations.

Speaker 2: Joining me on today's call are Ginger Graham, our interim chief executive officer, Minmohan Mohan, our interim global chief financial officer, and John Driscoll, president of UF Health Care.

Financial Officer, and John Driscoll President of U S Health care. In addition, Rick H Senior Vice President and Chief Pharmacy Officer at Walgreens, and Tracey Brown, President of Walgreens, retail and Chief customer officer, who will participate in Q&A.

Speaker 2: In addition, Rick Gates, Senior Vice President and Chief Pharmacy Officer at Walgreens, and Tracy Brown, President of Walgreens Retail and Chief Customer Officer will participate in Q&A.

Speaker 2: All references to the COVID-19 headwind on today's call include U.S. vaccines, drive-through tests, and OTC tests.

References to the COVID-19 headwind on today's call include U S vaccines drive through tests and O T C tests.

Speaker 2: As always during the conference call, we anticipate making projections and forward looking statements based on our current expectations.

As always during the conference call, we anticipate making projections and forward looking statements based on our current expectations our.

Speaker 2: Our actual results could differ materially due to a number of factors, including those listed on slide two and those outlined in our latest form 10K filed with the Securities and Exchange Commission. We undertake no obligation to publicly update any forward-looking statement after this presentation, whether as a result of new information, future events, changes in assumptions, or otherwise.

Our actual results could differ materially due to a number of factors, including those listed on slide two and those outlined in our latest Form 10-K filed with the Securities and Exchange Commission. We undertake no obligation to publicly update any forward looking statement. After this presentation, whether as a result of new information future events.

Changes in assumptions or otherwise.

You can find our press release and the slides referenced on this call on the investors section of the Walgreens Boots Alliance website, the slides and the press release also contain further information about the non-GAAP financial measures that we will discuss during this call I will now turn the call over to Ginger.

Speaker 2: You can find our press release and the slides referenced on this call in the investors section of the Walgreens Boots Alliance website. The slides and the press release also contain further information about the non-GAAP financial measures that we will discuss during this call. I will now turn the call over to Ginger.

Speaker 3: Thanks Tiffany and good morning everyone. The good news you heard yesterday is that Tim Wentworth has agreed to join WBA as our new Chief Executive Officer, Effective October 23rd.

Thanks, Tiffany and good morning, everyone. The good news you heard yesterday is the Tim Wentworth has agreed to join W. B, a as our new Chief Executive Officer effective October 23rd.

Speaker 3: We're thrilled to have Tim and believe he will make a meaningful contribution to the future of the company with his deep knowledge and expertise in healthcare.

We're thrilled to have him and believe he will make a meaningful contribution to the future of the company with his deep knowledge and expertise in health care we've.

Speaker 4: We've asked him to make a few comments this morning, and I would like to turn it over to him now. Tim? Thanks, Ginger. I'm excited to join the call today, and even more excited to get to work after next week.

We've asked him to make a few comments this morning, and I would like to turn it over to him now Tim. Thanks, Ginger I'm excited to join the call today and even more excited to get to work after next week.

During my nearly three decades in health care I'd want efforts to create innovative and flexible health services to meet the needs of health plans employers and government organizations as well as their employees and members.

Speaker 4: During my nearly three decades in healthcare, I've led efforts to create innovative and flexible health services to meet the needs of health plans, employers, and government organizations, as well as their employees and members.

Speaker 4: And you know, whether building a team that grew the largest, most operationally efficient PBM in the country, or helping to establish a credo as the most significant specialty pharmacy in the United States, or helping to put together every North, a hundred billion dollar plus health services business, I've consistently built relationships and offered solutions, both for customers who are looking for a trusted innovative partner who listens, and for patients who are looking for access and affordability.

And you know where we're building the team that grew the largest most operationally efficient pbms in the country, we're helping to establish accredo as the most significant specialty pharmacy in the United States, We're hoping to put together every north of $100 billion plus health services business.

Unknown Executive: Good morning, my name is Krista, and I'll be your conference operator today.

I've consistently built relationships and offered solutions both for customers, who are looking for a trusted and innovative partner who listens.

Unknown Executive: At this time, I would like to welcome everyone to the Walgreens Boots Alliance Inc, fourth quarter and fiscal year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.

And for patients who are looking for access and affordability.

This impact was the direct result of having a winning team of employees and a culture that values patients now.

Speaker 4: This impact was the direct result of having a winning team of employees and a culture that valued patients.

Unknown Executive: After the speaker's remarks, there will be a question in answer session. If you would like to ask a question during this time, simply press star, follow up on number one. And if you would like to withdraw your question, please press star one. Thank you.

Speaker 4: Now I know WBA. I have worked with Walgreens as a customer, partner, competitor, investor, and family member, and I understand the challenges ahead for us as well as for the healthcare industry.

No I know Wpa I have worked with Walgreens as a customer partner competitor Investor and family member and I understand the challenges ahead for us as well as for the health care industry.

Speaker 4: Walpins was built on convenience, access and trust, and has unique advantages in today's healthcare environment.

Walgreens is built on convenience access and trust and has unique advantages in today's healthcare environment.

Tiffany Kanaga: Tiffany Kanaga, Vice President of Global Investor Relations, you may begin your conference. Good morning. Thank you for joining us for the Walgreens Boots Alliance earnings call for the fourth quarter of fiscal year 2023.

Speaker 4: I see the opportunities before us to build on our pharmacy strength and our trusted brand to evolve healthcare and the customer experience to deliver better outcomes at a lower cost.

I see the opportunities before us to build on our pharmacy strengths and our trusted brand to evolve health care and the customer experience to deliver better outcomes at a lower cost.

Tiffany Kanaga: I'm Tiffany Kanaga, Vice President of Global Investor Relations. Joining me on today's call are Ginger Graham, our Interim Chief Executive Officer, Manmohan Mahajan, our Interim Global Chief Financial Officer, and John Driscoll, President of US Healthcare. In addition, Rick Gates, Senior Vice President and Chief Pharmacy Officer at Walgreens, and Tracey Brown, President of Walgreens Retail and Chief Customer Officer, will participate in Q&A. All references to the COVID-19 headwind on today's call include US vaccines, drive-through tests, and OTC tests.

Speaker 4: Now I've learned a lot over the recent weeks, as you might imagine. I've spent time with each and every board member talking about the future and their priorities, learning about our challenges and opportunities, and most importantly, the importance of execution. Thank you.

Now I've learned a lot over the recent weeks as you might imagine I've spent time with each and every board member talking about the future and their priorities learning about our challenges and opportunities and most importantly, the importance of execution.

Those discussions and for my own research and.

Speaker 4: And of course, I have my personal experiences. For example, just last week, made a terrific store employee in Rochester, New York, professionally and cheerfully delivered to me a critical prescription to help my mother.

And of course I have my personal experiences for example, just last week made a terrific store employee in Rochester, New York professionally and cheerfully delivered to meet a critical prescription to help my mother.

Speaker 4: It was the kind of experience I appreciate and everyone deserves. And I know that Maeve is surrounded by a committed pharmacist and other team members, all of whom together can improve the lives of each person who walks through our door. In my mom's hometown Walgreens in Rochester and in every store we operate.

It was the kind of experience I appreciate and everyone deserves and I know that nave is surrounded by committed pharmacists and other team members all of whom together can improve the lives of each person who walks through our doors and my mom's hometown Walgreens in Rochester and in every store we operate.

Tiffany Kanaga: As always, during the conference call, we anticipate making projections and forward-looking statements based on our current expectations. Our actual results could differ materially due to a number of factors, including those listed on slide two, and those outlined in our latest form 10K, filed with the Securities and Exchange Commission. We undertake no obligation to publicly update any forward-looking statement after this presentation, whether as a result of new information, future events, changes in assumptions, or otherwise.

Speaker 4: All of these experiences together made my decision to join WBA, frankly, uneasy.

All of these experiences together made my decision to join Wpa frankly, an easy one.

Speaker 4: There is a reservoir of goodwill for this company across communities and a substantial opportunity to return value to our customers, employees, and shareholders.

There is a reservoir of goodwill for this company across communities and a substantial opportunity to return value to our customers employees.

Tiffany Kanaga: You can find our press release and the slides referenced on this call in the Investor section of the Walgreens Boots Alliance website. The slides in the press release also contain further information about the non-GAAP financial measures that we will discuss during this call.

And shareholders.

Speaker 4: Alongside the board, our team members and partners. I'm enthusiastic about our future and realizing our healthcare strategy and vision.

Alongside the board our team members and partners I am enthusiastic about our future and realizing our health care strategy and vision.

Ginger Graham: I will now turn the call over to Ginger. Thanks, Tiffany, and good morning, everyone. The good news you heard yesterday is that Tim Wentworth has agreed to join WBA as our new Chief Executive Officer, Effective October 23rd. We're thrilled to have Tim and believe he will make a meaningful contribution to the future of the company with his deep knowledge and expertise in healthcare.

Speaker 4: I'm humbled to serve as WBA's next CEO and look forward to speaking to many of you in the coming weeks.

I'm humbled to serve as Wpa's next CEO I look forward to speaking to many of you in the coming weeks Ginger.

Speaker 4: Ginger, thank you. And thank you to the entire WBA board for this opportunity. I'll now.

Ginger thank you.

Thank you to the entire Wpa board for this opportunity.

I'll now turn it back to you.

Speaker 3: Thanks, Tim. I'm excited and looking forward to working with you. While Tim won't be on the Q&A, I'm sure he will be talking with all of you soon after he joins the company. With that, let me turn to our business results.

Thanks, Tim I'm excited and looking forward to working with you while Tim won't be on the Q&A I'm sure. He will be talking with all of you. Soon after he joined the company with that let me turn to our business results.

Tim Wentworth: We've asked him to make a few comments this morning, and I would like to turn it over to him now. Tim? Thanks, Ginger.

Speaker 3: My time here has been very focused on stabilizing our talent, addressing our level of spending relative to the scale of our business, and critically reviewing our capital allocation across the business.

My time here has been very focused on stabilizing our talent.

Tim Wentworth: I'm excited to join the call today, and even more excited to get to work after next week. During my nearly three decades in healthcare, I've led efforts to create innovative and flexible health services to meet the needs of health plans, employers, and government organizations, as well as their employees and members. And you know whether building a team that grew the largest, most operationally efficient PBM in the country, or helping to establish a credo as the most significant specialty pharmacy in the United States, or helping to put together Evan North, a hundred billion dollar plus health services business.

Dressing our level of spending relative to the scale of our business and critically reviewing our capital allocation across the business.

Speaker 3: With the benefit of having been on the board, it has accelerated my ability to work with the team and make swift decisions and implement changes across many areas of our operations.

With the benefit of having been on the board. It has accelerated my ability to work with the team and make swift decisions and implement changes across many areas of our operations.

Speaker 3: We have focused on three near term operational priorities. We must support our customer facing activity.

We have focused on three near term operational priorities, we must support our customer facing activities scrutinize every penny of spend that does not directly benefit the customer and improved cash management.

Speaker 3: scrutinize every penny of spend that does not directly benefit the customer and improve cash management.

Tim Wentworth: I've consistently built relationships and offered solutions both for customers who are looking for a trusted innovative partner who listens and for patients who are looking for access and affordability. This impact was the direct result of having a winning team of employees and a culture that value patients.

Speaker 3: I will restate what we know and is critical to our future. We believe the fundamentals of our core business remain strong. We dispense over a billion prescriptions annually across our retail and specialty farm.

I will restate, what we know and is critical to our future. We believe the fundamentals of our core business remains strong. We just spent over 1 billion prescriptions annually across our retail and specialty pharmacies.

Speaker 3: We play a key role in healthcare delivery in this country. 78% of Americans live within five miles of a Walgreens or a Dwayne Reed. And 58% of us are likely to visit a local pharmacy as the first step for a non-emergency health need. Our trusted brand, deep community relationships, and convenience form the foundation of our pharmacy business and our platform for growth as we expand throughout other areas of healthcare.

We play a key role in health care delivery in this country, 78% of Americans live within five miles of a walgreens or a Duane reade and 58% of us are likely to visit a local pharmacy as the first step for a non emergency health need.

Tim Wentworth: Now I know WBA, I have worked with Walgreens as a customer, partner, competitor, investor, and family member, and I understand the challenges ahead for us as well as for the healthcare industry. Walgreens was built on convenience, access and trust, and has unique advantages in today's healthcare environment. I see the opportunities before us to build on our pharmacy strength and our trusted brand to evolve healthcare and the customer experience to deliver better outcomes at a lower cost.

Our trusted brand deep community relationships and convenience form the foundation of our pharmacy business and our our platform for growth as we expand throughout other areas of health care.

Speaker 3: I see significant opportunity to improve the cost space of this business.

I see significant opportunity to improve the cost base of this business. During the last six weeks, we have taken decisive actions to rightsize our cost structure.

Speaker 3: During the last six weeks, we have taken decisive actions to right size our cost structure. We expect over $1 billion of cost savings during fiscal year 2024, based on the actions we have already taken and are in progress.

Tim Wentworth: Now I've learned a lot over the recent weeks, as you might imagine. I've spent time with each and every board member, talking about the future and their priorities, learning about our challenges and opportunities, and most importantly the importance of execution. Those discussions inform my own research, and of course I have my personal experiences.

We expect over $1 billion of cost savings during fiscal year 2024 based on the actions we have already taken and are in progress.

Speaker 3: Examples include reducing our headquarter costs, going line by line, expense category by expense category, and reducing all non-essential spend.

Examples include reducing our headquarter cost going line by line expense category by expense category and reducing all nonessential spend.

Tim Wentworth: For example, just last week, Maeve, a terrific store employee in Rochester, New York, professionally and cheerfully delivered to Maeve, a critical prescription to help my mother. It was the kind of experience I appreciate and everyone deserves. And I know that Maeve is surrounded by committed pharmacists and other team members, all of whom together can improve the lives of each person who walks through our door in my mom's hometown Walgreens in Rochester and in every store we operate.

Speaker 3: We've reviewed and are reducing areas for contracted or project work.

We've reviewed and are reducing areas for contracted our project work.

Speaker 3: We are altering our store operating hours based on local market trends. We are closing unpro-

We are altering our store operating hours based on local market trends, we are closing unprofitable stores.

Speaker 3: We're driving supply chain efficiencies, including using AI to more accurately forecast demand and optimizing our transportation network. We're also implementing centralized services that control inventory, reduce workload, and provide better customer support.

We're driving supply chain efficiencies, including using AI to more accurately forecast demand and optimizing our transportation network. We're also implementing centralized services that control inventory reduce workload and provide better customer support.

Tim Wentworth: All of these experiences together made my decision to join WBA, frankly an easy one. There is a reservoir of goodwill for this company across communities, and a substantial opportunity to return value to our customers, employees and shareholders. Alongside the board, our team members and partners, I'm enthusiastic about our future and realizing our healthcare strategy and vision.

Speaker 3: We're taking a hard look at all projects and stopping those that are not essential. These actions reduce expenses, but more importantly, they help focus our energy on the most important needs for the business and for our customers.

We're taking a hard look at all projects and stopping those that are not essential.

These actions reduce expenses, but more importantly, they help focus our energy on the most important needs for the business and for our customers.

Speaker 3: We are more aggressively managing decisions that impact cash. This includes working capital management, targeting over $500 million of improvement, and defining near-term capital expenditure reductions, which we expect will bolster our balance sheet and support our priorities.

We are more aggressively managing decisions that impact cash. This includes working capital management targeting over $500 million of improvement and defining near term capital expenditure reductions, which we expect will bolster our balance sheet and support our priorities.

Ginger Graham: I'm humbled to serve as WBA's next CEO and look forward to speaking to many of you in the coming weeks. Ginger, thank you, and thank you to the entire WBA board for this opportunity. I'll now turn it back to you. Thanks, Tim. I'm excited and looking forward to working with you.

Ginger Graham: While Tim won't be on the Q&A, I'm sure he will be talking with all of you soon after he joins the company.

Speaker 3: Let me give you some examples. One major effort at Walgreens has been to introduce a perpetual pharmacy inventory system across the chain.

Let me give you. Some examples one major effort at Walgreens has been to introduce a perpetual pharmacy inventory system across the chain.

Speaker 3: As of last week, it is available to all 9,000 of our stores. This provides complete visibility of our inventory in the pharmacies and supports our work to reduce excess inventory and free up working capital. It also has many benefits for the pharmacy staff and feedback has been overwhelmingly positive as it simplifies workflows reducing store level activity.

As of last week. It is available to all 9000 of our stores. This provides complete visibility of our inventory in the pharmacies and supports our work to reduce excess inventory and free up working capital. It also has many benefits for the pharmacy staff and feedback has been overwhelmingly positive as it simplifies.

Ginger Graham: With that, let me turn to our business results. My time here has been very focused on stabilizing our talent, addressing our level of spending relative to the scale of our business, and critically reviewing our capital allocation across the business. With the benefit of having been on the board, it has accelerated my ability to work with the team and make swift decisions and implement changes across many areas of our operations.

Workflows, reducing store level activities.

Speaker 3: Another area where we have reduced working capital and impacted our workflow at the store level is related to regional micro fulfillment centers. These centers allow us to improve product availability while at the same time reduce total inventory levels. Our 11th micro fulfillment center opened three weeks ago. These centers currently support more than 4,300 stores filling over 2.3 million prescriptions each week across 29 states.

Another area, where we have reduced working capital and impacted our workflow at the store level is related to regional micro fulfillment centers. These centers allow us to improve product availability, while at the same time reduce total inventory levels, our 11th micro fulfillment center opened three weeks ago. These.

Ginger Graham: We have focused on three near-term operational priorities. We must support our customer-facing activities, scrutinize every penny of spend that does not directly benefit the customer and improve cash management. I will restate what we know and is critical to our future. We believe the fundamentals of our core business remain strong. We dispense over a billion prescriptions annually across our retail and specialty pharmacies. We play a key role in healthcare delivery in this country.

Centers currently support more than 4300 stores filling over $2 3 million prescriptions each week across 29 states.

Speaker 3: As we fill more prescriptions centrally, it frees up our staff to spend more time with customers, offering other health-related products and services, and it relieves some of the pressure on store staffing.

As we fill more prescription centrally it frees up our staff to spend more time with customers offering other health related products and services and it relieves some of the pressure on store staffing it.

Ginger Graham: 78% of Americans live within five miles of a Walgreens or a Dwayne Reed, and 58% of us are likely to visit a local pharmacy as the first step for a non-emergency health need. Our trusted brand, deep community relationships and convenience form the foundation of our pharmacy business and our platform for growth as we expand throughout other areas of health healthcare. I see significant opportunity to improve the cost space of this business.

Speaker 3: It is important to note that we have paused further expansion of our fulfillment centers to first drive improvements in the rollout, so we may fully realize the many benefits the centers offer. Working capital reduction, inventory tracking and control, customer service enhancements, workflow improvements, and reduction in cost to fill. The team has defined threshold requirements of performance before we move to implement the final five locations.

It is important to note that we have paused further expansion of our fulfillment centers to first drive improvements in the rollout. So we may fully realize the many benefits the centers offer working capital reduction inventory tracking and control customer service enhancements workflow improvements and <unk>.

Reduction in cost to fill the team has defined threshold requirements of performance before we moved to implement the final five locations.

Ginger Graham: During the last six weeks, we have taken decisive actions to right size our cost structure. We expect over $1 billion of cost savings during fiscal year 2024, based on the actions we have already taken and are in progress. Examples include reducing our headquarter cost, going line by line, expense category by expense category, and reducing all non-essential spend. We've reviewed and are reducing areas for contracted or project work. We are altering our store operating hours based on local market trends.

Speaker 3: There is significant opportunity to reduce retail inventory and optimize our retail product mix. We are reducing skews, addressing slow-moving product categories, and moving e-commerce shipments to fulfillment by our stores, getting the delivery to the customer in most cases in less than one hour. This is augmented by real progress on our own brand, which offers a big opportunity that we have been slow to capture.

There is significant opportunity to reduce retail inventory and optimize our retail product mix, we are reducing skus addressing slow moving product categories and moving e-commerce shipments to fulfillment by our stores getting the delivery to the customer in most cases in less than one hour.

This is augmented by real progress on our own brands, which offers a big opportunity that we have been slow to capture.

Speaker 3: All of these working capital improvements yield customer service benefits and workflow improvements for our staff.

All of these working capital improvements yield customer service benefits and workflow improvements for our staff.

Cash is also influenced by our capital expenditure budgets and we are reducing our capital expenditures in fiscal year 2024, compared to last year down approximately $600 million.

Speaker 3: Cash is also influenced by our capital expenditure budget, and we are reducing our capital expenditures in fiscal year 2024 compared to last year, down approximately $600 million. We have already identified many of the actions required to deliver this improvement, and to ensure that we execute all capital and project expenses are now being reviewed and approved centrally.

Ginger Graham: We are closing unprofitable stores. We're driving supply chain efficiencies including using AI to more accurately forecast demand and optimizing our transportation network. We're also implementing centralized services that control inventory, reduce workload, and provide better customer support. We're taking a hard look at all projects and stopping those that are not essential. These actions reduce expenses, but more importantly, they help focus our energy on the most important needs for the business and for our customers.

We have already identified many of the actions required to deliver this improvement and to ensure that we execute all capital and project expenses are now being reviewed and approved centrally.

One other important action I want to mention is our return to the office I have recently communicated that our leaders are expected to return to the office. This month and all other team members are expected back in late November we are convinced that our ability to act quickly deliver priority projects and respond to business.

Speaker 3: One other important action I want to mention is our return to the office. I have recently communicated that our leaders are expected to return to the office this month, and all other team members are expected back in late November . We're convinced that our ability to act quickly, deliver priority projects, and respond to business demands will be improved by being together.

Ginger Graham: We are more aggressively managing decisions that impact cash. This includes working capital management, targeting over $500 million of improvement, and defining near term capital expenditure reductions, which we expect will bolster our balance sheet and support our priorities.

Demands will be improved by being together.

Speaker 5: With that, I'll hand it over to Menmoan to review our financial results and our outlook for fiscal year 2024. Thank you, Ginger, and good morning. Fourth quarter at just the DPS came in near the low end of the range provided on June 27th, and in line with our update on September 1st.

With that I'll hand, it over to <unk> to review, our financial results and our outlook for fiscal year 2024. Thank you Ginger and good morning fourth quarter. Adjusted EPS came in near the low end of the range provided on June 27th and in line with our update on September 1st our results reflect.

Ginger Graham: Let me give you some examples. One major effort at Walgreens has been to introduce a perpetual pharmacy inventory system across the chain. As of last week, it is available to all 9,000 of our stores. This provides complete visibility of our inventory in the pharmacies and supports our work to reduce excess inventory and free up working capital. It also has many benefits for the pharmacy staff and feedback has been overwhelmingly positive as it simplifies workflows, reducing store level activities.

Speaker 5: Our results reflected a further slowdown in respiratory events, shifting consumer behaviors driven by a challenging macroeconomic environment and lower COVID-19 related contributions.

A further slowdown in respiratory events shifting consumer behaviors, driven by a challenging macroeconomic environment and lower COVID-19 related contributions.

Speaker 5: Overall, we delivered 8.3% sales growth on a constant currency basis. This includes $1.4 billion in growth in our healthcare business versus the prior year.

Overall, we delivered eight 3% sales growth on a constant currency basis. This includes $1 4 billion and growth in our healthcare business versus the prior year.

Ginger Graham: Another area where we have reduced working capital and impacted our workflow at the store level is related to regional micro fulfillment centers. These centers allow us to improve product availability while at the same time reduce total inventory levels. Our 11th micro fulfillment center opened three weeks ago. These centers currently support more than 4,300 stores filling over 2.3 million prescriptions each week across 29 states. As we fill more prescriptions centrally, it frees up our staff to spend more time with customers offering other health related products and services, and it relieves some of the pressure on store staffing.

Speaker 5: Our US retail pharmacy business grew 3.6 percent. And our Boots UK business delivered 10.9 percent sales growth.

Our U S retail pharmacy business grew three 6% and our boots UK business delivered 10, 9% sales growth.

Speaker 5: Adjusted EPS of 67 cents was down 18% on a constant currency basis. The 18% decline was driven by lower COVID-19 contributions, lower sale leaseback gains, net of rent, and a higher tax rate.

Adjusted EPS of <unk> 67 was down 18% on a constant currency basis.

18% decline was driven by lower COVID-19 contributions lower sale leaseback gains net of rent and a higher tax rate.

Speaker 5: We saw positive results from underlying retail pharmacy performance, lower incentive accruals, strong international growth, and improved profitability in US health here.

We saw positive results from underlying rebuild pharmacy performance lower incentive accruals strong international growth and improved profitability in U S health care.

Ginger Graham: It is important to note that we have paused further expansion of our fulfillment centers to first drive improvement in the rollout so we may fully realize the many benefits the centers offer, working capital reduction, inventory tracking and control, customer service enhancements, workflow improvements, and reduction in cost to fill. The team has defined threshold requirements of performance before we move to implement the final five locations. There is significant opportunity to reduce retail inventory and optimize our retail product mix.

Speaker 5: GAP net loss of $180 million improved by $235 million compared to prior year. Remember that we had a $783 million non-cash impairment charge in the year ago quarter.

GAAP net loss of $180 million improved by $235 million compared to prior year.

Remember that we had a $783 million noncash impairment charge in the year ago quarter.

Speaker 5: The loss in the quarter was driven by charges for certain legal and regulatory accrual to settlements and one time charges related to transformational cost management program. Now let's move to the year-to-date highlights.

The loss in the quarter was driven by charges for certain legal and regulatory accruals and settlements and onetime charges related to the transformational cost management program now.

Now, let's move to the year to date highlights.

Ginger Graham: We are reducing skews, addressing slow moving product categories, and moving e-commerce shipments to fulfillment by our stores, getting the delivery to the customer in most cases in less than one hour. This is augmented by real progress on our own brand, which offers a big opportunity that we have been slow to capture. All of these working capital improvements yield customer service benefits and workflow improvements for our staff. Cash is also influenced by our capital expenditure budgets, and we are reducing our capital expenditures in fiscal year 2024 compared to last year down approximately $600 million. We have already identified many of the actions required to deliver this improvement, and to ensure that we execute all capital and project expenses are now being reviewed and approved centrally.

Speaker 5: Fiscal 23 sales increased 5.6% on a constant currency basis. Adjusted EPS of $3.98 was down 20.3% on a constant currency basis. Our results reflected lower COVID-19 contributions and increased labor investments.

Fiscal 'twenty three sales increased five 6% on a constant currency basis.

Just did EPS of $3.98 was down <unk>, 3% on a constant currency basis.

Our results reflected lower COVID-19 contributions and increased labor investments.

Speaker 5: And these challenges were partly offset by lower incentive accruals, growth in international and retail performance in the U.S.

These challenges were partly offset by lower incentive accruals growth in international and rebuild performance in the U S.

Speaker 5: GAP net loss was $3.1 billion compared to net earnings of $4.3 billion in fiscal 22. Fiscal 23 included a $5.5 billion after tax charge for opioid related claims and lawsuits. Now, let's move to the US retail pharmacy segment.

GAAP net loss was $3 1 billion compared.

Compared to net earnings of $4 3 billion in fiscal 'twenty two.

Fiscal 'twenty three included a $5 $5 billion after tax charge for opioid related claims and lawsuits now let's move to the U S retail pharmacy segment.

Speaker 5: Compfield's growth was 5.7% reflecting higher brand inflation and mixed impacts in our pharmacy business and CompScript growth. AOI was down 29.4% in the quarter, reflecting a 27% impact from lower COVID-19 contributions and a 17% impact from lower levels of fill lease back gain net of rent.

Comp sales growth was five 7%, reflecting higher brand inflation and mix impacts in our pharmacy business and comp script growth <unk>.

Ginger Graham: One other important action I want to mention is our return to the office. I have recently communicated that our leaders are expected to return to the office this month, and all other team members are expected back in late November. We are convinced that our ability to act quickly, deliver priority projects, and respond to business demands will be improved by being together.

<unk> was down 29, 4% in the quarter, reflecting a 27% impact from lower COVID-19 contributions and a 17% impact from lower levels of sale leaseback gains net of rent.

Speaker 5: higher underlying pharmacy growth profit and lower incentive accruals contributed positively to EOI. Let me now turn to you.

Manmohan Mahajan: With that, I'll hand it over to Menmoan to review our financial results and our outlook for fiscal year 2024. Thank you, Ginger, and good morning. Fourth quarter of just an EPS came in near the low end of the range provided on June 27th, and in line with our update on September 1st. Our results reflected a further slowdown in respiratory events, shifting consumer behaviors driven by a challenging macro economic environment and lower COVID-19 related contributions.

Higher underlying pharmacy gross profit and lower incentive accruals contributed positively to Eli let.

Let me now turn to U S pharmacies.

Pharmacy comp sales increased nine 2% in the quarter driven by brand inflation and mix impacts.

Speaker 5: Pharmacy Comp Sales increased 9.2% in the quarter, driven by brand inflation and mixed impacts, and CompScript growth, a weaker than normal respiratory season, and impact of Medicaid redeterminations resulted in a weaker overall prescription market during the quarter. Third-party market data showed flu, cold, and respiratory activity down 35%, compared to the prior year quarter.

Comps group growth.

Weaker than normal respiratory season, and impact of Medicaid Redetermination resulted in a weaker overall prescription market during the quarter third party market data showed flu cold and respiratory activity down 35% compared to the prior year quarter.

Manmohan Mahajan: Overall, we delivered 8.3% sales growth on a constant currency basis. This includes $1.4 billion in growth in our healthcare business versus the prior year. Our US retail pharmacy business grew 3.6% and our boots UK business delivered 10.9% sales growth. Adjusted EPS of 67 cents was down 18% on a constant currency basis. The 18% decline was driven by lower COVID-19 contributions, lower sale lease back gains, net of rent, and a higher tax rate.

Speaker 5: Despite these weaker trends, ComScripts grew 1.6% excluding immunizations. We administered roughly 400,000 COVID-19 vaccinations in the quarter, down from 2.9 million in the prior year quarter. Excluding the impact of COVID-19, fourth quarter adjusted gross profit increased versus the prior year period. Turning next to our US retail business.

Despite these weaker trends comps groups grew one 6% excluding immunizations.

We administer roughly 400000, COVID-19 vaccinations in the quarter down from $2 9 million in the prior year quarter.

The impact of COVID-19 fourth quarter adjusted gross profit increased versus the prior year period.

Turning next to our U S retail business.

Speaker 5: During the quarter, the retail business was impacted by a weaker than normal respiratory season and a continued shift in consumer behaviors driven by a challenging macroeconomic environment.

During the quarter the rebuild business was impacted by a weaker than normal respiratory season, and a continued shift in consumer behavior, driven by a challenging macroeconomic environment.

Manmohan Mahajan: We saw positive results from underlying retail pharmacy performance, lower incentive accruals, strong international growth, and improved profitability in US healthcare. Gap Netloth of $180 million improved by $235 million compared to prior year. Remember that we had a $783 million non-cash impairment charge in the year ago quarter. The loss in the quarter was driven by charges for certain legal and regulatory accruals and settlements and one time charges related to transformational cost management program.

Speaker 5: As a result, comparable sales declined 3.3% in the quarter. There are three main drivers.

As a result comparable sales declined three 3% in the quarter. There are three main drivers.

Speaker 5: FAST, an 80% decline in COVID-19 test kits impacted growth by around 160 basis points.

And 80% decline in COVID-19 test kits impacted growth by around 160 basis points.

Speaker 5: Second, Vika Kafka flu sales had an approximately 100 basis points impact, and lastly, we were impacted by approximately 60 basis points from summer seasonal weakness. As customers continued to pull back on discretionary spending, reflecting the challenging macroeconomic environment.

Second weaker cough cold flu sales had an approximately 100 basis points impact and lastly, we were impacted by approximately 60 basis points from summer seasonal weakness as customers continued to pull back on discretionary spending reflecting the challenging macroeconomic environment.

Speaker 5: Looking at category performance, we saw decline in health and well-less while personal care and beauty both grew low single digits.

Looking at category performance, we saw a decline in health and wellness, while personal care and beauty both grew low single digits.

Manmohan Mahajan: Now let's move to the year-to-date highlights. Fiscal 23 sales increased 5.6% on a constant currency basis. Adjusted EPS of $3.98 was down 20.3% on a constant currency basis. Our results reflected lower COVID-19 contributions and increased labor investments. These challenges were partly offset by lower incentive accruals, growth in international and retail performance in the US. Gap Netloth was $3.1 billion compared to net earnings of $4.3 billion in fiscal 22. Fiscal 23 included a $5.5 billion after tax charge for opioid related claims and lawsuits.

Speaker 5: Retail-dross margin was impacted by elevated shrink and lower sales in higher margin categories, such as cough, cold flu, seasonal and COVID-19 test kits.

Retail gross margin was impacted by elevated shrink and lower sales in our higher margin categories, such as cough cold flu seasonal and COVID-19 test kits.

Despite the pressure in the second half gross margin grew by nearly 100 basis points in fiscal 'twenty three on top of a 100 basis point increase in the prior year.

Speaker 5: Despite the pressure in the second half, growth margin grew by nearly 100 basis points in fiscal 23, on top of a 100 basis point increase in the prior year, turning next to the international segment, and as always, I will talk in constant currency numbers.

Turning next to the international segment and as always I will talk in constant currency numbers.

Speaker 5: The international segment, again, performed very well in the quarter, delivering profit ahead of guidance.

The International segment again performed very well in the quarter delivering profit ahead of guidance sales increased six 7% with growth across all international markets Boots, UK was up 10, 9% and Germany wholesale grew three 5%.

Speaker 5: sales increased 6.7% with growth across all international markets. Boots UK was up 10.9% and Germany wholesale grew 3.5%.

Manmohan Mahajan: Now let's move to the US retail pharmacy segments. Comp sales growth was 5.7% reflecting higher brand inflation and mixed impacts in our pharmacy business and Comp script growth. AOI was down 29.4% in the quarter reflecting a 27% impact from lower COVID-19 contributions and a 17% impact from lower levels of sale lease backgains net of rent.

Speaker 5: Growth profit increased nearly 10% outpacing sales growth. Boots UK experienced continued strong retail growth and improved pharmacy margin compared to the prior year period.

Gross profit increased nearly 10% outpacing sales growth boots, UK experienced continued strong retail growth and improved pharmacy margin compared to the prior year period.

Speaker 5: Despite higher inflation and increased store-related costs, S-GNA as a percentage of sales improved, benefiting from discipline cost management.

Despite higher inflation and increased store related costs SG&A as a percentage of sales improved benefiting from disciplined cost management.

Manmohan Mahajan: Higher underlying pharmacy growth profit and lower incentive accruals contributed positively to AOI. Let me now turn to US pharmacy. Pharmacy Comp sales increased 9.2% in the quarter driven by brand inflation and mixed impacts and Comp script growth. A weaker than normal respiratory season and impact of Medicaid redeterminations resulted in a weaker overall prescription market during the quarter. Third party market data showed flu, cold and respiratory activity down 35% compared to the prior year quarter. Despite these weaker trends, comm scripts grew 1.6% excluding immunizations. We administered roughly 400,000 COVID-19 vaccinations in the quarter down from 2.9 million in the prior year quarter.

Speaker 5: These impacts resulted in adjusted operating income growth of 52%. Let's now look in more.

These impacts resulted in adjusted operating income growth of 52%.

Let's now look in more details at boots UK.

Speaker 5: Comp retail sales increased 11.7% on top of a 15.2% comp in the prior year quarter. Boots grew market share for the 10th consecutive quarter, approximately 1% versus the prior year quarter. With games and beauty,

Comp rebuild sales increased 11, 7% on top of a 15, 2% comp in the prior year quarter boots grew market share for the 10th consecutive quarter, approximately one percentage point versus the prior year quarter.

With gains in beauty and health and wellness boots Dot com sales grew 29% year on year and represented over 13% of our UK retail sales turning next to U S health care.

Speaker 5: Boots.com sales grew 29 percent year on year and represented over 13 percent of our UK retail sales. Turning next to U.S. healthcare.

Speaker 5: US healthcare segment results were in line with the guidance provided on June 27th, with AOI and adjusted EBITDA both up sequentially and year over year. The business continues to rapidly scale with fourth quarter sales of $2 billion. Reflecting the acquisition of Care Centrics, the acquisition of Submit Health by Village MD, and growth in all businesses.

U S. Healthcare segment results were in line with the guidance provided on June 27th with AOR and adjusted EBITDA, both up sequentially and year over year.

Manmohan Mahajan: Excluding the impact of COVID-19, fourth quarter adjusted gross profit increased versus the prior year period. Turning next to our US retail business. During the quarter, the retail business was impacted by a weaker than normal respiratory season and a continued shift in consumer behaviors driven by a challenging macroeconomic environment. As a result, comparable sales declined 3.3% in the quarter. There are three main drivers. First, an 80% decline in COVID-19 test kits impacted growth by around 160 basis points. Second, weaker cough cold flu sales had an approximately 100 basis points impact. And lastly, we were impacted by approximately 60 basis points from summer seasonal weakness.

The business continues to rapidly scale with fourth quarter sales of $2 billion.

Reflecting the acquisition of <unk> the acquisition of summit held by village M D and growth in all businesses.

Speaker 5: Segment performance sales grew 19% driven by village MD sales of $1.4 billion up 17% on a performance basis.

Segment pro forma sales grew 19% driven by village MDU sales of $1 4 billion.

Up 17% on a pro forma basis.

The growth was led by higher value based lives expansion of the clinic footprint and increased fee for service volume.

Speaker 5: The growth was led by higher value-based lies, expansion of the clinic footprint, and increased fee-for-service volumes as clinics mature.

As clinics mature.

Speaker 5: Care centric sales were up 24% on a performance basis and shields delivered performance sales growth of 29%.

<unk> sales were up 24% on a pro forma basis, and shields delivered pro forma sales growth of 29%.

Speaker 5: Segment gross profit improved 29% sequentially. Adjusted Ibediah was a loss of $30 million and improvement of $103 million from the prior year quarter. Turning next to the cash flow.

Segment gross profit improved 29% sequentially.

Adjusted EBITDA was a loss of $30 million, an improvement of $103 million from the prior year quarter, turning next to the cash flow.

Manmohan Mahajan: As customers continued to pull back on discretionary spending, reflecting the challenging macroeconomic environment. Looking at category performance, we saw a decline in health and well less while personal care and beauty both grew low single digits. Retail growth margin was impacted by elevated shrink and lower sales in higher margin categories, such as cough, cold flu, seasonal and COVID-19 test kits.

Speaker 5: We generated 2.3 billion dollars of operating cash flow in fiscal 23 reflecting lower COVID-19 contributions, opioid settlement payments, and losses in our U.S. health care segment. Fiscal 23 capital expenditures of 2.1 billion dollars increased by approximately $400 million compared to the prior year. This was driven by growth initiatives, including Village MD and the Microfilment Center rule out.

We generated $2 3 billion of operating cash flow in fiscal 'twenty, three reflecting lower COVID-19 contributions opioid settlement payments and losses in our U S health care segment.

Fiscal 'twenty three capital expenditures of $2 1 billion increased by approximately $400 million.

Compared to the prior year.

Manmohan Mahajan: Despite the pressure in the second half, growth margin grew by nearly 100 basis points in fiscal 23, on top of a hundred basis point increase in the prior year, turning next to the international segment and as always I will talk in constant currency numbers. The international segment again performed very well in the quarter, delivering profit ahead of guidance, sales increased 6.7% with growth across all international markets, Boots UK was up 10.9% and Germany wholesale growth 3.5%.

This was driven by growth initiatives, including village M D and the micro fulfillment center rollout.

Speaker 5: This resulted in free cashflow of $665 million.

This resulted in free cash flow of $665 million.

Speaker 5: We also reduced debt by $2.6 billion in fiscal 23. As Ginger discussed, we are taking a number of actions to drive improvement in free cash flow in fiscal 24, including approximately $600 million in reduced capital expenditures and approximately $500 million benefit from working capital optimization initiatives. I will now turn to our fiscal 24 guidance.

We also reduced debt by $2 6 billion in fiscal 'twenty three.

As Ginger discussed we are taking a number of actions to drive improvement in free cash flow in fiscal 2004, including approximately $600 million and reduced capital expenditures and approximately $500 million benefit from working capital optimization initiatives.

Manmohan Mahajan: Growth profit increased nearly 10% outpacing sales growth, Boots UK experienced continued strong retail growth and improved pharmacy margin compared to the prior year period. Despite higher inflation and increased store related costs, SGNA as a percentage of sales improved, benefiting from discipline cost management.

I will now turn to our fiscal 2000 and for guidance.

Speaker 5: We are guiding to fiscal 24 adjusted EPS of $3.20 to $3.50, down from $3.98 in fiscal 23.

We are guiding to fiscal 2000 and for adjusted EPS of $3 20 to $3.50 down.

Down from $3 98 in fiscal 'twenty three.

Speaker 5: Before discussing underlying performance, I want to mention some key headwinds that we will face in fiscal 24. These include lower sale and leaseback contributions, a higher tax rate, and lower COVID-19 contributions. We're also assuming continued macroeconomic pressure on the consumer and a weaker respiratory season compared to the prior year.

Before discussing underlying performance I want to mention some key headwinds that we will face in fiscal 2000 and for these.

Manmohan Mahajan: These impacts resulted in adjusted operating income growth of 52%. Let's now look in more details at Boots UK. Comp retail sales increased 11.7% on top of a 15.2% income in the prior year quarter. Boots grew market share for the 10th consecutive quarter, approximately 1% each point versus the prior year quarter. With gains in beauty and health and wellness, Boots.com sales grew 29% year on year and represented over 13% of our UK retail sales, turning next to US health care.

These include lower sale and leaseback contributions.

Higher tax rate and lower COVID-19 contributions.

And we're also assuming continued macroeconomic pressure on the consumer and a weaker respiratory season compared to the prior year.

Speaker 5: excluding the impact of these headwinds are forecast asians underline growth, which is primarily driven by two factors. First, we expect accelerating profitability in our US healthcare business in 2024. As the segment continues to scale, with adjusted EBITDA expected to be at or around break even.

Excluding the impact of these headwinds our forecast assumes underlying growth, which is primarily driven by two factors first we expect accelerating profitability in our U S healthcare business in 2024 as the segment continues to scale with adjusted EBITDA expected to be at or around <unk>.

Kevin second we expect U S retail pharmacy underlying adjusted operating income to be driven by immediate actions to improve the cost base and modest underlying growth in both retail and pharmacy.

Speaker 5: Second, we expect US retail pharmacy underlying adjusted operating income to be driven by immediate actions to improve the cost base and modest underlying growth in both retail and pharmacy.

Manmohan Mahajan: US health care segment results were in line with the guidance provided on June 27th with AOI and adjusted EBIDA both up sequentially and year over year. The business continues to rapidly scale with fourth quarter sales of $2 billion dollars, reflecting the acquisition of care centrics, the acquisition of submit health by village MD and growth in all businesses. Segment performance sales grew 19% driven by village MD sales of $1.4 billion, up 17% on a performance basis.

Speaker 5: Let me now illustrate the larger moving pieces as we bridge from fiscal 23 to fiscal 24.

Let me now illustrate the larger moving pieces as we bridge from fiscal 'twenty three for fiscal 'twenty four.

I mentioned three notable headwinds to adjusted EPS ceiling leaseback is estimated to have a negative year on year impact of between 11% to 13% as we have said before we do not expect any contribution from sale and leaseback beyond fiscal 'twenty four.

Speaker 5: I mentioned three notable headwinds to adjust the DPS. Sail and Lease Pack is estimated to have a negative year-on-year impact of between 11 to 13%. As we have said before, we do not expect any contribution from Sail and Lease Pack beyond with an average procedure to upgrade a unique

Speaker 5: Tax rates will be higher in 2024, increasing by approximately 10 percentage points compared to 2023, due to higher international rates and benefits recognized in 2023 that are not expected to repeat in 2024. Finally, we're projecting lower COVID-19 contributions that result in a six to seven percent year-on-year impact.

<unk> rates will be higher in 2024, increasing by approximately 10 percentage points compared to 2023 due to higher international rates and benefits recognized in 2023 that are not expected to repeat in 2024. Finally, we are projecting lower COVID-19 contributions.

Manmohan Mahajan: The growth was led by higher value-based lies, expansion of the clinic footprint, and increased fee-for-service volumes as clinics mature. Care centric sales were up 24% on a performance basis and shields delivered performance sales growth of 29%. Segment growth profit improved 29% sequentially.

That result in a 6% to 7% year on year impact.

Speaker 5: excluding these impacts, we expect underlying growth of 9 to 12 percent driven by accelerating profitability in US healthcare and immediate actions to improve our cost-base across the company. Let me now walk you through the 2024 guidance in greater detail.

Manmohan Mahajan: Adjusted EBIDA was a loss of $30 million dollars and improvement of $103 million dollars from the prior year quarter, turning next to the cash flow. We generated $2.3 billion of operating cash flow in fiscal 23, reflecting lower COVID-19 contributions, opioid settlement payments, and losses in our US health care segment. Fiscal 23 capital expenditures of $2.1 billion increased by approximately $400 million dollars compared to the prior year. This was driven by growth initiatives including village MD and the micro fulfillment center rule out.

Excluding this impact we expect underlying growth of 9% to 12% driven by accelerating profitability in U S healthcare and immediate actions to improve our cost base across the company.

Let me now walk you through the 2024 guidance in greater detail.

Speaker 5: Overall, we expect total sales in fiscal 24 to be up 1 to 4% on a constant currency basis.

Overall, we expect total sales in fiscal 'twenty four to be up 1% to 4% on a constant currency basis.

Speaker 5: Adjusted operating income is expected to be down 5 to 12% on a constant currency basis. Let me now walk you through the assumptions and guidance for each of our reporting segments, starting with US retail pharmacy. US retail pharmacy segment sales are projected to be flat to up 2%.

Adjusted operating income is expected to be down 5% to 12% on a constant currency basis.

Let me now walk you through the assumptions and guidance for each of our reporting segments, starting with U S retail pharmacy.

Manmohan Mahajan: This resulted in free cash flow of $665 million. We also reduced debt by $2.6 billion in fiscal 23. As Ginger discussed, we are taking a number of actions to drive improvement in free cash flow in fiscal 24, including approximately $600 million in reduced capital expenditures and approximately $500 million benefit from working capital optimization initiatives.

U S retail pharmacy segment sales are projected to be flat to up 2%.

Speaker 5: AOI will be negatively impacted by approximately 8 percentage points from the lower COVID-19 contributions and roughly 11 percentage points of lower salient lease back gain.

<unk> will be negatively impacted by approximately eight percentage points from the lower COVID-19 contributions and roughly 11 percentage points of lower sale and leaseback gains.

Speaker 5: excluding these impacts, the underlying business is projected to drive 5 to 10% EOI growth. I will now take you through the key business drivers.

Excluding these impacts the underlying business is projected to drive 5% to 10% yoy growth.

We'll now take you through the key business drivers.

Speaker 5: First, anticipate script volume growth driven by overall market growth. On reimbursement, we have roughly 75% of the contract signed for calendar year 24. We do expect reimbursement pressure to be less of a headwind in fiscal 24 than in fiscal 23.

First we anticipate the script volume growth driven by overall market growth on reimbursement, we have roughly 75% of the contract signed for calendar year 'twenty four.

Manmohan Mahajan: I will now turn to our fiscal 24 guidance. We are guiding to fiscal 24 adjusted EPS of $3.20 to $3.50 down from $3.98 in fiscal 23. Before discussing underlying performance, I want to mention some key headwinds that we will face in fiscal 24. These include lower sale and leaseback contributions, a higher tax rate and lower COVID-19 contributions. We're also assuming continued macroeconomic pressure on the consumer and a weaker respiratory season compared to the prior year.

We do expect reimbursement pressure to be less of a headwind in fiscal 2004, then in fiscal 'twenty three.

Speaker 5: We're projecting approximately 5 million COVID vaccinations in 2024. Quarter-to-date were well on track and have already administered over 3 million COVID vaccinations.

We're projecting approximately $5 million COVID-19 vaccinations in 2024 quarter to date, we're well on track and have already administered over $3 million Covid vaccinations.

Speaker 5: In retail, we expect margins to benefit from our category performance improvement program and a roughly 1 percentage point increase in on-brand penetration. At the same time, we're adopting a prudent approach.

In retail, we expect margins to benefit from our category performance improvement program and a roughly one percentage point increase in owned brand penetration at the same time, we're adopting a prudent approach.

Manmohan Mahajan: Excluding the impact of these headwinds, our forecast assumes underlying growth, which is primarily driven by two factors. First, we expect accelerating profitability in our U.S, healthcare business in 2024. As the segment continues to scale, with adjusted EBITDA expected to be at or around break given. Second, we expect U.S, retail pharmacy underlying adjusted operating income to be driven by immediate actions to improve the cost base and modest underlying growth in both retail and pharmacy.

Speaker 5: We see a continuation of the challenging trends that impacted the second half of fiscal 2023. We're projecting flat comparable sales due to a milder cost-cold and flu season year-on-year, lower-covid OTC-test-kit-volume and continued consumer pressure. We're also planning a higher level of shrink, which has been increasing in the last several months and continues to represent a serious systemic issue across the retail industry.

We see a continuation of the challenging trends that impacted the second half of fiscal 2023, we're projecting flat comparable sales due to a milder cough cold and flu season year on year, lower Covid OTC test get volume and continued consumer pressure. We're also planning a.

Higher level of shrink which has been increasing in the last several months and continues to represent is Syria systemic issue across the retail industry.

Speaker 5: Within SGA, we expect to achieve over $1 billion of cost savings during fiscal 2024, as Ginger has already described. Turning next to guidance for the-

Within SG&A, we expect to achieve over $1 billion of cost savings during fiscal 2024 as Ginger has already described.

Manmohan Mahajan: Let me now illustrate the larger moving pieces as we bridge from fiscal 23 to fiscal 24. I mentioned three notable headwinds to adjusted EPS. Sale and leaseback is estimated to have a negative year-on-year impact of between 11 to 13%. As we have said before, we do not expect any contribution from sale and leaseback beyond fiscal 24. Tax rates will be higher in 2024, increasing by approximately 10 percentage points compared to 2023 due to higher international rates and benefits recognized in 2023 that are not expected to repeat in 2024.

Turning next to guidance for the international segment.

Speaker 5: Segment sales are projected flat to up 4% on a constant currency basis.

Segment sales are projected flat to up 4% on a constant currency basis, we expect adjusted operating income of $745 million to $770 million, representing a constant currency decline of 18% to 21%.

Speaker 5: We expect adjusted operating income of $745 to $770 million, representing a constant currency decline of 18 to 21%.

Speaker 5: The year-on-year decline is entirely driven by property transactions during fiscal 23, which will not be repeated, and the pending sales of the business in Chile.

The year on year decline is entirely driven by property transactions during fiscal 'twenty, three which will not be repeated in the pending sales of the business in Chile.

Speaker 5: excluding those impacts, we expect AOI growth to be flat to up to percent with continued execution within Boots UK retail business held back by the impact of inflationary pressures. Let's turn to U.S. healthcare.

Excluding those impacts we expect <unk> growth to be flat to up 2% with continued execution within boots UK retail business held back by the impact of inflationary pressures.

Manmohan Mahajan: Finally, we're projecting lower COVID-19 contributions that result in a 6 to 7% year-on-year impact. Excluding these impacts, we expect underlying growth of 9 to 12% driven by accelerating profitability in U.S, healthcare and immediate actions to improve our cost base across the company. Let me now walk you through the 2024 guidance in greater detail. Overall, we expect total sales in fiscal 24 to be up 1 to 4% on a constant currency basis. Adjusted operating income is expected to be down 5 to 12% on a constant currency basis.

Let's turn to U S health care.

We are focused on driving improved financial performance for U S healthcare in 2024.

Speaker 5: We are focused on driving improved financial performance for US healthcare in 2024. We expect fiscal 24 sales of $8.3 to $8.8 billion reflecting fust for the year of some mid-health and ongoing growth in all businesses.

We expect fiscal 2000 and for sales of eight three to $8 8 billion, reflecting first full year of summit held in ongoing growth in all businesses.

Speaker 5: On a performance basis, we see sales growth of 10 to 17% and expect fiscal 24 adjusted EBITDA to be break given at the midpoint of the guidance range.

On a pro forma basis, when we see sales growth of 10% to 17% and expect fiscal 'twenty for adjusted EBITDA to be breakeven at the midpoint of the guidance range.

Manmohan Mahajan: Let me now walk you through the assumptions and guidance for each of our reporting segments starting with U.S, retail pharmacy. U.S, retail pharmacy segments sales are projected to be flat to up 2%. AOI will be negatively impacted by approximately 8 percentage points from the lower COVID-19 contributions and roughly 11 percentage points of lower sale and lease Excluding these impacts, the underlying business is projected to drive 5-10% AOI growth.

Speaker 5: This represents an increase of 325 to 425 million dollars compared to fiscal 23, driven by growth in full risk lives, fee for service volume, optimization of the clinic footprint, and reallignment of the cost-based at Village MD. for robust growth at shield

This represents an increase of $325 million to $425 million compared.

Compared to fiscal 'twenty, three driven by growth in full risk lives fee for service volume optimization of the clinic footprint and realignment of the cost base at village and the robust growth at shields.

Speaker 5: and Walrean's health business growth driven by scaling of our clinical trial business and health care services and through cost management.

And Walgreens health business growth driven by scaling of our clinical trial business and health care services and through cost management.

Manmohan Mahajan: I will now take you through the key business drivers. First, the anticipated volume growth driven by overall market growth. On reimbursement, we have roughly 75% of the contract signed for calendar year 24. We do expect reimbursement pressure to be less of a headwind in fiscal 24 than in fiscal 23. We're projecting approximately 5 million COVID vaccinations in 2024. Quarter to date, we're well on track and have already administered over 3 million COVID vaccinations. In retail, we expect margins to benefit from our category performance improvement program. And a roughly 1 percentage point increase in on brand penetration. At the same time, we're adopting a prudent approach.

Speaker 5: We assume an effective tax rate of approximately 19 to 20% with the year-over-year increase driven by higher international statutory tax rates and benefits recognized in 2023 that are not expected to repeat in 2024. Interest expenses expected to decrease by approximately $80 million.

We assume an effective tax rate of approximately 19% to 20% with the year over year increase driven by higher international statutory tax rates and benefits recognized in 2023 that are not expected to repeat in 2020 for interest expense is expected to decrease by approximately.

<unk> $80 million in the first quarter, we will be lapping the prior year quarter's adjusted EPS of $1 16.

Speaker 5: In the first quarter, we will be lapping the prior year quarters at just a DPS of $1.16.

Speaker 5: The following five factors are expected to have an outsized impact in the first quarter this year. FUS.

The following five factors are expected to have an outsized impact in the first quarter. This year first we had a significant tax benefit in prior year period, which will not repeat in the first quarter of 2024.

Speaker 5: We had a significant tax benefit in prior year period, which will not repeat in the first quarter of 2024. Second, we're expecting COVID-19 contributions to be lower in the first quarter, reflecting last year's Omicron wave and seasonality. Third, we anticipate lower contributions from sale and leaseback activity.

Second we're expecting COVID-19 contributions to be lower in the first quarter, reflecting last year's omicron wave and seasonality.

Manmohan Mahajan: We see a continuation of the challenging trends that impacted the second half of fiscal 2023. We're projecting flat comparable sales due to a milder cough cold and flu season year on year. Lower COVID OTC test kit volume and continued consumer pressure. We're also planning a higher level of shrink, which has been increasing in the last several months and continues to represent a serious systemic issue across the retail industry.

Third we anticipate lower contributions from sale and leaseback activity.

Speaker 5: Fourth, we're lapping elevated levels of labor investments in our pharmacy staff.

Fourth we're lapping elevated levels of labor investments in our pharmacy staff.

Speaker 5: Finally, we also expect a more normalized flu season in fiscal 24, speaking in the second quarter versus the early start in the prior year.

Finally, we also expect a more normalized flu season and fiscal 'twenty four peaking in the second quarter versus the early start in the prior year.

Speaker 5: Moving beyond the first quarter, we will see sequential improvement and I will discuss the top four drivers.

Manmohan Mahajan: Within SGNA, we expect to achieve over $1 billion of cost savings during fiscal 2024, as Ginger has already described.

Moving beyond the first quarter, we will see sequential improvement and I will discuss the top four drivers.

Speaker 5: First, we're executing a series of actions to lower our cost base.

First we're executing a series of actions to lower our cost base.

Manmohan Mahajan: Turning next to guidance for the international segment. Segment sales are projected flat to up 4% on a constant currency basis. We expect adjusted operating income of $745 to $770 million, representing a constant currency decline of 18 to 21%.

Speaker 5: These will have limited impact on the first quarter, but will start to ramp in the second quarter. There is adjusted EPS benefit of 50 to 60 cents in the balance of the year compared to the first quarter. Second, in our US health care segment, we expect profitability to improve from optimizing the clinic footprint, growing patient panels and realigning costs.

This will have limited impact on the first quarter, but we will start to ramp in the second quarter. There is adjusted EPS benefit of 50 to 60 in the balance of the year compared to the first quarter.

In our U S health care segment, we expect profitability to improve from optimizing the clinic footprint growing patient panels and realigning costs.

Manmohan Mahajan: The year on year decline is entirely driven by property transactions during fiscal 2023, which will not be repeated and the pending sales of the business in Chile. Excluding those impacts, we expect AOI growth to be flat to up 2% with continued execution within boots UK retail business held back by the impact of inflationary pressures.

Speaker 5: Third, we expect growing contributions from retail initiatives, including sequentially improving retail comps and margin expansion programs.

Third we expect growing contributions from retail initiatives, including sequentially, improving retail comps and margin expansion programs.

Finally seasonality plays a role in our business benefiting the second quarter, which is usually the height of the cough cold flu season in the U S.

Speaker 5: Seasonality plays a role in our business, benefiting the second quarter, which is usually the height of the cuff-cold flu season in the US. And it's when Boots, UKC's significant profit driven by the holiday season. With that, let me now hand it over to John to discuss our US healthcare business.

Manmohan Mahajan: Now let's turn to U.S, health care. We are focused on driving improved financial performance for U.S, health care in 2024. We expect fiscal 24 sales of $8.3 to $8.8 billion, reflecting fast full year of submit health and ongoing growth in all businesses. On a performance basis, we see sales growth of 10 to 17%, and expect fiscal 24 adjusted EBITDA to be break given at the midpoint of the guidance range. This represents an increase of $325 to $425 million, compared to fiscal 23, driven by growth in full risk lives, fee for service volume, optimization of the clinic footprint, and realignment of the cost-base at village and the robust growth at shields, and Walreens health business growth driven by scaling of our clinical trial business and health care services and through cost management. We assume an effective tax rate of approximately 19 to 20 percent with the year-over-year increase driven by higher international statutory tax rates and benefits recognized in 2023 that are not expected to repeat in 2024.

And as when boots Uk's is significant profit driven by the holiday season with that let me now hand, it over to John to discuss our U S healthcare business.

Speaker 4: Good morning and thanks, Momohan. Over the past two years, we've acquired or launched new business.

Good morning, and thanks, Mamone over the past two years, we've acquired or launched new businesses in primary care multi specialty post acute care urgent care specialty pharmacy services and population health.

Speaker 6: In primary care, multi-specialty, post-acute care, urgent care, specialty pharmacy services, population health, and provider enablement.

And provider enablement.

Speaker 6: Each of these businesses builds upon our strong foundation in retail pharmacy to tap into high growth healthcare service.

Each of these businesses builds upon our strong foundation and retail pharmacy to tap into high growth healthcare services.

Speaker 6: Walgreens uniquely has an advantage in convenience.

Walgreens uniquely has an advantage in convenience.

Speaker 6: consumer traffic, independence, and trust that will help us with our health plan and provider partners create solutions that deliver better outcomes at lower cost.

Consumer traffic independence, and trust that will help us with our health plan and provider partners create solutions that deliver better outcomes at lower cost.

Speaker 6: We connect daily with many of the patients that our plan and provider partners struggle to reach.

We connect daily with many of the patients that are planned and provider partners struggled to reach our goal is to be the independent partner of choice.

Speaker 6: Our goal is to be the independent partner of choice, not just in pharmacy, but also in healthcare services, where we can lower costs and help patients.

Not just in pharmacy, but also in health care services, where we can lower costs and help patients.

Speaker 6: Today most of our customers come to Walgreens to meet their pharmacy.

Today, most of our customers come to Walgreens to meet their pharmacy needs.

Speaker 6: Increasingly, in the future, our pharmacy team is will be a critical part of how our plan and provider partners bend.

Increasingly in the future our pharmacy teams will be a critical part of our plan and provider partners Bend the cost curve.

Manmohan Mahajan: The following five factors are expected to have an outsized impact in the first quarter this year. First, we had a significant tax benefit in prior year period which will not repeat in the first quarter of 2024. Second, we're expecting COVID-19 contributions to be lower in the first quarter, reflecting last year's Omicron wave and seasonality. Third, we anticipate lower contributions from sale and leaseback activity. Fourth, we're lapping elevated levels of labor investments in our pharmacy staff. Finally, we also expect a more normalized flu season in fiscal 24, speaking in the second quarter versus the early start in the prior year.

Speaker 6: So whether you're a health plan or a health system, you're dealing with one Walgreens and a suite of capabilities and service.

So whether you're a health plan or a health system youre dealing with one Walgreens and a suite of capabilities and services.

Speaker 6: Here are some of the ways that our US health care assets work with Walgreens to better serve our customers and payer, provider, and pharma clients.

Here are some of the ways that our U S health care assets work with Walgreens to better serve our customers.

And payor provider and pharma clients.

Speaker 6: Shields is working with our Walgreens specialty pharmacy to convert Walgreens locations to shields partner sites collaborating with our country.

<unk> is working with our Walgreens specialty pharmacy to convert Walgreens locations to shields partner sites collaborating with our contract pharmacies and.

Speaker 6: and delivering better adherence for patients on complex specialty drugs and better value for hospital.

And delivering better adherence for patients on complex specialty drugs and better value for hospitals.

Walgreens health and care centric or partnering with Pearl health to support providers, we'd like to transition from fee for service to value based care by leveraging pearls Tech solutions with Walgreens Health care services.

Speaker 6: Walgreens health and care centers are partnering with Pearl Health to support providers who'd like to transition from fee for service to value-based care by leveraging Pearl's tech solutions with Walgreens health care service.

Manmohan Mahajan: Moving beyond the first quarter, we will see sequential improvement and I will discuss the top four drivers. First, we're executing a series of actions to lower our cost base. These will have limited impact on the first quarter but will start to ramp in the second quarter. There is adjusted EPS benefit of 50 to 60 cents in the balance of the year compared to the first quarter. Second, in our U.S, health care segment, we expect profitability to improve from optimizing the clinic footprint, growing patient panels and realigning costs.

Speaker 6: will accept full medical risk as we support physician's patients by providing post-acute and home health solutions from care centers and population health services for more green cells.

We will accept full medical risk as we support physicians patients by providing post acute and home health solutions from Kerr Centrex and population health services for more green itself.

Speaker 6: All of this is underpinned by Walgreens' engagement of our customers, ensuring them access to better care. Our clinical trials business...

All of this is underpinned by Walgreens engagement of our customers ensuring them access to better care, our clinical trials business, which launched just last year leverages, our pharmacy capabilities and data to recruit and execute on clinical trials for our pharma clients.

Speaker 6: just last year. Leverages are pharmacy capabilities and data.

Speaker 6: to recruit and execute on clinical trials for our pharma clients.

Manmohan Mahajan: Third, we expect growing contributions from retail initiatives, including sequentially improving retail combs and margin expansion programs. Finally, seasonality plays a role in our business, benefiting the second quarter, which is usually the height of the cough cold flu season in the U.S, and is when Boots UK sees significant profit driven by the holiday season.

<unk>.

Speaker 6: We will engage patients in all markets, including underserved communities.

We will engage patients in all markets, including underserved communities to date, we've signed 15 contracts and continue to see increasing demand for our services and.

Speaker 6: We've signed 15 contracts and continue to see increasing demand for our service.

Speaker 6: Care Centrics provides an increasing number of post-acute services to help.

<unk> Centrex provides an increasing number of post acute services to health plans.

Speaker 6: Combining Walgreens convenient locations and care centric health plan relationships and patient management opens the door for a significant opportunity in durable medical equipment sales in our store.

Binding Walgreens convenient locations and care Centrex health plan relationships and patient management.

John Driscoll: With that, let me now hand it over to John to discuss our U.S, health care business. Good morning and thanks, Mamoan. Over the past two years, we've acquired or launched new businesses in primary care, multi-specialty, post-acute care, urgent care, specialty pharmacy services, population health and provider enablement. Each of these businesses builds upon our strong foundation and retail pharmacy to tap into high growth health care services. Walgreens uniquely has an advantage in convenience, consumer traffic, independence and trust that will help us with our health plan and provider partners create solutions that deliver better outcomes at lower cost.

Opens the door for a significant opportunity in durable medical equipment sales in our stores.

The U S health care segment has ramped to an $8 billion sales run rate in just two years.

Speaker 6: The U.S. Healthcare Segment has ramped to an $8 billion sales run rate in just two years.

Our healthcare services aim to deliver better value for our payer and provider partners.

Speaker 6: Our healthcare services came to deliver better value for our payer and provider partners.

Speaker 6: We meet patients where they are in order to improve access to lower cost solutions.

We meet patients where they are in order to improve access to lower cost solutions.

Speaker 6: While we have made progress on the buildup of our healthcare business.

While we have made progress on the Buildout of our health care business, we are not satisfied with the near term returns on our investments.

Speaker 6: We are not satisfied with the near term returns on our investment.

Speaker 6: We will continue to grow in 2024, but with a renewed focus on more profitable.

We will continue to grow in 2024, but with a renewed focus on more profitable growth.

John Driscoll: We connect daily with many of the patients that our plan and provider partners struggle to reap. Our goal is to be the independent partner of choice, not just in pharmacy but also in healthcare services where we can lower costs and health patients. Today most of our customers come to Walgreens to meet their pharmacy needs. If you're a health system, you're dealing with one Walgreens and a suite of capabilities and services. Here are some of the ways that our U.S, healthcare assets work with Walgreens to better serve our customers and payer, provider, and pharma clients.

Speaker 6: We have seen some improved performance in the fourth quarter with adjusted EBITDA sequentially increasing by $83 million.

We have seen some improved performance in the fourth quarter with adjusted EBITDA sequentially, increasing by $83 million.

Speaker 6: Our results reflect gross profit growth with each quarter this year building on the prior with an enhanced focus on expense.

Our results reflect gross profit growth with each quarter of this year building on the prior with an enhanced focus on expense discipline. We are taking swift action to unlock the embedded profits at village and already see the benefit of improved capital and expense management with the addition of our.

Speaker 6: We are taking swift action to unlock the embedded profits at village. In already see the benefit of improved capital and expense management, with the addition of our new CFO at village Rich Rebener.

New CFO at village Rich Rubino.

Speaker 6: Village MD, Summon Health, and City MD will be the most meaningful drivers of growth in fiscal 2024.

Village MD summit health and city AMD will be the most meaningful drivers of growth in fiscal 2024.

Speaker 6: It has taken us longer than anticipated to realize the cost energies across the combined assets.

It has taken us longer than anticipated to realize the cost synergies across the combined assets.

Speaker 6: We also need to solve for a less efficient cost profile and excellence in execution.

We also need to solve for a less efficient cost profile and excellence in execution.

John Driscoll: Shields is working with our Walgreens specialty pharmacy to convert Walgreens locations to shields partner sites collaborating with our contract pharmacies and delivering better adherence for patients on complex specialty drugs and better value for hospitals. Walgreens health and care centers are partnering with Pearl Health to support providers who'd like to transition from fee for service to value-based care by leveraging Pearl's tech solutions with Walgreens healthcare services. We'll accept full medical risk as we support physicians patients by providing post-acute and home health solutions from care centers and population health services for Walgreens health.

We believe that we can best enhance village MD growth and value by focusing on increased density in our highest opportunity markets.

Speaker 6: We believe that we can best enhance village MD growth and value by focusing on increased density in our highest opportunity market.

Speaker 6: and expanding integration of our digital assets.

And expanding integration of our digital assets.

Speaker 6: As we grow, we are constantly evaluating our footprint. With that, we plan to exit approximately five markets and approximately 60 clinics in fiscal 2024.

As we grow we are constantly evaluating.

Our footprint with that we plan to exit approximately five markets and approximately 60 clinics in fiscal 2024.

Speaker 6: These exits may take a variety of forms, including outright sales and hybrid equity arrangements, as examples.

These exits may take a variety of forms including outright sales and hybrid equity arrangements as examples.

Speaker 6: As we exit these non-strategic markets, our long-term focus will be on achieving density in those regions with the greatest potential to drive future profitability growth and where we can best serve patients with our consolidated set of assets.

As we exit these non strategic markets. Our long term focus will be on achieving density in those regions with the greatest potential to drive future profitability growth and where we can best serve patients with our consolidated assets.

John Driscoll: All of this is underpinned by Walgreens engagement of our customers ensuring them access to better care. Our clinical trials business which launched just last year leverages our pharmacy capabilities and data to recruit and execute on clinical trials for our pharma clients. We will engage patients in all markets including underserved communities to date we've signed 15 contracts and continue to see increasing demand for our services. Care centers provides an increasing number of post-acute services to health plans combining Walgreens convenient locations and care centers health plan relationships and patient management opens the door for a significant opportunity in durable medical equipment sales in our stores.

The village MD model works as evidenced by the consistent performance of reducing total cost of care and improving outcomes.

Speaker 6: The Village MD Model works as evidenced by the consistent performance of reducing total cost of care and improving outcomes in our more mature Mark.

More mature markets.

Speaker 6: Village M.D. has a net promoter score of 89, which is one point higher than what I shared a year ago.

Village MD has a net promoter score of 89, which is one point higher than what I shared a year ago.

Speaker 6: We are also launching new virtual and less capital intensive months.

We are also launching new virtual and less capital intensive models in August we launched a pilot program with Citi MD and Duane Reade.

Speaker 6: In August , we launched a pilot program with CityMD and Dwayne Reed.

Duane Reade Walgreens customer can click a QR code and set up a visit at CIT AMD or a virtual telehealth visit with a clinician.

Speaker 6: We plan to roll out this digital partnership across Manhattan in the fall.

We plan to rollout this digital partnership.

Cross Manhattan in the fall.

John Driscoll: The US health care segment has ramped to an $8 billion sales run rate in just two years. Our health care services aim to deliver better value for our payer and provider partners. We meet patients where they are in order to improve access to lower cost solutions.

Speaker 6: Our Village MD business is a primary care led, risk-bearing platform serving all customers and payers, focusing on utilizing their technology platform to deliver the best health outcomes in a lower total cost of care. Our Village MD business is a primary care led, risk-bearing platform serving all customers and payers, focusing on utilizing their technology platform to deliver the best health outcomes in a lower total cost of care.

Our Villa <unk> business is a primary care led risk bearing platform, serving all customers and payors focusing on utilizing their technology platform to deliver the best health outcomes and a lower total cost of care.

Growth in clinics transfer.

Speaker 6: translates into growth in full risk lives as evidenced by the growth in member months in all markets and mature markets.

Translates into growth and full risk lives as evidenced by the growth in member months in all markets and mature markets from fiscal year 2022 to 2023 village MD has grown full risk member months by 40% across all markets and 24% in our mature markets.

John Driscoll: While we have made progress on the build-up of our health care business we are not satisfied with the near term returns on our investments. We will continue to grow in 2024 but with a renewed focus on more profitable growth. We have seen some improved performance in the fourth quarter with adjusted EBITDA sequentially increasing by $83 million. Our results reflect gross profit growth with each quarter this year building on the prior with an enhanced focus on expense discipline.

Speaker 6: From fiscal year 2022 to 2023, Village MD has grown full risk member months by 40%. Across all markets, and 24% in our mature markets.

Speaker 6: Even with the rapid growth of Village MD clinics, we're seeing positive proof points of the business's ability to perform in full risk of rain.

Even with the rapid growth of village MD clinics, we're seeing positive proof points of the businesses ability to perform in full risk arrangements.

Speaker 6: For our full-risk MA population in three mature markets, we've seen village bend the cost curve across multiple pairs.

For our full risk and MA population in three mature markets, we've seen village bend the cost curve across multiple payers.

John Driscoll: We are taking swift action to unlock the embedded profits at village and already see the benefit of improved capital and expense management with the addition of our new CFO at village Rich Rubino. Village MD, Summon most meaningful drivers of growth in fiscal 2024. It is taken as longer than anticipated to realize the cost energies across the combined assets. We also need to solve for a less efficient cost profile and excellence in execution.

Going forward as we focus on more profitable growth, we will build on positive clinical margin to deliver contribution margin on a consolidated basis.

Speaker 6: Going forward as we focus on more profitable growth, we will build on positive clinical margin to deliver contribution margin on a consolidated base.

Speaker 6: Next, I'd like to discuss our latest Walgreens health partner.

Next I'd like to discuss our latest Walgreens health partnership.

We're partnering with Pearl health provider enablement company that can help walgreens expand our risk offering to more community based primary care providers.

Speaker 6: We're partnering with Pearl Health, a provider-enablement company, that can help Walgreens expand our risk offering to more community-based primary care providers.

Speaker 6: Walgreens and Pearl together will provide a management services offering with Walgreens providing prescription fulfillment, medication adherence, immunizations, care,

Walgreens and Pearl together will provide a management services offering with Walgreens, providing prescription fulfillment.

John Driscoll: We believe that we can best enhance village MD growth and value by focusing on increased density in our highest opportunity markets and expanding integration of our digital assets. As we grow, we are constantly evaluating our footprint.

Medication adherence immunizations.

<unk> closures and diagnostic testing.

Integrating local Walgreens pharmacies translates into more access to members with chronic illness and more opportunities to influence better patient outcomes.

Speaker 6: Integrating local Walgreens pharmacies translates into more access to members with chronic illness and more opportunities to influence better patient outcomes.

This partnership enables physicians and health systems to work with us to manage the chronically ill and a much more targeted fashion.

Speaker 6: This partnership enables physicians and health systems to work with us to manage the chronically ill in a much more targeted fashion.

John Driscoll: With that, we plan to exit approximately five markets and approximately 60 clinics in fiscal 2024. These exits may take a variety of forms, including outright sales and hybrid equity arrangements as examples. As we exit these non-strategic markets, our long-term focus will be on achieving density in those regions with the greatest potential to drive future profitability growth and where we can best serve patients with our consolidated services. The village MD model works as evidenced by the consistent performance of reducing total cost of care and improving outcomes in our more mature markets.

Speaker 6: Pearls access to doctors through the ACO Reach program creates a care

<unk> access to doctors through the ACO reach program.

Creates a care traffic control system.

Speaker 6: that can deliver on our commitment to provide better health care at a lower price for plans and patients.

It can deliver on our commitment to provide better health care at a lower price for plans in patients.

This model is also capital efficient.

Speaker 6: This model is also capital efficient, scalable, and configurable nationwide.

Scalable and Configurable nationwide.

With this partnership we are initially assuming risk for 9000 lives in 12 markets.

Speaker 6: With this partnership, we are initially assuming risk for 9,000 lives in 12 marks.

Speaker 6: Our existing Walgreens health payer relationships have started with fee-for-service arrangements tied to care gap closures, clinical quality services, and screening.

Our existing Walgreens health payer relationships have started with fee for service arrangements tied to caregiver closures clinical quality services and screening.

Speaker 6: Successful performance with these services provides a sound foundation for moving up the risk continues.

Successful performance with these services provides a sound foundation for moving up the risk continuum.

John Driscoll: Village MD has a net promoter score of 89, which is one point higher than what I shared a year ago. We are also launching new virtual and less capital intensive models. In August, we launched a pilot program with city MD and Dwayne Reed, where a Dwayne Reed Walgreens customer can click a QR code and set up a visit at city MD or a virtual telehealth visit with a clinician. We plan to roll out this digital partnership across Manhattan in the fall.

Speaker 6: We expect to develop a range of risk arrangement.

We expect to develop a range of risk arrangements that will leverage our assets across the care continuum, including village M. D Summit in care Centrex, all building on our suite of clinical services available at Walgreens.

Speaker 6: that will leverage our assets across the care continuum, including Village MD, Summit and Care Centrics, all building on our suite of clinical services available at Walgreens.

Speaker 6: With that, I'd like to pass it back to Ginger for closing remarks.

With that I'd like to pass it back to Ginger for closing remarks.

Speaker 3: Thank you, John . The last several weeks have reinforced my confidence in the company's potential, and also crystallized what actions must be taken to achieve it. We are focused on the right things. I am already encouraged by early results from decisions that advance our customer focus, eliminate costs, and conserve cash.

Thank you John .

The last several weeks have reinforced my confidence in the company's potential and also crystallized what actions must be taken to achieve it. We are focused on the right things I am already encouraged by early results from decisions that advance our customer focus eliminate costs and conserve cash.

John Driscoll: Our village MD business is a primary care led, risk-bearing platform serving all customers and payers, focusing on utilizing their technology platform to deliver the best health outcomes in a lower total cost of care. Growth in clinics translates into growth in full risk lives as evidenced by the growth in member months in all markets and mature markets. From fiscal year 2022 to 2023, village MD has grown full risk member months by 40 percent across all markets and 24 percent in our mature markets.

Speaker 3: While we have a challenging year ahead of us, as the Moen said earlier, our plan anticipates nine to 12% growth in adjusted operating income from our underlying business. This comes in large part from our aggressive actions to manage cost we control.

While we have a challenging year ahead of us as <unk> said earlier, our plan anticipate 9% to 12% growth in adjusted operating income from our underlying business. This comes in large part from our aggressive actions to manage costs, we can trial.

Speaker 3: Of course, none of this would be possible without the hard work and dedication of a vast team of people here at WBA. They are doing the work and they move quickly to respond to the realities of the business. I'm thankful for their responsiveness and commitment and for the opportunity that lies ahead as we set up WBA for a successful future together. Now I would like to open the line for questions. Operator.

Of course, none of this would be possible without the hard work and dedication of our vas team of people here at W. B a they are doing the work and they've moved quickly to respond to the realities of the business.

John Driscoll: Even with the rapid growth of village MD clinics, we're seeing positive proof points of the business's ability to perform in full risk arrangements. For our full-risk MA population in three mature markets, we've seen village bend the cost curve across multiple payers. Going forward as we focus on more profitable growth, we will build on positive clinical margin to deliver contribution margin on a consolidated basis.

Thanks, all for their responsiveness and commitment and for the opportunity that lies ahead as we set up double uba for a successful future together.

Now I would like to open the line for questions operator.

If you would like to ask a question. Please press star followed by the number one on your telephone keypad.

Speaker 1: If you would like to ask a question, please press star, follow by the number one on your telephone keypad.

Speaker 1: Your first question comes from the line of Lisa Gill from JP Morgan. Please go ahead.

Your first question comes from the line of Lisa Gill from Jpmorgan. Please go ahead.

John Driscoll: Next, I'd like to discuss our latest Walgreens health partnership. We're partnering with Pearl Health, a provider enablement company that can help Walgreens expand our risk offering to more community-based primary care providers. Walgreens and Pearl together will provide a management services offering with Walgreens providing prescription fulfillment, medication adherence, immunizations, care gap closures and diagnostic testing. Integrating local Walgreens pharmacies translates in to more access to members with chronic illness and more opportunities to influence better patient outcomes.

Speaker 7: Thanks very much. Good morning, everyone. I just really wanted to understand two things a little bit better. First, John , when you talk about the ramp and the challenges to profitability, one, when we think about that improved profitability, the exit of those markets in the 60 clinics, is that contributing to better AOI as we think about 2024? And then secondly, trying to better understand where you see that the biggest opportunities from a challenge perspective, you know, you talked about a lot of positives, Pearl, you talked about the turnaround at Village. Obviously, Care Centric did really well this quarter, but you maybe just talk about what are some of the other challenges you feel like you need to overcome to really truly make this a profitable business.

Thanks, very much good morning, everyone.

I, just really wanted to understand two things a little bit better.

John when you talk about the ramp and the challenges to profitability. One when we think about that improved profitability at the exit of those markets and the 60 clinics is that contributing to better.

As we think about 2024, and then secondly, trying to better understand where you see the biggest opportunity is from a talent perspective, you talked about a lot of positives Pearl you talked about the turnaround at village, obviously care centric did really well this quarter, but can you maybe just talk about what are some of the other challenges you feel like you need to over it.

John Driscoll: This partnership enables physicians and health systems to work with us to manage the chronicly ill in a much more targeted fashion. Pearl's access to doctors through the ACO Reach program creates a care traffic control system that can deliver on our commitment to provide better health care and a lot of health care. We have a lower price for plans and patients. This model is also capital efficient, scalable and configurable nationwide. With this partnership, we are initially assuming risk for 9,000 lives in 12 markets.

Really truly make this a profitable business.

Sure I think Lisa thanks for the question.

Speaker 6: Sure, I think, Lisa, thanks for the question.

Speaker 6: If you think about the cost reduction, that's only one piece of what we're doing at Village City in Summit. It's really a three-pronged strategy. We are right-sizing the footprint and getting our expenses in the right place.

If you think about the cost reduction that's only one piece of what we're doing at village city in summit, It's really a three pronged strategy, we are right sizing the footprint and getting our expenses in the right place there are revenue synergy opportunities and we're seeing consistent growth in core revenues, which indicate that there is some opportunity on the.

Speaker 6: There are revenue synergy opportunities and we're seeing consistent growth in core revenues, which indicate that there's some opportunity on the margin side, which we are quickly getting after.

The margin side, which we are quickly getting after and in the rest of U S health care actually we're seeing substantial growth and building profitability in care Centrex shields, our analytics business, our U S healthcare business. So we're seeing substantial demand clinical trials is doing quite well and so I think as a portfolio.

Speaker 6: And then the rest of US healthcare, actually we're seeing substantial growth and building profitability in care centers, shields, our analytics business, our US healthcare business.

John Driscoll: Our existing Walgreens health payer relationships have started with deeper service arrangements tied to care gap closures, clinical quality services and screening. Successful performance with these services provides a sound foundation for moving up the risk continuum. We expect to develop a range of risk arrangements that will leverage our assets across the care continuum, including Village MD Summit and Care Centrics, all building on our suite of clinical services available at Walgreens.

Speaker 6: So we're seeing substantial demand clinical trials is doing quite well. And so I think as a portfolio, we are very confident in our ability to perform in 24. If you look at those revenue numbers, we've got the revenues. Now we're gonna get at some more effectively, some of the embedded profits.

We have a we are we're very confident in our ability to perform in 24.

If you look at those revenue numbers, we've got the revenues now we're going to get at some more effectively some of the embedded profits.

Speaker 7: And then, you know, just as a ties into kind of what everybody's talking about on the retail side, right? And I know you've given some guidance there. But as we think about, you know, expectation of scripts coming down, I would think that maybe there's an opportunity for more scripts to be pulled through into Walgreens. I understand respiratory, et cetera. But maybe if somebody can comment if Rick is on the call, how do you think about, you know, that pull through an opportunity on the scripts, excluding what we're seeing on the respiratory side? I know that the talk was 75% of relationships are signed on reimbursement, but reimbursement is expected to be down. Like, what are going to be some of the big drivers beyond the billion dollars of incremental cost saves that we can actually see drive the operating profit in your core pharmacy business?

And then just as it ties into what everybody is talking about on the retail side right and I know you've given some guidance there, but as we think about it.

Expectation of scripts coming down I would think that maybe there is an opportunity for more scripts to be pulled through into Walgreens, I understand respiratory et cetera, but.

Ginger Graham: With that, I would like to pass it back to Ginger for closing remarks. Thank you, John. The last several weeks have reinforced my confidence in the company's potential and also crystallized what actions must be taken to achieve it. We are focused on the right things. I am already encouraged by early results from decisions that advance our customer focus, eliminate costs and conserve cash. While we have a challenging year ahead of us, as the moment said earlier, our plan anticipates 9-12% growth in adjusted operating income from our underlying business.

Maybe if somebody can comment.

On the call how do you think about that pull through an opportunity on the script, excluding what we're seeing on the respiratory side I know that they're talking about 75% of them.

Our relationships are signed on reimbursement, but reimbursement is expected to be down like what are you going to be some of the big drivers beyond the $1 billion of incremental cost saves that we can actually see drive the operating profit in your core pharmacy business.

Speaker 8: Lisa, this is Rick. It's a great question. And I'll kind of give the building blocks to script growth that we're expecting this year. You know, obviously we saw a weaker end of the fiscal year from market growth, specifically around cough cold flu, some of the respiratory and some of the Medicaid re-determination, which shows lower utilization from consumers. So the primary drivers, the market coming back in mind with what the expectations are from IQV and others. So tuning on here.

And Lisa this is Rick it's a great question and I'll kind of give the building blocks to script growth that we're expecting this year.

Ginger Graham: This comes in large part from our aggressive actions to manage cost we control. Of course, none of this would be possible without the hard work and dedication of a vast team of people here at WBA. They are doing the work and they move quickly to respond to the realities of the business.

Obviously, we saw weaker end of the fiscal year from market growth, specifically around cough cold flu some of the respiratory.

Ginger Graham: I'm thankful for their responsiveness and commitment and for the opportunity that lies ahead as we set up WBA for a successful future together.

And some of the Medicaid Redetermination, which showed some lower utilization from consumers. So.

The primary drivers the market coming back in line with what the expectations are from ITV and others and so that's really what we've seen is we've started in the first quarter of the fiscal year end market is going to be a big underpinning to what we do but we continue to advance our adherence programs that are really driving incremental script growth partnering with.

Speaker 8: That's really what we've seen as we've started in the first quarter of the fiscal year. And Mark is gonna be a big underpinning to what we do, but we continue to advance our adherence programs.

Unknown Executive: Now I would like to open the line for questions.

Unknown Executive: Operator? If you would like to ask a question, please press star, follow by the number one on your telephone keypad.

Speaker 8: that are really driving incremental script growth, partnering with health plans and others to really drive better adherence. And obviously that does help on the script side. You're also going to see some access initiatives, especially going into Calnier 24, which should be some tailwinds for us.

Health plans and others to really drive better adherence and obviously that does help on the Scripps side Youre also going to see some access initiatives, especially going into calendar year, 'twenty, four which should be some tailwind for us.

Lisa Gill: Your first question comes from the line of Lisa Gill from JP Morgan. Please go ahead. Thanks very much. Good morning, everyone. I just really wanted to understand two things a little bit better. First, John, when you talk about the ramp and the challenges to profitability, one, when we think about that improved profitability, the exit of those markets and the 60 clinics, is that contributing to better AOI as we think about 2024?

Lisa Gill: And then secondly, you know, trying to better understand where you see the biggest opportunities from a talent perspective, you know, you talked about a lot of positives, Pearl, you talked about the turnaround, the village, obviously care center, it did really well this quarter, but you maybe just talk about what are some of the other challenges you feel like you need to overcome to really truly make this a profitable business?

Speaker 8: I think some changing dynamics in the marketplace or having individuals choose more open access and things that should give us access differently than what we've seen in the past. And the last one would be that we're really focused on potential for file bives and opportunities given some of the changes in the marketplace. So I think there's a bunch of drivers that really give us confidence that we have tailwinds behind us in the script room.

Change in dynamics in the marketplace or having individuals choose more open access and things that should give us access differently than what we've seen in the past in the last one would be that we're really focused on potential for file buys and opportunities given some of the changes in the marketplace. So I think theres a bunch of drivers that really gives us confidence that we have.

<unk> is behind us in the script.

Trip Com.

Speaker 1: Your next question comes from the line of Charles Rhee from TD Cowland. Please go ahead.

Your next question comes from the line of Charles <unk> from TD Cowen. Please go ahead.

Speaker 5: Yeah, thanks for picking the question. I wanted to ask about Tim coming on board here. Obviously, it seems like it was a fairly quick turnaround process. Maybe you can give us a little bit more insight into the...

Yes, thanks for taking the question.

Wanted to ask about.

Tim coming onboard here, obviously it seems like it was a fairly quick.

John Driscoll: Sure, I think Lisa, thanks for the question. If you think about the cost reduction, that's only one piece of what we're doing at Village City in Summit. It's really a three prong strategy. We are right sizing the footprint and getting our expenses in the right place. There are revenue synergy opportunities and we're seeing consistent growth in core revenues, which indicate that there's some opportunity on the margin side, which we are quickly getting after.

Turnaround process, maybe you can give us a little bit more insight into the.

Speaker 9: that kind of hiring process, sort of when he was identified. And also here, obviously starting in a week and a half or so, the company has given guidance, any kind of sense on his involvement in sort of the business planning for the coming year. Anything there. And then also, obviously, you've given a lot of details in preserving and generating greater cash flow, obviously through

That kind of hiring process. So.

Sort of when he was identified and also here, obviously, starting in a week and a half or so.

The company has given guidance any kind of sense on his involvement in sort of the business planning for the coming year.

Anything there and then also obviously you've given a lot of details in.

John Driscoll: And then the rest of US health care, actually we're seeing substantial growth and building profitability in care centers, shields, our analytics business, our US health care business. So we're seeing substantial demand clinical trials is doing quite well. And so I think as a portfolio, we have, we are, we're very confident in our ability to perform in 24. If you look at those revenue numbers, we've got the revenues. Now we're going to get at some more effectively some of the embedded profits.

Preserving and generating greater cash flow obviously through.

Speaker 9: working capital reduction, et cetera. Any thoughts from the board on sort of the dividend policy?

Working capital reduction et cetera.

Any thoughts from the board on sort of the dividend policy at this point.

Speaker 3: Thanks, Charles. Let me start off with the process around Tim. We, as a board, engaged a global executive search firm and spent quite a bit of time with them talking about what we believe with the important characteristics, attributes and experiences of someone who would lead an organization of this impact and magnitude.

Thanks Charles.

Start off with the process around 10, we as a board engaged a global executive search firm and spent quite a bit of time with them talking about what we believe were the important characteristics attributes and experiences of someone who would lead an organization of this impact in magnitude.

John Driscoll: And then, you know, just as it ties into kind of what everybody's talking about on the retail side, right? And I know you've given some guidance there, but as we think about, you know, expectation of scripts coming down, I would think that maybe there's an opportunity for more scripts to be pulled through into Walgreens. I understand respiratory, et cetera, but maybe if somebody can comment Rick, if Rick is on the call, how do you think about, you know, that pull through an opportunity on the scripts, excluding what we're seeing on the respiratory side, I know that the talk was 75% of relationships are signed on reimbursement, but reimbursement expected to be down. Like, what are going to be some of the big drivers beyond the billion dollars of incremental cost saves that we can actually see drive the operating profit in your core pharmacy business?

Speaker 3: We did review dozens of candidates. There was quite an extensive search process was undertaken and we then narrowed it down to a top few where personal interviews were conducted with those individuals. We did a very aggressive background and reference check with the primary candidate.

We did review dozens of candidates there was quite an extensive.

Search process. It was undertaken and we then narrowed it down to a top few where personal interviews were conducted with those individuals. We did a very aggressive background in reference check with the primary candidates and then have had what I would call very extended conversation in a broad sense.

Speaker 3: And then have had what I would call very extended conversations in a broad sense about philosophy, background, experiences, the future, the market dynamics, the capabilities required, and about the ability to manage a very complex global organization.

Philosophy background experiences the future the market dynamics, the capabilities required and about the ability to manage a very complex global organization.

Rick Gates: Yeah, and Lisa, this is Rick. It's a great question. And I'll kind of give the building blocks to script growth that we're expecting this year. You know, obviously, we saw a weaker end of the fiscal year from market growth, specifically around cough cold flu, some of the respiratory and some of the Medicaid re-determination, which shows lower utilization from consumers. So the primary drivers, the market coming back in line with what the expectations are from IQV and others.

Speaker 3: As Tim mentioned in his comments, every single board member has been involved. I would say that we've done a very extensive evaluation through the process.

As Tim mentioned in his comments every single Board member has been involved I would say that we've done a very extensive evaluation through the process and we did decide in the process that Tim was a very striking candidate for us on a number of fronts obviously.

Speaker 3: And we did decide in the process that Tim was a very striking candidate for us on a number of fronts. Obviously, we were clear that we were looking for someone who had extensive background in health care. And Tim brings that pharmacy provider, payer, networks, distribution. He really does understand a surround sound of the feedback that we get from the market about Walgreens and its many businesses.

We were clear that we were looking for someone who had extensive background in healthcare and Tim brings that pharmacy provider payer networks distribution. He really does understand our surround sound of the feedback that we get from the market about Walgreens and its many businesses. He also Manny.

Rick Gates: And so that's really what we've seen as we've started in the first quarter of the fiscal year. And market's going to be a big underpinning to what we do, but we continue to advance our adherence programs that are really driving incremental script growth, partnering with health plans and others to really drive better adherence and obviously that does help on the script side. You're also going to see some access initiatives, especially going into calendar 24, which should be some tailwinds for us.

Speaker 3: He also has managed scale and complexity before, which I think is very important. This is a $140 billion business. It's global. It has many possibilities. But someone has to be able to manage the strategic and the operational aspects of that.

<unk> scale and complexity before which I think is very important this is a $140 billion business. Its global it has many possibilities, but someone has to be able to manage the strategic and the operational aspects of that and I think you heard from him even in his quick comments, so he's very patient and customer focused which to me.

Rick Gates: I think some changing dynamics in the marketplace or having individuals choose more open access and things that should give us access differently than what we've seen in the past. And the last one would be that we're really focused on potential profile by the opportunities given some of the changes in the marketplace. So I think there's a bunch of drivers that really give us confidence that we have tailwinds behind us in the script in the script role.

Speaker 3: And I think you heard from him even in his quick comments. He's very patient and customer focused, which to me is of primary importance because that passion for the business, the understanding we have on human lives, the importance of our disciplines, our safety and compliance, our quality, our personnel.

He is of primary importance because that passion for the business. The understanding we have on human lives. The importance of our disciplines are safety and compliance our quality our personnel and the love. He has of the store those are big big win for the company. So I personally am.

Speaker 3: and the love he has of the store. Those are big.

Speaker 3: big wins for the company. So I personally am thrilled. I've had, I don't know how many hours with Tim.

Charles Rhyee: Your next question comes from the line of Charles Rhyee from TD Cowland. Please go ahead. Yeah, thanks for picking the question. I wanted to ask about Tim coming on board here. Obviously, it seems like it was a fairly quick turnaround process. Maybe you can give us a little bit more insight into the, you know, that kind of hiring process sort of when he was identified. And also here, obviously, starting in a week and a half or so, the company has given guidance, any kind of sense on his involvement in sort of the business planning for the coming year.

Thrilled I've had I don't know, how many hours with Tim and it's a lot and he and I are not done yet we actually start together next week and a very extended work session. So I think the board is excited as Kim conveyed his excitement and we're all looking forward to him starting obviously that.

Charles Rhyee: Anything there. And then also, you know, obviously, you've given a lot of details in in preserving and generating greater cash flow, obviously through, you know, working capital reduction, et cetera. Any thoughts from the board on sort of the dividend policy at this point. Thanks, Charles.

Speaker 3: And it's a lot and he and I are not done yet. We actually start together next week in a very extended work session.

Speaker 3: So I think the board is excited as Kim conveyed his excitement and we're all looking forward to him starting. Obviously that won't happen again now till the 23rd.

It happened again now till the 23rd So you second question you asked with his involvement in all of this obviously, we've only recently come to this agreement between us and so Tim has not been involved at all in the business or the operation. He has not been a party to farming.

Speaker 3: So you second question you asked with his involvement in all of this. Obviously, we've only recently come to this agreement between us. And so Tim has not been involved at all.

Speaker 3: in the business or the operation. He's not been a party to forming the 2024 plan. Although he and I have had extensive discussions about what the opportunities are, the business capabilities and our challenges. I think he mentioned maybe in his comments as well.

The 2024 plan, although he and I have had extensive discussions about what the opportunities are the business capabilities and our challenges I think he mentioned maybe in his comments as well that he comes in eyes wide open. So I think that's very important but Tim is not a party to this plan.

Speaker 3: that he comes in eyes wide open. So I think that's very important. But Tim is not a party to this plan. He is a party to what we believe is possible and he understands the assumptions we're making and he can't wait to get here.

Ginger Graham: Let me start off with the process around Tim. We as a board engaged a global executive search firm and spent quite a bit of time with them talking about what we believe were the important characteristics attributes and experiences of someone who would lead an organization of this impact and magnitude. We did review dozens of candidates. There was quite an extensive search process that was undertaken. And we then narrowed it down to a top view where personal interviews were conducted with those individuals.

He is a party to what we believe is possible and he understands the assumptions, we're making and he can't wait to get here.

Ginger Graham: We did a very aggressive background and reference check with the primary candidates and then have had what I would call very extended conversations in a broad sense about philosophy, background experiences, the future, the market dynamics, the capabilities required and about the ability to manage a very complex global organization. As Tim mentioned in his comments, every single board member has been involved. I would say that we've done a very extensive evaluation through the process.

Speaker 3: The third question I think you ask was the board and its discussions about the dividend. As you might imagine, this is a very important topic to the company. We have a very thorough process as a board that we review every year. At this point, the board made no changes to the dividend policy.

Third question I think you ask with the board and its discussions about the dividend and so as you might imagine. This is a very important topic to the company. We have a very thorough process as a board that we review every year and at this point. The board has made no changes to the dividend policy.

Your next question comes from the line of George Hill from Deutsche Bank. Please go ahead.

Speaker 1: Your next question comes from the line of George Hill from Deutsche Bank. Please go ahead.

Speaker 10: Yeah, good morning guys. This is kind of a two-party question to go together. I guess can you talk about, let me think about the segment.

Yes. Good morning, guys. This is kind of a two part question that go together I guess can you talk about thinking about the segments.

Speaker 10: how we should look at apportioning the billion dollars in cost savings and kind of the other side of that is the cut in cat-back.

How we should look at apportioning, the $1 billion in cost savings and kind of the other side of that is the cut in capex.

Speaker 10: seems pretty severe, you know, taking $1,000,000 or so out on a sum of $2,000,000 number. How should we take about from a segment perspective, kind of where the cat-backs cuts are coming from and kind of how they're being apportioned? And I don't know if you can kind of give any examples specifically of the bigger sources of cost-cutting savings or the bigger sources of cat-back savings. Thanks.

It was pretty severe taking half a billion dollars or so well on that sub $2 billion number how should we think about from a segment perspective kind of where the where the capex cuts are coming from.

How are they being a portion of that and I don't know if you can kind of give any examples.

Statistically as the biggest sources of cost cutting savings, where the biggest sources of Capex savings.

Ginger Graham: And we did decide in the process that Tim was a very striking candidate for us on a number of fronts. Obviously, we were clear that we were looking for someone who had extensive background and healthcare. And Tim brings that pharmacy provider, payer networks, distribution. He really does understand a surround sound of the feedback that we get from the market about Walgreens and its many businesses. He also has managed scale and complexity before, which I think is very important.

Speaker 5: Yeah, sure. So let me, let me start with the cost savings. We're expecting at least a billion dollar of cost saving. And I think the way you need to think about this as majority of this is going to be coming from our US retail pharmacy business.

Yes, sure. So let me let me start with the cost savings, we're expecting at least $1 billion of cost savings and I think the way you need to think about this as majority of this is going to be coming from our U S retail pharmacy business.

Speaker 5: And, you have three or four components. Let me just walk through them real quick. Ginger talked about we're looking at all costs related to headquarter support office and we're going line by line. So that's one, we are closing unprofitable locations and that's gonna be a critical in the year.

Three or four components, let me just walk through them real quick Ginger.

<unk> talked about we're looking at all costs related to headquarter support office and we're going line by line. So that's one.

We are closing unprofitable locations and that's going to be accretive in the year.

Ginger Graham: This is a $140 billion business. It's global. It has many possibilities. But someone has to be able to manage the strategic and the operational aspects of that. And I think you heard from him even in his quick comments. He's very patient and customer focused, which to me is of primary importance because that passion for the business, the understanding we have on human lives, the importance of our disciplines, our safety and compliance, our quality, our personnel, and the love he has of the store.

Speaker 5: We have optimized store hours in certain locations, you know, to match with, you know, where the local market already is.

We have optimized store hours in certain locations to match with where the local market already is.

Speaker 5: And I think the other big component of this is, you know, we've looked at all the projects spent and all the projects that exist across the company. And I think the focus is there to fold. More importantly, it's how do we focus the organization on customer-focused initiatives so that we deliver more value? But then obviously, you know, reducing the spend on the income state.

And I think the other big component of this is we've looked at all the project spend and all the projects that exist across the company and I think the focus is there are two fold more importantly, it's how do we focus the organization on customer focused initiative, so that we deliver more value within obviously, reducing the spend on the <unk>.

On the income statement.

Speaker 5: So that's on the on the cost side. You know, look on the on the capex side, I'd say, you know, if you look at the trend we've seen, you know, you go back to maybe fiscal 22, I think we were at around 1.4 billion.

So that's on the on the cost side look on the Capex side I would say if you look at the trend we've seen.

Ginger Graham: Those are big, big wins for the company. So I personally am thrilled. I've had, I don't know how many hours with Tim and it's a lot and he and I are not done yet. We actually start together next week in a very extended work session. So I think the board is excited as Tim conveyed his excitement and we're all looking forward to him starting. Obviously that won't happen again now until the 23rd.

You go back to maybe fiscal 'twenty two I think we were at around $1 4 billion.

In the year.

Speaker 5: We increased, you know, to, you know, this is 21, sorry. So, and then we went up, you know, $300 million. And, you know, again, last year was the peak of 2.1. And so, all we're trying to achieve here is getting back to kind of the normal levels of CAPEX here. Two parts.

Increased.

Two this is 21, sorry, so and then we went up $300 million and again last year was the peak of Q1 and so all we're trying to achieve here is getting back to kind of the normal levels of Capex here two parts that are going to contribute and this again is one as John talked about we're very focused on that.

Ginger Graham: So you second question you asked was his involvement in all of this. Obviously, we've only recently come to this agreement between us and so Tim has not been involved at all in the business or the operations. He's not been a party to forming the 2024 plan. Although he and I have had extensive discussions about what the opportunities are, the business capabilities and our challenges. I think he mentioned maybe in his comments as well, that he comes in eyes wide open.

Speaker 5: that are going to contribute into this again is one. As John talked about, we're very focused in our healthcare segment on profitable growth. And so, you know, we will see a lower level of graphics or growth graphics.

Ginger Graham: So I think that's very important. But Tim is not a party to this plan. He is a party to what we believe is possible and he understands the assumptions we're making and he can't wait to get here.

Our healthcare segment on profitable growth and so we will see a lower level of capex or growth capex.

Speaker 5: you know, coming out from US health care segment. And then, you know, if you look at a couple of drivers of the CapEx on the US retail pharmacy, you know, micro fulfillment centers as well as our digital, you know, transformation, you know, some of those things are coming to fruition. And, you know, Ginger talked about, you know, taking a pause on micro fulfillment centers so that, you know, we increase the productivity and achieve the desired results there first. So those are, you know, some of the factors high level that are driving the CapEx reduction.

Coming out from U S Health care segment, and then if you look at a couple of drivers of the Capex on the U S retail pharmacy micro fulfillment centers as well as our digital.

No transformation some of those things are coming to fruition and ginger talked about taking a pause on micro fulfillment centers. So that we increase the productivity and achieved.

Achieved the desired results. There. So those are some of the factors high level that are driving the capex reduction.

Ginger Graham: The third question I think you asked was the board and its discussions about the dividend. And so as you might imagine, this is a very important topic to the company. We have a very thorough process as a board that we review every year. And at this point, the boards made no changes to the dividend policy.

Your next question comes from the line of Kevin Kelly Ando from UBS. Please go ahead.

Speaker 1: Your next question comes from the line of Kevin Kelliendo from UBS. Please go ahead.

Speaker 4: Thanks, and thanks for taking my question. The 60 clinics that are closing, you know, sort of what was the driving factor there? Why were they not successful? Was it competition in the marketplace? Was it payer relationships? Like why weren't you able to drive volumes in those markets? What happened there? What can you learn from that?

Thanks, and thanks for thanks for taking my question.

The 60 clinics that are closing sort of what was the driving factor. There why were they not successful was it competition in the marketplace with the payer relationships like why weren't you able to drive volumes in those in those markets what happened there what can you learn from that.

George Hill: Your next question comes from the line of George Hill from Deutsche Bank. Please go ahead. Yeah, good morning, guys.

Manmohan Mahajan: This is kind of a two-parted question to go together. I guess can you talk about, if you think about the segments, how we should look at apportioning the billion dollars in cost savings. And kind of the other side of that is the the cut in cat-backs seems pretty severe, you know, taking half a billion dollars or so out on the sub-tool. A billion dollar number. How should we think about from a segment perspective, kind of where the where the cat-backs cuts are coming from, and kind of how they're being apportioned. And I don't know if you can kind of give any examples specifically of the bigger sources of cost-cutting savings or the bigger sources of cat-back saving. Thanks.

Speaker 6: Kevin, it's a fair question. I think the way to think about the 60 clinic reductions is that some of them will be closed. In some cases, we're gonna transition those to affiliate relationships, but it comes down to how quickly can we unlock profitable growth. And in the village city summit, it's about concentration of power and relevance within certain markets. Every one of our clinics actually shows month over month growth.

Hey, Kevin It's a it's a fair question I think the way to think about the 60 clinic reductions is that some of them will be closed in some cases, we're going to transition those to affiliate relationships, but it comes down to how quickly can we unlock profitable growth and in the village City summit, it's about.

<unk> of power and relevance within certain markets every one of our clinics actually shows month over month over month growth, but we don't see the growth coming fast enough in certain markets and so we're going to pivot there and be very focused on where we can drive the most profitable growth we're growing through the <unk>.

Speaker 6: But we don't see the growth coming fast enough in certain markets. And so we're gonna pivot there and be very focused on where we can drive the most profitable growth. We're growing through the right sizing of our footprint and some of the changes in our relationship.

Manmohan Mahajan: Yeah, sure. So let me let me start with the cost savings. We're expecting at least a billion dollar of cost saving. And I think the way you need to think about this as majority of this is going to be coming from our US retail pharmacy business. And you have two or four components. Let me just walk through them real quick. You know, Ginger talked about we're looking at all costs related to headquarter support office and we're going line by line.

Sizing of our footprint and some of the changes in our relationships, but our strategy going forward, we will be really focusing on markets, where we see that momentum and scale and.

Speaker 6: But our strategy going forward will be really focusing on markets where we see that momentum and scale and at a level that we want to see to drive the profits and the margin expectations that we want. So it's really more of a discipline around focusing on markets where we can go deep and continue to grow in a compounded serious way. is

At a level that we want to see to drive the profits and the margin expectations that we want so it's it's it's really more of a discipline around focusing on markets, where we can go deep and continue to.

Manmohan Mahajan: So that's one, you know, we are closing unprofitable locations and that's going to be accredited in the year. We have optimized store hours in certain locations, you know, to match with, you know, where the local market already is. And, you know, I think the other big component of this is, you know, we've looked at all the project spend and all the projects that exist across the company. And I think the focus is there to fold more importantly, it's how do we focus the organization on, you know, customer focused initiative so that we deliver more value. But then obviously, you know, reducing the spend on the on the on the income statement.

To grow when a compounded serious way profitably.

Speaker 10: Okay, that's helpful. Can I just ask a quick follow up on cash flow? Is the right way to think about it? I know you didn't provide fiscal 24 free cash flow, but should we take the 6505, add the 600 million and reduce CAPEX 500 million benefit in working CAP and then adjust for net income? Is that like a rough range of where you think it would should come out for fiscal 24? Just go forward for a week. Okay, Sharma. So we combined, and

Okay. That's that's helpful can I just ask a quick follow up on cash flow is the right way to think about it I know you didn't provide fiscal 'twenty four free cash flow, but should we take the $6 55 add the $600 million in reduced capex at $500 million benefit in working cap and then adjust for net income is that like a rough.

Manmohan Mahajan: So that's on the on the cost side. You know, look on the on the capex side, I'd say, you know, if you look at the trend we've seen, you know, you go back to maybe fiscal 22. I think we were at around 1.4 billion in the year. We increased, you know, to, you know, this is 21. Sorry. So and then we went up, you know, 300 million dollars and, you know, again, last year was the peak of 2.1.

Range of where you think it would it should come out for fiscal 'twenty four.

Speaker 5: Yes, sure. So, look at as the end to stand and at the rightly pointed out, we do not generally provide guidance on the free cash flows.

Yes sure.

Look as you understand and as you rightly pointed out we do not generally provide guidance on the free cash flows.

Speaker 5: But we have outlined, you know, we do expect significant growth. And, you know, what we did here is we've carved out, you know, two significant drivers a year on year, but having said that. And there was, let me add a third one to that as well, just, you know, on the US health care.

But we have outlined we do expect significant growth in what we did here is we've carved out two significant drivers of year on year, but having said that and they were looking at a third one to do that as well just you know.

Manmohan Mahajan: And so all we're trying to achieve here is getting back to kind of the normal levels of capex here. Two parts that are going to contribute into this again is one. As John talked about, we're very focused on our healthcare segment on profitable growth. And so, you know, we will see a lower level of capex or growth capex, you know, coming out from US health care segment. And then, you know, if you look at a couple of drivers of the capex on the US retail pharmacy, you know, micro fulfillment centers.

On the U S health care, we are expecting in fiscal 'twenty four.

Speaker 5: You know, we are expecting in fiscal 24.

Speaker 5: at the midpoint of the range to be, you know, break even on the beda and when you look at that year on year, that is significant improvement on the cash as well. So I mean, said that, you know, we're also, you know, looking at other, you know, offsetting items. So we just wanted to make sure you have kind of the tree. We do expect significant improvement and you have those tree key drivers there.

At the midpoint of the range to be breakeven on the EBITDA and when you look at that year on year that is a significant improvement on the cash as well. So having said that we're also looking at other offsetting items. So we just wanted to make sure you have kind of the three we do expect significant improvement in your three key dry.

Manmohan Mahajan: As well as our digital, you know, transformation, you know, some of those things are coming to fruition. And, you know, Ginger talked about, you know, taking a pause on micro fulfillment center so that, you know, we increased the productivity and and achieve the desired results there. So those are, you know, some of the factors high level that are driving the capex reduction.

Or is there.

Our next question comes from the line.

Speaker 1: Your next question comes from the line. I'm paying a pen quillet from Jeffries. Please go ahead.

Tim Quillin from Jefferies. Please go ahead.

Hi, good morning.

Speaker 11: Hi, good morning. I guess John , just a question of village MD right here. You're clearly showing some expectation for meaningful year over your improvement there or at least the whole ballroom health segment. As I think about the fact that you're opening new clinics, how does a J-curve factor into this? Because I'm just trying to bridge to that significant improvement when you're opening new clinics, hopefully you will lose money.

John just a question of village MD right, you're clearly showing some expectation for meaningful year over year improvement there or at least the whole Walgreens health segment as I think about the fact that youre opening new clinics, how does the J curve factor into this right because I'm just trying to bridge to that.

Kevin Caliendo: Your next question comes from the line of Kevin Kelliendo from a UBS, please go ahead. Thanks and thanks for thanks for taking my question. The 60 clinics that are closing, you know, sort of what was the driving factor there? Why were they not successful? Was it competition in the marketplace? Was it pair relationships? Like why weren't you able to drive volumes in those in those markets? What happened there? What can you learn from that?

An improvement when Youre opening new clinics globally, you will lose money sure well first of all I think we're essentially stopped the opening of new clinics, but remember the J curve really refers most clearly to village with summit and city, we've got consistent growing revenues that <unk>.

Speaker 6: Well, first of all, I think we're essentially stopped the opening of new clinics. But remember, the J-curve really refers most clearly to village. With Summit and City, we've got consistent growing revenues that balance that a bit and actually help kind of develop a better profit profile. And then we've got...

John Driscoll: Kevin, it's a fair question. I think the way to think about the 60 clinic reductions is that some of them will be closed. In some cases, we're going to transition those to affiliate relationships. But it comes down to how quickly can we unlock profitable growth. And in the village city summit, it's about concentration of power and relevance within certain markets. Every one of our clinics actually shows month over month growth. But we don't see the growth coming fast enough in certain markets.

<unk> that a bit.

Actually help help kind of develop a show a better profit profile and then we've got solid growth building quarter over quarter with shields care centric. So our analytics business, our clinical trials business in U S health care. So I think you've got to think about it as a portfolio the J curve specifically impacting.

Speaker 6: solid growth building quarter over quarter with shields care centrics or analytics business our clinical trials business in u.s. Healthcare so I think you've got to think about it as a portfolio the j curve specifically impacting the new clinics that we are in the early stage clinic.

The new clinics that we are in the early stage clinics.

Speaker 6: and for village, but we've got a lot of other levers to pull or really advantages in the momentum and the margin profile, improving margin profile across the other businesses.

For village, but we've got a lot of other levers to pull.

John Driscoll: And so we're going to pivot there and be very focused on where we can drive the most profitable growth. We're growing through the right sizing of our footprint and some of the changes in our relationships, but our strategy going forward, we will be really focusing on markets where we see that momentum and scale and at a level that we want to see to drive the profits and the margin X expectations that we want. So it's really more of a discipline around focusing on markets where we can go deep and continue to grow in a compounded serious way profitably.

Or really advantages in the momentum and the margin profile improving margin profile across the other businesses.

John Driscoll: Okay, that's that's helpful.

Our next question comes from the line of Elizabeth Anderson from Evercore ISI. Please go ahead.

Speaker 1: Your next question comes from the line of Elizabeth Anderson from Evercore ISI. Please go ahead.

Hi, guys. Thanks. So much further question one thing that's been obviously a hot topic. This year as utilization. Obviously you guys have a mixed model that both has fee for service as well as value based care life can you talk through us how you sort of see those infections and utilization impacting the village M. D overall business.

Speaker 7: Hi guys, thanks so much for the question. One thing that's been obviously a hot topic this year is utilization. Obviously, you guys have a mixed model that both has fee-for-service as well as salue-based care lives. Can you talk through us how you see those inflections in utilization, impacting the village MD overall, business overall? And then secondly, can you just comment more generally on any additional de-loveraging plans you have for this year?

Overall, and then secondly can you just comment more generally on sort of any additional deleveraging plans you have for this year. Thank you.

Manmohan Mahajan: Can I just ask a quick follow up on cash flow is the right way to think about it. I know you didn't provide fiscal 24 free cash flow, but should we take the 655 add to 600 million and reduce capex 500 million benefit and working cap and then adjust for net income. Is that like a rough range of where you think it would should come out for fiscal 24. Yeah, sure. So look at as you understand that you rightly pointed out, we do not generally provide guidance on the free cash flows.

Yeah.

Speaker 6: I think on the utilization, utilization is our friend, obviously, at City and at Summit, and has been more of a headwind in village. The good news from a village perspective is that even with that increasing in utilization post-COVID, that we are, particularly in our mature markets, showing an improved margin profile on our full-risk lives.

I think on on the on the utilization utilization is our friend, obviously at Citi and at summit.

And it has been more of a headwind in village. The good news from a village perspective is that even with that.

Increasing in utilization post COVID-19 that we are particularly in our mature markets showing an improved margin profile on our full risk lives and so it's it's a the way we solve for what's the benefit of having a two part portfolio.

Speaker 6: And so it's the way we solve for what's a benefit of having a two-part portfolio is continuing to convert more of those fee-for-service lives to full-risk lives with a better margin profile and optimizing our cost base so that we can get the full value of that improvement in revenue.

Manmohan Mahajan: But we have a outline, you know, we do expect significant growth. And, you know, what we did here is we've carved out, you know, two significant drivers, you're on here, but having said that. And there was let me add a third one to that as well, just, you know, on the US health care, you know, we are expecting in fiscal 24. At the midpoint of the range to be, you know, break even on the bed, and you look at that year on year that is significant improvement on the cash as well.

Manmohan Mahajan: Having said that, you know, we're also, you know, looking at other offsetting items. So we just wanted to make sure you have kind of the tree. We do expect significant improvement. You have those three key drivers there.

Is continuing to convert more of those fee for service lives to full risk lives with a better margin profile and optimizing our cost base. So that we can get the full value of that improvement in revenues.

Unknown Executive: Your next question comes from the line.

Speaker 5: You know, I think on the question around deleveraging, a couple of, a couple of sauce there, number one, you know, we're absolutely committed to our investment grade rating.

Yeah, and I think on the on the question around deleveraging.

A couple of couple of thoughts there number one.

We're absolutely committed to our investment grade rating.

Speaker 5: And, you know, as we've said, you know, one of the key areas of focus here in last six to eight weeks for me and Ginger has been, you know, cash management. I've gone through that as to how we're gonna drive the improvement there.

And as we've said one of the key areas of focus here in the last six to eight weeks for me and Ginger It's Ben.

Cash management I've gone through that as to how we're going to drive the improvement there and.

Speaker 5: And you know, and and lost I would point out is we continue to have a portfolio of investments, which we look at, you know, simplification optimizing that that provides us flexibility.

And in the last I would point out is we continue to have a portfolio of investments, which we look at simplification optimizing that that provides us flexibility.

Pam Quillet: I'm Pam Quillet from Jeffrey. Please go ahead. Hi, good morning. I guess John, just a question and village MD, right? You're clearly showing some expectation for meaningful year over your improvement there or at least the old Walgreens health segment. As I think about the fact that you're opening new clinics, how does the J curve factor into this right because I'm just trying to bridge to that significant improvement when you're opening new clinics. Probably will lose money. Sure.

Okay.

Speaker 1: Our final question comes from Eric Purcher from Neffron Research. Please go ahead.

Our final question comes from Eric Percher from Nephron Research. Please go ahead.

Speaker 12: Thank you. I'd like to turn to the topic of labor and ask to what extent you're seeing headwinds from a labor cost and I think there's probably a bit of a reminder on the one time cost. You still on fiscal year 23 versus fiscal year 24.

Thank you I'd like to turn to the topic of labor and ask to what extent, you're seeing headwinds from labor costs and I think there's probably a bit of a reminder, on the one time costs you saw on <unk>.

Fiscal year, 'twenty three versus fiscal year 'twenty four.

John Driscoll: Well, first of all, I think we're essentially stopped the opening of new clinics. But remember the J curve really refers most clearly to village with summit and city. We've got consistent growing revenues that balance that a bit and actually help help kind of develop a show of a better profit profile. And then we've got solid growth building quarter over quarter with shields care centrics or analytics business or clinical trials business in US health care.

Speaker 5: Yeah, maybe let me let me start with the one time cost. And look, you know, we have significant savings here that that we're going to achieve in fiscal 24. And obviously there is there is going to be a cost associated with it. But when I look at the cash flow impact in the year within 24, we see a positive impact net net from a cash flow perspective of, you know, cost savings initiative net of net of the cost associated with it.

Yeah, maybe let me let me start with the one time costs look.

We have significant savings here that we're going to achieve in fiscal 'twenty four and obviously there is there is going to be a cost associated with it but when I look at the cash flow impact in the year within 24, we see a positive impact net net from a cash flow perspective, our cost savings initiative net of net of the cost.

We ended with it you know on the.

Speaker 5: You know, on the labor cost, you know, look, we have seen, you know, investments in last year and a half.

The labor cost Yeah look we.

John Driscoll: So I think you've got to think about it as a portfolio. The J curve specifically impacting the new clinics that we are in the early stage clinics for village. But we've got a lot of other levers to pull or really advantages in the momentum and the margin profile improving margin profile across the other businesses.

We have seen.

Unknown Executive: Thank you.

Investments in last year and a half.

Speaker 5: You know, if you think about Q1, Q1 would be the last quarter where we would see, you know, headwinds from a labor investment perspective. And because most of these investments were in place starting second quarter last year. Apart from that, you know, I think normal, you know, business course investments and labor will continue.

If you think about Q1 Q1 would be the last quarter, where we would see.

Headwinds from a labor investment perspective.

Because most of these investments were in place starting second quarter last year.

Apart from that you know I think normal business course investments in labor will continue.

Elizabeth Anderson: Our next question comes from the line of Elizabeth Anderson from Evercore ISI.

Speaker 1: We have no further questions in the queue at this time. Ginger Graham, I'll turn a call back over to you for closing remarks.

And we have no further questions in the queue at this time Ginger Graham I will turn the call back over to you for closing remarks.

Elizabeth Anderson: Please go ahead. Hi guys, thanks so much for the question. One thing that's been obviously a hot topic this year is utilization. Obviously you guys have a mixed model that both has, you know, fee-for-service as well as salue-based care lives. Can you talk through us how you sort of see those inflections in utilization, impacting the village MD overall? And then secondly, can you just comment more generally on sort of any additional deleveraging plans you have for this year?

John Driscoll: Thank you.

Speaker 3: Thanks so much and thanks everyone for joining the call and your questions. We really appreciate the feedback and the support. We are clear on our challenges and our priorities and we are focused on the future. We're looking forward to your further question so please reach out to our investor relations team. Thanks very much.

Thanks, so much and thanks, everyone for joining the call and your questions. We really appreciate the feedback and the support we are clear on our challenges and our priorities and we are focused on the future. We're looking forward to your further questions. So please reach out to our Investor relations team. Thanks very much.

And this concludes today's conference call. Thank you for your participation and you may now disconnect.

Speaker 1: In this concludes today's conference, thank you for your participation, and you may now disconnect.

John Driscoll: I think on the utilization, utilization is our friend obviously at city and at summit and has been more of a headwind in village. The good news from a village perspective is that even with that increasing in utilization, post-COVID, that we are particularly in our mature markets showing an improved margin profile on our full-risk lives. And so it's the way we solve for what's a benefit of having a two-part portfolio is continuing to convert more of those fee-for-service lives to full-risk lives with a better margin profile and optimizing our cost base so that we can get the full value of that improvement in revenues.

Okay.

Yeah.

Yeah.

Yeah.

John Driscoll: I think on the question around deleveraging, a couple of thoughts there. Number one, we're absolutely committed to our investment-grade rating. And as we've said, one of the key areas of focus here in the last six to eight weeks for me and Ginger has been cash management. I've gone through that as to how we're going to drive the improvement there. And, you know, in the last I would point out is we continue to have a portfolio of investments, which we look at, you know, simplification, optimizing that that provides us flexibility.

Manmohan Mahajan: Our final question comes from Eric Purcher from Neffron Research. Please go ahead. Thank you. I'd like to turn to the topic of labor and ask to what extent you're seeing headwinds from labor cost. And I think there's probably a bit of a reminder on the one-time cost you still on fiscal year 23 versus fiscal year 24. Yeah, maybe let me let me start with the one-time cost. Look, you know, we have significant savings here that that we're going to achieve in fiscal 24.

Manmohan Mahajan: And obviously there is there is going to be a cost associated with it. But when I look at the cash flow impact in the year within 24, we see a positive impact net net from a cash flow perspective of, you know, cost savings initiative net of net of the cost associated with it. You know, on the labor cost, you know, look, we have seen, you know, investments in last year and a half.

Manmohan Mahajan: You know, if you think about Q1, Q1 would be the last quarter where we would see, you know, headwinds from a labor investment perspective. Because most of these investments were in place starting second quarter last year. Apart from that, you know, I think normal, you know, business course investments and labor will continue.

Ginger Graham: We have no further questions in the queue at this time. Ginger Graham, I'll turn a call back over to you for closing remarks. Thanks so much, and thanks everyone for joining the call and your questions. We really appreciate the feedback and the support. We are clear on our challenges and our priorities, and we are focused on the future. We're looking forward to your further questions, so please reach out to our investor relations team. Thanks very much.

Unknown Executive: In this concludes today's conference, thank you for your participation, and you may now disconnect. Thanks.