Walgreens Boots Alliance, Inc.

WBA

US9314271084

Drug Retailers

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MANAGEMENT'S DISCUSSION AND ANALYSIS Item 2. Management's discussion and analysis of financial condition and results

January 06, 2023 at 02:42 am IST

of operations
The following discussion and analysis of the Company's financial condition and
results of operations should be read together with the financial statements and
the related notes included elsewhere herein and the Consolidated Financial
Statements, accompanying notes and management's discussion and analysis of
financial condition and results of operations and other disclosures contained in
the Walgreens Boots Alliance, Inc. Annual Report on Form 10-K for the fiscal
year ended August 31, 2022 as amended by Form 10-K/A for the fiscal year ended
August 31, 2022 filed on November 23, 2022 (the "2022 10-K"). This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those discussed in forward-looking
statements that involve risks and uncertainties. Factors that might cause a
difference include, but are not limited to, those discussed under "Cautionary
note regarding forward-looking statements" below and in Item 1A, Risk factors,
in our 2022 10-K. References herein to the "Company," "we," "us," or "our" refer
to Walgreens Boots Alliance, Inc. and its subsidiaries, and in each case do not
include unconsolidated partially-owned entities, except as otherwise indicated
or the context otherwise requires.

Certain amounts in the management's discussion and analysis of financial condition and results of operations may not add due to rounding. All percentages have been calculated using unrounded amounts for each of the periods presented.



INTRODUCTION AND SEGMENTS
Walgreens Boots Alliance, Inc. and its subsidiaries ("Walgreens Boots Alliance"
or the "Company"), is an integrated healthcare, pharmacy and retail leader
serving millions of customers and patients every day, with a 170-year heritage
of caring for communities. Its operations are conducted through three reportable
segments:
•U.S. Retail Pharmacy,
•International, and
•U.S. Healthcare.

FACTORS, TRENDS AND UNCERTAINTIES AFFECTING OUR RESULTS AND COMPARABILITY
The Company has been, and we expect it to continue to be, affected by a number
of factors that may cause actual results to differ from our historical results
or current expectations. These factors include: the impact of COVID-19 on our
operations and financial results; the financial performance of our equity method
investees, including AmerisourceBergen; the influence of certain holidays;
seasonality; foreign currency rates; changes in vendor, payor and customer
relationships and terms and associated reimbursement pressure; strategic
transactions and acquisitions, dispositions, joint ventures and other strategic
collaborations; changes in laws, including United States ("U.S.") and the United
Kingdom ("UK") tax law changes; changes in trade tariffs, including trade
relations between the U.S. and China, and international relations, including the
UK's withdrawal from the European Union and its impact on our operations and
prospects, and those of our customers and counterparties; the timing and
magnitude of cost reduction initiatives, including under our Transformational
Cost Management Program (as defined below); the timing and severity of the
cough, cold and flu season; fluctuations in variable costs; the impacts of
looting, natural disasters, war, terrorism and other catastrophic events, and
changes in general economic conditions in the markets in which the Company
operates.

Specialty pharmacy represents a significant and growing proportion of
prescription drug spending in the U.S., a significant portion of which is
dispensed outside of traditional retail pharmacies. To better serve the evolving
specialty pharmacy market, in March 2017, the Company and Prime Therapeutics LLC
("Prime"), a PBM, closed a transaction to form a combined central specialty
pharmacy and mail services company, AllianceRx Walgreens Prime, using an
innovative model that sought to align pharmacy, PBM, and health plans to
coordinate patient care, improve health outcomes and deliver cost of care
opportunities. On December 31, 2021, the Company purchased Prime's portion of
the joint venture and now wholly owns the joint venture, which was renamed
AllianceRx Walgreens. Certain clients of AllianceRx Walgreens are not obligated
to contract through AllianceRx Walgreens, and have in the past, and may in the
future, enter into specialty pharmacy and other agreements without involving
AllianceRx Walgreens. Certain clients have chosen not to renew their contracts
through AllianceRx Walgreens which impacts gross sales. However, considering the
relatively low margin nature of this business, the Company does not anticipate
this will have a material impact on operating income.
WBA Q1 2023 Form 10-Q    33

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
Opioid litigation settlements
On November 2, 2022, the Company announced that it had agreed to financial
amounts and payment terms as part of settlement frameworks (the "Settlement
Frameworks") that have the potential to resolve a substantial majority of
opioid-related lawsuits filed against the Company by the attorneys general of
participating states and political subdivisions (the "Settling States") and
litigation brought by counsel for tribes. The Company recorded a $6.5 billion
liability associated with the Settlement Frameworks and other opioid-related
claims and litigation during the three months ended November 30, 2022. The
settlement accrual is reflected in the Consolidated Condensed Statement of
Earnings within Selling, general and administrative expenses as part of the U.S.
Retail Pharmacy segment. The Company recorded $619 million and $5.9 billion of
the estimated settlement liability in Accrued expenses and other current
liabilities, and Accrued litigation obligations, respectively, in the
Consolidated Condensed Balance Sheet.

See Note 10. Commitments and contingencies to the Consolidated Condensed Financial Statements for further information.

U.S. Healthcare
In fiscal 2022, the Company announced the launch of its new healthcare strategy.
The Company plans to become a leading provider of local clinical care services
by leveraging its consumer-centric technology and retail pharmacy network to
deliver value-based care. The Company's goal is to provide better consumer
experiences, improve health outcomes and lower costs.

The Company's U.S. Healthcare segment, created at the beginning of fiscal 2022,
is a consumer-centric, technology-enabled healthcare business that engages
consumers through a personalized, omni-channel experience across the care
journey. The U.S. Healthcare segment delivers improved health outcomes and lower
costs for payors and providers by delivering care through owned and partnered
assets.

The U.S. Healthcare segment currently consists of a majority position in Village
Practice Management Company, LLC ("VillageMD"), a leading, national provider of
value-based primary care services; a majority position in Shields Health
Solutions Parent, LLC ("Shields"), a specialty pharmacy integrator and
accelerator for hospitals, a majority position in CCX Next, LLC ("CareCentrix"),
a leading player in the post-acute and home care management sectors; and the
Walgreens Health organic business that contracts with payors and providers to
deliver clinical healthcare services to their members and members' caregivers
through both digital and physical channels.

See Note 14. Segment reporting to the Consolidated Condensed Financial Statements for further information.



These and other factors can affect the Company's operations and net earnings for
any period and may cause such results not to be comparable to the same period in
previous years. The results presented in this report are not necessarily
indicative of future operating results.

RECENT TRANSACTIONS



Shields acquisition
On December 28, 2022 the Company acquired the remaining 30% equity interest in
Shields for approximately $1.4 billion of cash consideration. See Note 2.
Acquisitions and other investments to the Consolidated Condensed Financial
Statements for further information.

CareCentrix acquisition
On October 11, 2022, the Company announced the acceleration of its plans to
acquire the remaining 45% equity interest of CareCentrix for approximately $392
million of cash consideration. The transaction is expected to close by the third
quarter of fiscal 2023. See Note 2. Acquisitions and other investments to the
Consolidated Condensed Financial Statements for further information.

WBA Q1 2023 Form 10-Q 34

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
Summit Health-CityMD acquisition
On January 3, 2023, VillageMD, through its parent company following an internal
reorganization, completed the acquisition of Summit Health-CityMD in exchange
for $7.0 billion aggregate consideration, consisting of $4.85 billion of cash
consideration paid, $2.05 billion in Preferred Units of VillageMD issued to
Summit Health-CityMD equity holders and $100 million of cash to be paid one year
following closing. In addition, VillageMD paid off approximately $1.9 billion in
net debt of Summit Health-CityMD. Pursuant to the terms and conditions of the
transaction, the Company and Cigna acquired Preferred Units of VillageMD in
exchange for $1.75 billion and $2.5 billion in aggregate consideration,
respectively. The Company also entered into a credit agreement with VillageMD
pursuant to which the Company provided VillageMD senior secured credit
facilities in the aggregate amount of $2.25 billion, consisting of (i) a senior
secured term loan facility in an aggregate original principal amount of
$1.75 billion to support the acquisition of Summit Health-CityMD; and (ii) a
senior secured revolving credit facility in an aggregate original committed
amount of $500 million available for general corporate purposes. In connection
with the issuance of the senior secured credit facilities, the Company received
a $220 million credit for certain fees payable by VillageMD in the form of
Preferred Units of VillageMD. The intercompany senior secured credit facilities
will eliminate in consolidation. See Note 19. Subsequent events to the
Consolidated Condensed Financial Statements for further information.

Sale of AmerisourceBergen common stock
On November 10, 2022, the Company sold 13.2 million shares of AmerisourceBergen
Corporation ("AmerisourceBergen") common stock through a registered public
offering and a concurrent share repurchase by AmerisourceBergen for total
consideration of approximately $2.0 billion.

On December 13, 2022, the Company sold 6.0 million shares of AmerisourceBergen
common stock for total consideration of approximately $984 million. See Note 5.
Equity method investments to the Consolidated Condensed Financial Statements for
further information.

TRANSFORMATIONAL COST MANAGEMENT PROGRAM



On December 20, 2018, the Company announced a transformational cost management
program that was expected to deliver in excess of $2.0 billion of annual cost
savings by fiscal 2022 (the "Transformational Cost Management Program"). The
Company achieved this goal at the end of fiscal 2021.

On October 12, 2021, the Company expanded and extended the Transformational Cost
Management Program through the end of fiscal 2024 and increased its annual cost
savings target to $3.3 billion by the end of fiscal 2024. In fiscal 2022, the
Company increased its annual cost savings target from $3.3 billion to $3.5
billion by the end of fiscal 2024. The Company is currently on track to achieve
the savings target.

The Transformational Cost Management Program, which is multi-faceted and
includes divisional optimization initiatives, global smart spending, global
smart organization and the transformation of the Company's information
technology (IT) capabilities, is designed to help the Company achieve increased
cost efficiencies. To date, the Company has taken actions across all aspects of
the Transformational Cost Management Program which focus on the U.S. Retail
Pharmacy and International reportable segments along with the Company's global
functions. Divisional optimization within the Company's segments includes
activities such as optimization of stores, including plans to close
approximately 350 Boots stores in the UK and approximately 450 to 500 stores in
the U.S. As of November 30, 2022, the Company has closed 244 and 363 stores in
the UK and U.S., respectively.

The Company currently estimates that the Transformational Cost Management
Program will result in cumulative pre-tax charges to its GAAP financial results
of approximately $3.6 billion to $3.9 billion, of which $3.3 billion to $3.6
billion are expected to be recorded as exit and disposal activities. In addition
to the impacts discussed above, as a result of the actions related to store
closures taken under the Transformational Cost Management Program, the Company
recorded $508 million of transition adjustments to decrease retained earnings
due to the adoption of the new lease accounting standard (Topic 842) that became
effective on September 1, 2019. The Company estimates that approximately 80% of
the cumulative pre-tax charges relating to the Transformational Cost Management
Program represent current or future cash expenditures, primarily related to
employee severance and business transition costs, IT transformation and lease
and other real estate payments.

WBA Q1 2023 Form 10-Q 35

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company currently estimates that it will recognize aggregate pre-tax charges
to its GAAP financial results related to the Transformational Cost Management
Program as follows:
Transformational Cost Management Program Activities                                 Range of Charges
Lease obligations and other real estate costs 1                                       $1,250 to 1,350 million
Asset impairments 2                                                                       $750 to 800 million
Employee severance and business transition costs                                      $1,025 to 1,075 million
Information technology transformation and other exit costs                                $300 to 350 million
Total cumulative pre-tax exit and disposal charges                                        $3.3 to 3.6 billion
Other IT transformation costs                                                             $275 to 325 million
Total estimated pre-tax charges                                                           $3.6 to 3.9 billion

1 Includes impairments relating to operating lease right-of-use and finance lease assets. 2 Primarily related to store closures and other asset impairments.



From the inception of the Transformational Cost Management Program to November
30, 2022, the Company has recognized cumulative pre-tax charges to its financial
results in accordance with GAAP of $2.4 billion, of which $2.1 billion is
recorded as exit and disposal activities, See Note 3. Exit and disposal
activities, to the Consolidated Condensed Financial Statements for additional
information. These charges included $681 million related to lease obligations
and other real estate costs, $461 million in asset impairments, $739 million in
employee severance and business transition costs and $219 million of information
technology transformation and transformation and other exit costs and $280
million in other information technology costs.

Costs under the Transformational Cost Management Program, which were primarily
recorded in Selling, general and administrative expenses were as follows (in
millions):
                                               U.S. Retail                                                                Walgreens Boots
Three months ended November 30, 2022             Pharmacy            International           Corporate and Other          Alliance, Inc.

Lease obligations and other real estate costs $ 79 $

     -          $                  -          $           79
Asset impairments                                      18                       -                             -                      18
Employee severance and business transition
costs                                                  11                       1                             4                      16
Information technology transformation and
other exit costs                                       11                       5                             -                      17

Total pre-tax exit and disposal charges $ 119 $


    6          $                  4          $          130
Other IT transformation costs                           8                       1                             -                       8
Total pre-tax charges                         $       127          $            7          $                  4          $          138


                                               U.S. Retail                                                                Walgreens Boots
Three months ended November 30, 2021             Pharmacy            International           Corporate and Other          Alliance, Inc.

Lease obligations and other real estate costs $ 87 $

     2          $                  -          $           89
Asset impairments                                      15                      25                             -                      40
Employee severance and business transition
costs                                                  20                      10                             7                      37
Information technology transformation and
other exit costs                                        1                       7                             1                       9

Total pre-tax exit and disposal charges $ 123 $

    44          $                  9          $          175
Other IT transformation costs                          18                      10                             -                      27
Total pre-tax charges                         $       141          $           53          $                  9          $          203



The amounts and timing of all estimates are subject to change until finalized.
The actual amounts and timing may vary materially based on various factors. See
"Cautionary note regarding forward-looking statements" below.

WBA Q1 2023 Form 10-Q 36

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
EXECUTIVE SUMMARY
The following table presents certain key financial statistics.

(in millions, except per share

amounts)

Three months ended November 30,


                                                                             2022                  2021
Sales                                                                  $      33,382          $    33,901
Gross profit                                                                   6,953                7,574
Selling, general and administrative expenses                                  13,158                6,391
Equity earnings in AmerisourceBergen                                              53                  100
Operating (loss) income (GAAP)                                                (6,151)               1,283
Adjusted operating income (Non-GAAP measure) 1                                 1,014                1,777

(Loss) earnings before interest and income tax (benefit) provision

   (5,159)               3,900

Net (loss) earnings attributable to Walgreens Boots Alliance, Inc. (GAAP)

                                                                        (3,721)               3,580

Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure) 1

                                                           1,004                1,455
Diluted net (loss) earnings per common share (GAAP)                            (4.31)                4.13

Adjusted diluted net earnings per common share (Non-GAAP measure) 1

     1.16                 1.68



                                                                              Percentage increases (decreases)
                                                                               Three months ended November 30,
                                                                            2022                              2021
Sales                                                                      (1.5)                               7.8
Gross profit                                                               (8.2)                              14.2
Selling, general and administrative expenses                               105.9                              10.4
Operating (loss) income (GAAP)                                               NM                                NM
Adjusted operating income (Non-GAAP measure) 1                             (42.9)                             48.5

(Loss) earnings before interest and income tax (benefit) provision

  NM                                NM

Net (loss) earnings attributable to Walgreens Boots Alliance, Inc. (GAAP)

                                                                       NM                                NM

Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure) 1

                                                  (31.0)                             53.5
Diluted net (loss) earnings per common share (GAAP)                          NM                                NM
Adjusted diluted net earnings per common share (Non-GAAP measure) 1        (30.8)                             53.2


                                                           Percent to sales
                                                   Three months ended November 30,
                                                    2022                        2021
Gross margin                                        20.8                        22.3
Selling, general and administrative expenses        39.4

18.9

1See "--Non-GAAP Measures" below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.

NM - Not meaningful. Percentage increases above 200% or when one period includes income and other period includes loss are considered not meaningful.

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

WALGREENS BOOTS ALLIANCE RESULTS OF OPERATIONS



Net earnings
Net loss attributable to the Company for the three months ended November 30,
2022 was  $3.7 billion compared to net earnings of $3.6 billion for the year-ago
quarter. Diluted net loss per share was $4.31 compared to diluted net earnings
per share of $4.13 for the year-ago quarter. The decreases in net earnings and
diluted net earnings per share reflect the $5.2 billion after-tax charge for
opioid-related claims and litigation, partly offset by the $931 million
after-tax gain from the partial sale of the Company's equity method investment
in AmerisourceBergen in the three months ended November 30, 2022, compared to
the $2.5 billion after-tax gain on the Company's investments in VillageMD and
Shields in the year-ago quarter. Additionally, the decrease reflects lower
COVID-19 vaccination volumes, continued reimbursement pressure and planned labor
investments, partly offset by improved higher retail gross profit from higher
sales and gross margin expansion.

Other income, net for the three months ended November 30, 2022 was $1.0 billion
compared to $2.6 billion for the year-ago quarter. The decrease in other income
is mainly due to the gains on the Company's investments in VillageMD and Shields
in the year-ago quarter, partly offset by the $1.0 billion pre-tax gain from the
partial sale of the Company's equity method investment in AmerisourceBergen.

Interest expense, net was $110 million and $86 million for the three months ended November 30, 2022 and 2021, respectively. The increase in interest expense was primarily the result of higher credit facility drawdowns in the current period.



The Company's effective tax rate for the three months ended November 30, 2022
was a benefit of 27.5 percent, primarily due to a reduction in the valuation
allowance and impact of the opioid-related claims and litigation. Additionally,
the Company recognized a tax benefit due to the reduction of a valuation
allowance previously recorded against deferred tax assets related to capital
loss carryforwards. The reduction is primarily due to capital loss carryforwards
utilized in the current period against capital gains recognized on the sale of
shares in AmerisourceBergen and based on forecasted capital gains. This benefit
was partially offset by the impact of certain nondeductible opioid-related
claims recorded in the three months ended November 30, 2022. The effective tax
rate for the three months ended November 30, 2021 was an expense of 7.2 percent,
primarily due to lower tax expense on gains from consolidation of the Company's
investment in VillageMD and Shields, as a portion of these gains is not subject
to tax.

Adjusted net earnings (Non-GAAP measure)
Adjusted net earnings attributable to the Company for the three months ended
November 30, 2022 decreased 31.0 percent to $1.0 billion compared with the
year-ago quarter. Adjusted diluted net earnings per share for the three months
ended November 30, 2022 decreased 30.8 percent to $1.16 compared with the
year-ago quarter.

Excluding the impact of currency translation, the decrease in adjusted net
earnings for the three months ended November 30, 2022 primarily reflects lower
volumes of COVID-19 vaccinations and testing, planned payroll and IT investments
in U.S. Retail Pharmacy, and growth investments in U.S Healthcare, partly offset
by improved retail contributions in the U.S. Retail Pharmacy and International
segments and the favorable impact of a lower tax rate compared with the year-ago
quarter due to reduction of a valuation allowance previously recorded against
deferred tax assets related to capital loss carryforwards. See "--Non-GAAP
Measures" below for a reconciliation to the most directly comparable financial
measure calculated in accordance with GAAP and related disclosures.

RESULTS OF OPERATIONS BY SEGMENT

U.S. Retail Pharmacy
The Company's U.S. Retail Pharmacy segment includes the Walgreens business which
is comprised of the operations of retail drugstores, health and wellness
services, specialty and home delivery pharmacy services, and its equity method
investment in AmerisourceBergen. Sales for the segment are principally derived
from the sale of prescription drugs and a wide assortment of retail products,
including health and wellness, beauty, personal care and consumables and general
merchandise.

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS


FINANCIAL PERFORMANCE                                               (in millions, except location
                                                                              amounts)
                                                                   Three months ended November 30,
                                                                      2022                  2021
Sales                                                           $      27,204          $    28,032
Gross profit                                                            5,886                6,347
Selling, general and administrative expenses                           11,698                5,091
Equity earnings in AmerisourceBergen                                       53                  100
Operating (loss) income (GAAP)                                         (5,758)               1,356
Adjusted operating income (Non-GAAP measure) 1                          1,105                1,690

Number of prescriptions 2                                               211.3                218.0
30-day equivalent prescriptions 2,3                                     311.6                313.8
Number of locations at period end                                       8,817                8,942



                                                                              Percentage increases (decreases)
                                                                               Three months ended November 30,
                                                                            2022                              2021
Sales                                                                      (3.0)                               3.2
Gross profit                                                               (7.3)                              12.6
Selling, general and administrative expenses                               129.8                               6.7
Operating (loss) income (GAAP)                                               NM                                NM
Adjusted operating income (Non-GAAP measure) 1                             (34.6)                             46.3

Comparable sales 4                                                          3.8                                7.9
Pharmacy sales                                                             (4.2)                               1.1
Comparable pharmacy sales 4                                                 4.8                                6.8
Retail sales                                                                0.8                               10.1
Comparable retail sales 4                                                   1.4                               10.6
Comparable number of prescription 2,4                                      (3.1)                               7.1
Comparable 30-day equivalent prescriptions 2,3,4                             -                                 6.2



                                                           Percent to sales
                                                   Three months ended November 30,
                                                    2022                        2021
Gross margin                                        21.6                        22.6
Selling, general and administrative expenses        43.0

18.2





1See "--Non-GAAP Measures" below for a reconciliation to the most directly
comparable financial measure calculated in accordance with GAAP and related
disclosures.
2Includes vaccinations, including COVID-19.
3Includes the adjustment to convert prescriptions greater than 84 days to the
equivalent of three 30-day prescriptions. This adjustment reflects that these
prescriptions include approximately three times the amount of product days
supplied compared to a normal prescription.
4Comparable sales are defined as sales from stores that have been open for at
least twelve consecutive months without closure for seven or more consecutive
days, including due to looting or store damage, and without a major remodel or
being subject to a natural disaster, in the past twelve months as well as
e-commerce sales. E-commerce sales include
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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
digitally initiated sales online or through mobile applications. Relocated
stores are not included as comparable sales for the first twelve months after
the relocation. Acquired stores are not included as comparable sales for the
first twelve months after acquisition or conversion, when applicable, whichever
is later. Comparable sales, comparable pharmacy sales, comparable retail sales,
comparable number of prescriptions and comparable number of 30-day equivalent
prescriptions refer to total sales, pharmacy sales, retail sales, number of
prescriptions and number of 30-day equivalent prescriptions, respectively.
Comparable retail sales for previous periods have been restated to include
e-commerce sales. The method of calculating comparable sales varies across the
retail industry and our method of calculating comparable sales may not be the
same as other retailers' methods.

NM - Not meaningful. Percentage increases above 200% or when one period includes income and other period includes loss are considered not meaningful.



Sales for the three months ended November 30, 2022 compared to three months
ended November 30, 2021
Sales for the three months ended November 30, 2022 decreased by 3.0 percent to
$27.2 billion. Comparable sales increased by 3.8 percent for the three months
ended November 30, 2022.

Pharmacy sales decreased by 4.2 percent for the three months ended November 30,
2022 and represented 74.3 percent of the segment's sales. Pharmacy sales were
negatively impacted by a 7.8 percentage point headwind from AllianceRx
Walgreens. The pharmacy sales decrease for three months ended November 30, 2022,
compares to sales growth of 1.1% in the year-ago quarter, which included a
significant contribution from COVID-19 vaccinations and testing. For the three
months ended November 30, 2021, pharmacy sales increased 1.1 percent and
represented 75.3 percent of the segment's sales. Comparable pharmacy sales
increased 4.8 percent for the three months ended November 30, 2022, benefiting
from higher branded drug inflation, compared to an increase of 6.8 percent in
the year-ago quarter. The effect of generic drugs, which have a lower retail
price, replacing brand name drugs, reduced pharmacy sales by 0.5 percent for the
three months ended November 30, 2022 compared to a reduction of 0.3 percent in
the year-ago quarter. The effect of generics on segment sales was a reduction of
0.4 percent for the three months ended November 30, 2022 compared to a reduction
of 0.2 percent in the year-ago quarter. Within comparable pharmacy sales, 30-day
equivalent prescriptions filled during the three months ended November 30, 2022
were flat compared to the year-ago quarter.

Retail sales increased by 0.8 percent for the three months ended November 30,
2022 and were 25.7 percent of the segment's sales. In comparison, in the
year-ago quarter, retail sales increased by 10.1 percent and comprised 24.7
percent of the segment's sales. Comparable retail sales increased 1.4 percent in
the three months ended November 30, 2022 and 10.6 percent in the year-ago
quarter. The increase in comparable retail sales in the current quarter was
primarily driven by strong cough, cold, and flu sales, and strength in the
beauty and personal care categories, benefiting from owned brand offerings and
improved inventory availability, partially offset by lower sales of over the
counter test kits.

Operating loss for the three months ended November 30, 2022 compared to
operating income for the three months ended November 30, 2021
Gross profit was $5.9 billion for the three months ended November 30, 2022
compared to $6.3 billion in the year-ago quarter. Gross profit decreased 7.3
percent, primarily driven by lower contributions from COVID-19 vaccinations and
testing, and reimbursement net of procurement savings, partially offset by
higher retail gross profit from higher sales and gross margin expansion.

Selling, general and administrative expenses as a percentage of sales were 43.0
percent for the three months ended November 30, 2022 and 18.2 percent for the
three months ended November 30, 2021. The increase is primarily driven by the
charge for opioid-related claims and litigation, increased labor investments,
and incremental IT and digital investments, partly offset by cost savings from
the Transformational Cost Management Program.

Operating loss for the three months ended November 30, 2022 was $5.8 billion,
including $53 million of operating income from the Company's share of equity
earnings in AmerisourceBergen. This compared to $1.4 billion of operating income
in the year-ago quarter, including $100 million from Company's share of equity
earnings in AmerisourceBergen. The decrease was primarily driven by a $6.5
billion pre-tax charge for opioid-related claims and litigation, lower COVID-19
vaccination volumes, continued reimbursement pressure, and planned labor
investments, partially offset by improved retail gross profit from higher sales
and gross margin expansion.

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                      MANAGEMENT'S DISCUSSION AND ANALYSIS
Adjusted operating income (Non-GAAP measure) for the three months ended November
30, 2022 and 2021
Adjusted operating income for the three months ended November 30, 2022 decreased
by 34.6 percent to $1.1 billion. The decrease was primarily due to lower
COVID-19 vaccination volumes, continued reimbursement pressure and planned labor
investments, partly offset by improved retail gross profit from higher sales and
gross margin expansion.

See "--Non-GAAP Measures" below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.

International


The Company's International segment consists of pharmacy-led health and beauty
retail businesses outside the U.S. and the Company's pharmaceutical wholesale
and distribution business in Germany. Pharmacy-led health and beauty retail
businesses include Boots branded stores in the UK, the Republic of Ireland and
Thailand, the Benavides brand in Mexico and the Ahumada brand in Chile. Sales
for these businesses are principally derived from the sale of prescription drugs
and health and wellness, beauty, personal care and other consumer products.

The International segment operates in currencies other than the U.S. dollar,
including the British pound sterling, euro, Chilean peso and Mexican peso and
therefore the segment's results are impacted by movements in foreign currency
exchange rates. See Item 3, Quantitative and qualitative disclosure about market
risk, for further information on currency risk.

The Company presents certain information related to operating results in
"constant currency," which is a non-GAAP financial measure. Comparable sales in
constant currency, comparable pharmacy sales in constant currency and comparable
retail sales in constant currency exclude the effects of fluctuations in foreign
currency exchange rates. See "--Non-GAAP Measures."

FINANCIAL PERFORMANCE                                             (in millions, except location
                                                                            amounts)
                                                                 Three months ended November 30,
                                                                    2022                  2021
Sales                                                         $       5,189          $     5,818
Gross profit                                                          1,050                1,207
Selling, general and administrative expenses                            944                1,153
Operating income (GAAP)                                                 106                   54
Adjusted operating income (Non-GAAP measure) 1                          116                  164

Number of locations at period end                                     3,978                4,020


                                                                              Percentage increases (decreases)
                                                                               Three months ended November 30,
                                                                            2022                              2021
Sales                                                                      (10.8)                             35.8
Gross profit                                                               (13.0)                             21.9
Selling, general and administrative expenses                               (18.2)                             21.1
Operating income (GAAP)                                                     96.5                              39.8
Adjusted operating income (Non-GAAP measure) 1                             (28.9)                             89.0

Comparable sales in constant currency 2                                     5.9                               12.0
Pharmacy sales                                                             (14.7)                             13.6
Comparable pharmacy sales in constant currency 2                            1.2                                9.2
Retail sales                                                               (8.1)                              18.0
Comparable retail sales in constant currency 2                              8.7                               13.7


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                WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                                                           Percent to sales
                                                   Three months ended November 30,
                                                    2022                        2021
Gross margin                                        20.2                        20.7
Selling, general and administrative expenses        18.2

19.8





1See "--Non-GAAP Measures" below for a reconciliation to the most directly
comparable financial measure calculated in accordance with GAAP and related
disclosures.
2Comparable sales in constant currency are defined as sales from stores that
have been open for at least twelve consecutive months without closure for seven
or more consecutive days, including due to looting or store damage, and without
a major remodel or being subject to a natural disaster, in the past twelve
months as well as e-commerce sales. Comparable sales in constant currency
exclude wholesale sales in Germany. E-commerce sales include digitally initiated
sales online or through mobile applications. Relocated stores are not included
as comparable sales for the first twelve months after the relocation. Acquired
stores are not included as comparable sales for the first twelve months after
acquisition or conversion, when applicable, whichever is later. Comparable sales
in constant currency, comparable pharmacy sales in constant currency and
comparable retail sales in constant currency refer to total sales, pharmacy
sales and retail sales, respectively. The method of calculating comparable sales
in constant currency varies across the retail industry and our method of
calculating comparable sales in constant currency may not be the same as other
retailers' methods.

NM - Not meaningful. Percentage increases above 200% or when one period includes income and other period includes loss are considered not meaningful.



Sales for the three months ended November 30, 2022 compared to three months
ended November 30, 2021
Sales for the three months ended November 30, 2022 decreased 10.8 percent to
$5.2 billion. The adverse impact of currency translation on sales was 15.4
percentage points. Comparable sales in constant currency, increased 5.9 percent,
mainly due to higher sales in Boots UK.

Pharmacy sales decreased 14.7 percent in the three months ended November 30,
2022 and represented 16.7 percent of the segment's sales. The adverse impact of
currency translation on pharmacy sales was 13.8 percentage points. Comparable
pharmacy sales in constant currency increased 1.2 percent compared to the year
ago-quarter, reflecting stronger pharmacy volumes in Mexico and Chile, partially
offset by lower comparable pharmacy sales in the UK, due to lower demand for
COVID-19 services compared to the year ago-quarter.

Retail sales decreased 8.1 percent for the three months ended November 30, 2022
and represented 31.8 percent of the segment's sales. The adverse impact of
currency translation on retail sales was 16.5 percentage points. Comparable
retail sales in constant currency increased 8.7 percent reflecting higher retail
sales in the UK, including the impact of the ongoing recovery in store footfall,
especially in larger stores and travel locations, compared to pre-COVID-19
levels.

Pharmaceutical wholesale sales decreased 11.1 percent for the three months ended
November 30, 2022 and represented 51.5 percent of the segment's sales. The
adverse impact of currency translation on pharmaceutical wholesale sales was
15.2 percentage points. Excluding the impact of currency translation, the
increase in pharmaceutical wholesale sales reflects strong execution in a
growing market.

Operating income for the three months ended November 30, 2022 compared to three
months ended November 30, 2021
Gross profit decreased 13.0 percent for the three months ended November 30,
2022. Gross profit was adversely impacted by 15.1 percentage points, or
$182 million, as a result of currency translation. Excluding the impact of
currency translation, the increase was primarily due to higher retail sales in
the UK, and strong execution in our Germany wholesale business. This was
partially offset by lower demand for COVID-19 pharmacy services and the adverse
gross margin impact of National Health Service ("NHS") pharmacy funding in the
UK.

Selling, general and administrative expenses in the quarter decreased 18.2
percent from the year-ago quarter to $944 million, reflecting a favorable
currency impact of 14.9 percent, lower acquisition-related costs in the Germany
wholesale business and lower costs related to the Transformational Cost
Management Program. This decrease was partially offset by increased UK in-store
and marketing activity, higher inflation, and the expiration of COVID-19 rental
reductions in the UK, received in the year-ago quarter.
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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

Operating income for the three months ended November 30, 2022 increased 96.5
percent to $106 million. Operating income was adversely impacted by 18.8
percentage points, or $10 million as a result of currency translation. Excluding
the impact of currency translation, the increase in operating income reflects
lower acquisition-related costs in the Germany pharmaceutical wholesale business
and lower costs related to the Transformational Cost Management Program compared
to the year-ago quarter, and a strong performance in UK retail sales and
Germany. This was partially offset by lower demand for COVID-19 pharmacy
services, the adverse gross margin impact of NHS pharmacy funding and the
expiration of COVID-19 rental reductions received in the year-ago quarter in the
UK.

Adjusted operating income (Non-GAAP measure) for the three months ended November
30, 2022 compared to three months ended November 30, 2021
Adjusted operating income for the three months ended November 30, 2022 decreased
28.9 percent to $116 million. Adjusted operating income in the quarter was
adversely impacted by 8.6 percentage points, or $14 million, of currency
translation. Excluding the impact of currency translation, the decrease in
adjusted operating income was primarily in the UK, reflecting lower demand for
COVID-19 pharmacy services, the adverse gross margin impact of NHS pharmacy
funding and increased selling, general and administrative expenses, reflecting
increased in-store and marketing activity, higher inflation, and the expiration
of COVID-19 rental reductions received in the year-ago quarter. This was
partially offset by a strong performance in UK retail sales and Germany.

See "--Non-GAAP Measures" below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.

U.S. Healthcare
The Company's U.S. Healthcare segment, created at the beginning of fiscal 2022,
is a consumer-centric, technology-enabled healthcare business that engages
consumers through a personalized, omni-channel experience across the care
journey. The U.S. Healthcare segment delivers improved health outcomes and lower
costs for payors and providers by delivering care through owned and partnered
assets.

The U.S. Healthcare segment currently consists of a majority position in
VillageMD, a leading, national provider of value-based primary care services; a
majority position in Shields, a specialty pharmacy integrator and accelerator
for hospitals; a majority position in CareCentrix, a leading player in the
post-acute and home care management sectors, and the Walgreens Health organic
business that contracts with payors and providers to deliver clinical healthcare
services and care management programs to their members and members' caregivers
through both digital and physical channels.

FINANCIAL PERFORMANCE                                         (in millions, except location amounts)
                                                                  Three months ended November 30,
                                                                     2022                   2021
Sales                                                         $           989          $        51
Gross profit                                                               17                   20
Selling, general and administrative expenses                              454                   65
Operating loss (GAAP)                                                    (436)                 (45)
Adjusted operating loss (Non-GAAP measure) 1                             (152)                 (13)
Adjusted EBITDA (Non-GAAP measure) 1                                     (124)                 (10)

Number of payor/provider partnerships at period end                         3                    2

Number of locations with Walgreens Health Corners at period end

                                                                       112                   45
Number of VillageMD co-located clinics at period end 2                    182                   72
Number of total VillageMD clinics at period end 2                         375                  256



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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
1See "--Non-GAAP Measures" below for a reconciliation to the most directly
comparable financial measure calculated in accordance with GAAP and related
disclosures.
2Clinics are defined as the primary care locations where the Company or the
Company's affiliates lease or license space and the providers are employed by
either the Company or one of the Company's affiliates. These clinics are
primarily branded as Village Medical where the Company employs the providers
but, in some instances, may operate under their own brands.

Sales for the three months ended November 30, 2022 compared to three months
ended November 30, 2021
Sales for the three months ended November 30, 2022 were $989 million. This
includes VillageMD sales of $550 million, Shields sales of $104 million, and
CareCentrix sales of $333 million. Sales for the three months ended November 30,
2021 were $51 million reflecting approximately six days of VillageMD and thirty
days of Shields sales in the year-ago quarter.

Operating loss for the three months ended November 30, 2022 compared to three
months ended November 30, 2021
Gross profit for the three months ended November 30, 2022 was $17 million,
reflecting results from Shields, VillageMD and CareCentrix. Shields and
CareCentrix gross profit was more than offset by the VillageMD expansion.
VillageMD added 119 clinics compared to the year-ago quarter for a total of 375
total clinics open.

Selling, general and administrative expenses were $454 million for the three
months ended November 30, 2022 compared to $65 million for the three months
ended November 30, 2021. The increase is driven by the year-over-year impact of
acquisitions and higher investments in the organic business.

Operating loss for the three months ended November 30, 2022 was $436 million, compared to a loss of $45 million in the year-ago quarter. Operating loss represents a full quarter of VillageMD results compared to six days in the year-ago quarter and growth in organic business investments.



Adjusted operating loss (Non-GAAP measure) for the three months ended November
30, 2022 compared to three months ended November 30, 2021
Adjusted operating loss was $152 million for the three months ended November 30,
2022 compared to a loss of $13 million in the year-ago quarter, reflecting a
full quarter of VillageMD results compared to six days in the year-ago quarter
and growth in organic business investments, partially offset by positive
contributions from Shields and CareCentrix.

Adjusted EBITDA for the three months ended November 30, 2022 compared to three
months ended November 30, 2021
Adjusted EBITDA was negative $124 million, reflecting a full quarter of
VillageMD results compared to six days of results in the year-ago quarter and
growth in organic business investments, partly offset by positive contributions
from Shields and CareCentrix.

See "--Non-GAAP Measures" below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.



NON-GAAP MEASURES
The following information provides reconciliations of the supplemental non-GAAP
financial measures, as defined under the SEC rules, presented herein to the most
directly comparable financial measures calculated and presented in accordance
with GAAP. The Company has provided the non-GAAP financial measures herein,
which are not calculated or presented in accordance with GAAP, as supplemental
information and in addition to the financial measures that are calculated and
presented in accordance with GAAP. See notes to the "Net (loss) earnings (GAAP)"
to "Adjusted diluted net (loss) earnings per common share (Non-GAAP measure)"
reconciliation table for definitions of non-GAAP financial measures and related
adjustments presented below.

These supplemental non-GAAP financial measures are presented because management
has evaluated the Company's financial results both including and excluding the
adjusted items or the effects of foreign currency translation, as applicable,
and believes that the supplemental non-GAAP financial measures presented provide
additional perspective and insights when analyzing the core operating
performance of the Company from period to period and trends in the Company's
historical operating results. These supplemental non-GAAP financial measures
should not be considered superior to, as a substitute for or as an alternative
to, and should be considered in conjunction with, the GAAP financial measures
presented herein.

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company does not provide a reconciliation for non-GAAP estimates on a
forward-looking basis where it is unable to provide a meaningful or accurate
calculation or estimation of reconciling items and the information is not
available without unreasonable effort. This is due to the inherent difficulty of
forecasting the timing or amount of various items that have not yet occurred,
are out of the Company's control or cannot be reasonably predicted, and that
would impact the most directly comparable forward-looking GAAP financial
measure. These items may include but are not limited to merger integration
expenses, restructuring charges, acquisition-related costs, asset impairments
and other significant items that currently cannot be predicted without
unreasonable efforts. For the same reasons, the Company is unable to address the
probable significance of the unavailable information. Forward-looking non-GAAP
financial measures may vary materially from the corresponding GAAP financial
measures.

The Company also presents certain information related to current period
operating results in "constant currency", which is a non-GAAP financial measure.
These amounts are calculated by translating current period results at the
foreign currency exchange rates used in the comparable period in the prior year.
The Company presents such constant currency financial information because it has
significant operations outside of the U.S. reporting in currencies other than
the U.S. dollar and such presentation provides a framework to assess how its
business performed excluding the impact of foreign currency exchange rate
fluctuations.

Operating (loss) income to Adjusted operating income (loss) by segments (in millions):

Three months ended November 30, 2022


                                                                                                                             Corporate and          Walgreens
                                             U.S. Retail Pharmacy           International           U.S. Healthcare              Other                Boots
                                                                                                                                                  Alliance, Inc.
Operating (loss) income (GAAP)              $        (5,758)              $          106          $           (436)         $        (63)         $

(6,151)


Certain legal and regulatory accruals
and settlements                                       6,554                            -                         -                     -

6,554


Transformational cost management                        127                            7                         -                     4

138


Acquisition-related amortization                         78                           14                       238                     -                  330
Acquisition-related costs                                 1                          (11)                       47                     3                   39
Adjustments to equity earnings in
AmerisourceBergen                                        86                            -                         -                     -                   86
LIFO provision                                           18                            -                         -                     -                   18

Adjusted operating income (loss)
(Non-GAAP measure)                          $         1,105               $          116          $           (152)         $        (56)         $     1,014



                                                                                  Three months ended November 30, 2021
                                               U.S. Retail            International          U.S. Healthcare          Corporate and        Walgreens Boots
                                                 Pharmacy                                                                 Other             Alliance, Inc.
Operating income (loss) (GAAP)               $       1,356          $           54          $           (45)         $        (82)         $

1,283


Transformational cost management                       141                      54                        -                     9

203


Acquisition-related amortization                       140                      17                        8                     -                    165
Acquisition-related costs                               (3)                     39                       24                    11                     71
Adjustments to equity earnings in
AmerisourceBergen                                       43                       -                        -                     -                     43
LIFO provision                                          14                       -                        -                     -                     14

Adjusted operating income (loss)
(Non-GAAP measure)                           $       1,690          $          164          $           (13)         $        (63)         $       1,777


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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

Net (loss) earnings to Adjusted net earnings & Net (loss) earnings per share to Adjusted earnings per share (in millions):

Three months ended November 30,


                                                                                      2022                2021

Net (loss) earnings attributable to Walgreens Boots Alliance, Inc. (GAAP)

$ (3,721) $ 3,580



Adjustments to operating (loss) income:
Certain legal and regulatory accruals and settlements 1                                6,554                  -
Transformational cost management 2                                                       138                203
Acquisition-related amortization 3                                                       330                165
Acquisition-related costs 4                                                               39                 71
Adjustments to equity earnings in AmerisourceBergen 5                                     86                 43
LIFO provision 6                                                                          18                 14

Total adjustments to operating (loss) income                                           7,166                495

Adjustments to other income, net:
Net investment hedging loss 7                                                              -                  1

Gain on previously held investments 8                                                      -             (2,576)
Gain on sale of equity method investments 9                                             (969)                 -
Total adjustments to other income, net                                                  (969)            (2,574)

Adjustments to income tax (benefit) provision:



Equity method non-cash tax 10                                                              8                 18
Tax impact of adjustments 10                                                          (1,438)               (26)
Total adjustments to income tax (benefit) provision                                   (1,430)                (8)

Adjustments to post-tax earnings (loss) from other equity method investments: Adjustments to earnings (loss) in other equity method investments 11

                       8                 15

Total adjustments to post-tax earnings (loss) from other equity method investments

                                                                                8                 15

Adjustments to net loss attributable to non-controlling interests: Transformational cost management 2

                                                         -                 (1)
Acquisition-related amortization 3                                                       (37)               (32)
Acquisition-related costs 4                                                              (14)               (17)

Total adjustments to net loss attributable to non-controlling interests

              (51)               (50)

Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure)

$ 1,004 $ 1,455



Diluted net (loss) earnings per common share (GAAP) 12                            $    (4.31)         $    4.13
Adjustments to operating (loss) income                                                  8.29               0.57
Adjustments to other income, net                                                       (1.12)             (2.97)

Adjustments to income tax (benefit) provision                                          (1.65)             (0.01)

Adjustments to post-tax earnings (loss) from other equity method investments 11

                                                                          0.01               0.02

Adjustments to net loss attributable to non-controlling interests

            (0.06)             (0.06)

Adjusted diluted net earnings per common share (Non-GAAP measure) 13

$ 1.16 $ 1.68

Weighted average common shares outstanding, diluted (in millions) 13


           864.3              867.6



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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

Operating (loss) income to Adjusted EBITDA for U.S. Healthcare segment (in millions):

Three months ended November 30,


                                                                          2022                      2021
Operating loss (GAAP) 14                                          $             (436)         $          (45)
Acquisition-related amortization 3                                               238                       8
Acquisition-related costs 4                                                       47                      24
Adjusted operating loss (Non-GAAP measure)                                      (152)                    (13)
Depreciation expense                                                              15                       2
Stock-based compensation expense 15                                               12                       -
Adjusted EBITDA (Non-GAAP measure)                                $             (124)         $          (10)

1 Certain legal and regulatory accruals and settlements relate to significant charges

associated with certain legal proceedings, including legal defense costs. The Company

excludes these charges when evaluating operating performance because it does not incur

such charges on a predictable basis and exclusion of such charges enables more consistent

evaluation of the Company's operating performance. These charges are recorded within

Selling, general and administrative expenses. During the three months ended November 30,

2022, the Company recorded a $6.5 billion charge related to the previously announced

opioid litigation settlement frameworks and certain other opioid-related matters. 2 Transformational Cost Management Program charges are costs associated with a formal

restructuring plan. These charges are primarily recorded within Selling, general and

administrative expenses. These costs do not reflect current operating performance and are

impacted by the timing of restructuring activity. 3 Acquisition-related amortization includes amortization of acquisition-related intangible

assets, inventory valuation adjustments and stock-based compensation fair valuation

adjustments. Amortization of acquisition-related intangible assets includes amortization

of intangible assets such as customer relationships, trade names, trademarks, developed

technology and contract intangibles. Intangible asset amortization excluded from the

related non-GAAP measure represents the entire amount recorded within the Company's GAAP

financial statements. The revenue generated by the associated intangible assets has not

been excluded from the related non-GAAP measures. Amortization expense, unlike the related

revenue, is not affected by operations of any particular period unless an intangible asset

becomes impaired, or the estimated useful life of an intangible asset is revised. These

charges are primarily recorded within Selling, general and administrative expenses.

Business combination accounting principles require us to measure acquired inventory at

fair value. The fair value of the inventory reflects cost of acquired inventory and a

portion of the expected profit margin. The acquisition-related inventory valuation

adjustments exclude the expected profit margin component from cost of sales recorded under

the business combination accounting principles. The stock-based compensation fair

valuation adjustment reflects the difference between the fair value based remeasurement of

awards under purchase accounting and the grant date fair valuation. Post-acquisition

compensation expense recognized in excess of the original grant date fair value of

acquiree awards are excluded from the related non-GAAP measures as these arise from

acquisition-related accounting requirements or agreements, and are not reflective of

normal operating activities. 4 Acquisition-related costs are transaction and integration costs associated with certain

merger, acquisition and divestitures related activities. These costs include charges

incurred related to certain mergers, acquisition and divestitures related activities

recorded in operating income, for example, costs related to integration efforts for

merger, acquisition and divestitures activities. Examples of such costs include deal

costs, severance and stock compensation. These charges are primarily recorded within

Selling, general and administrative expenses. These costs are significantly impacted by

the timing and complexity of the underlying merger, acquisition and divestitures related

activities and do not reflect the Company's current operating performance. 5 Adjustments to equity earnings in AmerisourceBergen consist of the Company's proportionate

share of non-GAAP adjustments reported by AmerisourceBergen consistent with the Company's

non-GAAP measures. 6 The Company's U.S. Retail Pharmacy segment inventory is accounted for using the

last-in-first-out ("LIFO") method. This adjustment represents the impact on cost of sales

as if the U.S. Retail Pharmacy segment inventory is accounted for using first-in first-out

("FIFO") method. The LIFO provision is affected by changes in inventory quantities,

product mix, and manufacturer pricing practices, which may be impacted by market and other

external influences. Therefore, the Company cannot control the amounts recognized or

timing of these items. 7 Gain or loss on certain derivative instruments used as economic hedges of the Company's

net investments in foreign subsidiaries. These charges are recorded within Other income,

net. We do not believe this volatility related to mark-to-market adjustment on the

underlying derivative instruments reflects the Company's operational performance. 8 Includes significant gains on business combinations due to the remeasurement of previously

held minority equity interests and debt securities to fair value. During the three months

ended November 30, 2021, the Company recorded such pre-tax gains of $2.2 billion and $402

million for VillageMD and Shields, respectively. 9 Includes significant gains on the sale of equity method investments. During the three

months ended November 30, 2022, the Company recorded a gain of $969 million in Other

income, net due to a partial sale of its equity method investment in AmerisourceBergen.




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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

10 Adjustments to income tax (benefit) provision include adjustments to the GAAP basis tax

(benefit) provision commensurate with non-GAAP adjustments and certain discrete tax items

including U.S. and UK tax law changes and equity method non-cash tax. These charges are

recorded within income tax (benefit) provision. 11 Adjustments to post tax earnings (loss) from other equity method investments consist of

the proportionate share of certain equity method investees' non-cash items or unusual or

infrequent items consistent with the Company's non-GAAP adjustments. These charges are

recorded within post tax earnings (loss) from other equity method investments. Although

the Company may have shareholder rights and board representation commensurate with its

ownership interests in these equity method investees, adjustments relating to equity

method investments are not intended to imply that the Company has direct control over

their operations and resulting revenue and expenses. Moreover, these non-GAAP financial

measures have limitations in that they do not reflect all revenue and expenses of these

equity method investees. 12 Due to the anti-dilutive effect resulting from the reported net loss, the impact of

potentially dilutive securities on the per share amounts has been omitted from the

quarterly calculation of weighted-average common shares outstanding for diluted EPS for

the three months ended November 30, 2022. 13 Includes impact of potentially dilutive securities in the quarterly calculation of

weighted-average common shares, diluted for adjusted diluted net earnings per common

share calculation purposes for the three months ended November 30, 2022. 14 The Company reconciles Adjusted EBITDA for U.S. Healthcare segment to Operating loss as

the closest GAAP measure for the segment profitability. The Company does not measure Net

earnings attributable to Walgreens Boots Alliance, Inc. for its segments. 15 Includes U.S. GAAP stock-based compensation expense excluding expenses related to

acquisition-related amortization and acquisition-related costs.





The Company considers certain metrics presented in this report, such as
comparable sales, comparable pharmacy sales, comparable retail sales, comparable
number of prescriptions, and comparable 30-day equivalent prescriptions, number
of payor/ provider partnerships, number of locations of Walgreens Health
Corners, number of co-located VillageMD clinics and number of total VillageMD
clinics, at period end, to be key performance indicators because the Company's
management has evaluated its results of operations using these metrics and
believes that these key performance indicators presented provide additional
perspective and insights when analyzing the core operating performance of the
Company from period to period and trends in its historical operating results.
These key performance indicators should not be considered superior to, as a
substitute for or as an alternative to, and should be considered in conjunction
with, the GAAP financial measures presented herein. These measures, which are
described in more detail in this report, may not be comparable to
similarly-titled performance indicators used by other companies.

LIQUIDITY AND CAPITAL RESOURCES
The Company's long-term capital policy is to: maintain a strong balance sheet
and financial flexibility; reinvest in its core strategies; invest in strategic
opportunities that reinforce its core strategies and meet return requirements;
and return surplus cash flow to stockholders in the form of dividends and share
repurchases over the long term. In June 2018, the Company's Board of Directors
reviewed and refined the Company's dividend policy to set forth the Company's
current intention to increase its dividend each year.

The Company's cash requirements are subject to change as business conditions
warrant and opportunities arise. The timing and size of any new business
ventures or acquisitions that the Company may complete may also impact its cash
requirements. Additionally, the Company's cash requirements, and its ability to
generate cash flow, have been and may continue to be adversely affected by
COVID-19 and the resulting market volatility and instability. For further
information regarding the impact of COVID-19 on the Company, including on its
liquidity and capital resources, please see Item 1A, Risk factors in the 2022
10-K.

The Company expects to fund its working capital needs, capital expenditures,
pending acquisitions, continuing obligations for recently completed
acquisitions, dividend payments and debt service obligations from liquidity
sources including cash flow from operations, availability under existing credit
facilities, commercial paper programs, working capital financing arrangements,
debt offerings, sale of marketable securities and current cash and investment
balances. The Company believes that these sources, and the ability to obtain
other financing will provide adequate cash funds for the Company's foreseeable
working capital needs, capital expenditures, pending acquisitions, dividend
payments and debt service obligations for at least the next 12 months. See Part
I. Item 3, Qualitative and quantitative disclosures about market risk, below for
a discussion of certain financing and market risks.

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
Cash, cash equivalents, marketable securities and restricted cash were $4.3
billion (including $251 million in non-U.S. jurisdictions) as of November 30,
2022 compared to $2.6 billion (including $188 million in non-U.S. jurisdictions)
as of August 31, 2022. Short-term investment objectives are primarily to
minimize risk and maintain liquidity. To attain these objectives, investment
limits are placed on the amount, type and issuer of securities. Investments are
principally in U.S. Treasury money market funds.

On October 11, 2022, the Company announced the acceleration of its plans to
acquire the remaining 45% equity interest of CareCentrix for approximately
$392 million of cash consideration. The transaction is expected to close by the
third quarter of fiscal 2023. See Note 2. Acquisitions and other investments to
the Consolidated Condensed Financial Statements for further information.

On November 30, 2022, the Company recorded a $6.5 billion liability to resolve a
substantial majority of opioid-related claims and litigation and is expected to
make payments for remediation and legal fees over the next 15 years. See Note
10. Commitments and contingencies to the Consolidated Condensed Financial
Statements for further information.

On December 13, 2022, the Company sold 6.0 million shares of AmerisourceBergen
common stock for total consideration of approximately $984 million. See Note 5.
Equity method investments to the Consolidated Condensed Financial Statements for
further information.

On December 19, 2022, the Company entered into a $1 billion senior unsecured
delayed draw term loan credit agreement (the "Credit Agreement"). The Credit
Agreement was fully drawn to fund the VillageMD Investment and matures on
January 3, 2026. Borrowings under the Credit Agreement bear interest at a
fluctuating rate per annum equal to, at the Company's option, the alternate base
rate, the term SOFR or the daily SOFR, in each case, plus an applicable margin.
The applicable margin is in each case based on the rating of the Company's
corporate debt obligations as determined by Moody's or S&P. Amounts borrowed
under the Credit Agreement and repaid or prepaid may not be reborrowed. See Note
19. Subsequent events to the Consolidated Condensed Financial Statements for
further information.

On December 28, 2022 the Company acquired the remaining 30% equity interest in Shields for approximately $1.4 billion of cash consideration. See Note 2. Acquisitions and other investments to the Consolidated Condensed Financial Statements for further information.



On January 3, 2023, VillageMD completed the acquisition of Summit Health-CityMD
in exchange for $7.0 billion in consideration and pay-off of $1.9 billion in net
debt of Summit Health-CityMD. See Note 19. Subsequent events to the Consolidated
Condensed Financial Statements for further information.

At November 30, 2022, the Company had no guarantees outstanding and the letters
of credit issued were not material. See Note 7. Debt, to the Consolidated
Condensed Financial Statements for further information on the Company's debt
instruments and its recent financing actions.

Cash provided by operations, incurrence of debt and our investments are the principal sources of funds for expansion, investments, acquisitions, remodeling programs, dividends to stockholders and stock repurchases.



Cash flows from operating activities
Net cash provided by operating activities for the three months ended November
30, 2022 was $0.5 billion, compared to $1.1 billion for the year-ago quarter.

The decrease in cash provided by operating activities primarily reflects a
decrease in operating performance partially offset by improvements in net
working capital cash flows. Improvements in net working capital cash flows are
driven by higher cash inflows from accounts receivable and income taxes combined
with lower cash outflows from inventory and accrued expenses, partially offset
by lower cash inflows from trade accounts payable. Changes in accounts
receivable, inventories, accounts payable and accrued expenses are mainly driven
by timing.

Cash flows from investing activities
Net cash provided by investing activities was $1.9 billion for the three months
ended November 30, 2022 compared to net cash used for investing activities of
$2.0 billion for the year-ago quarter.

WBA Q1 2023 Form 10-Q 49

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Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
Net cash provided by investing activities for the three months ended November
30, 2022 includes sale proceeds of $2.0 billion related to the Company's sale of
13.2 million shares of AmerisourceBergen common stock, proceeds from sales and
leaseback transaction of $409 million offset by additions to property, plant and
equipment of $610 million.

Net cash used for investing activities for the three months ended November 30,
2021 includes business acquisitions, net of cash acquired of VillageMD and
Shields for $0.8 billion and $0.9 billion, respectively. Net cash used for the
business acquisition of VillageMD includes net consideration of $2.9 billion of
which $1.9 billion was held as cash by VillageMD on November 30, 2021, and
subsequently used for the tender offer which completed on December 28, 2021. See
Note 2. Acquisitions and other investments, to the Consolidated Condensed
Financial Statement for further information.

See Note 2. Acquisitions and other investments, to the Consolidated Condensed Financial Statement for further information.



Capital Expenditure
Capital expenditure includes information technology projects and other growth
initiatives. Additions to property, plant and equipment were as follows (in
millions):

Three months ended November 30,


                                                                          2022                     2021
U.S. Retail Pharmacy                                              $             452          $          355
International                                                                    71                      84
U.S. Healthcare                                                                  87                      15
Total additions to property, plant and equipment                  $

610 $ 454




The increase in capital expenditure represents investment in growth initiatives,
including the VillageMD footprint expansion, the rollout of micro-fulfillment
centers, and digital transformation initiatives.

Cash flows from financing activities
Net cash used for financing activities for the three months ended November 30,
2022 was $0.6 billion compared to net cash provided by financing activities of
$3.9 billion in the year-ago quarter.

In the three months ended November 30, 2022 there were $39 million in proceeds
from debt, primarily from issuance of commercial paper, compared to $8.9 billion
in proceeds from debt, primarily from revolving credit facilities and the
issuance of notes, in the year-ago quarter. In the three months ended November
30, 2022 there were $11 million in payments of debt made primarily for
commercial paper compared to $4.4 billion primarily for revolving credit
facilities and commercial paper in the year-ago quarter. See Note 7. Debt, to
the Consolidated Condensed Financial Statements for further information.

The Company repurchased shares, as part of the stock repurchase programs
described below, totaling $150 million in the three months ended November 30,
2022 to support the needs of its employee stock plans compared to $154 million
in the year-ago quarter.

Cash dividends paid were $415 million and $413 million during the three months ended November 30, 2022 and 2021, respectively.



Stock repurchase program
In June 2018, the Company's Board of Director's approved a stock repurchase
program (the "June 2018 stock repurchase program"), which authorized the
repurchase of up to $10.0 billion of the Company's common stock of which the
Company had repurchased $8.0 billion as of November 30, 2022. The June 2018
stock repurchase program has no specified expiration date. In July 2020, the
Company suspended repurchases under this program. The Company may continue to
repurchase stock to offset anticipated dilution from equity incentive plans.

The Company determines the timing and amount of repurchases, including
repurchases to offset anticipated dilution from equity incentive plans, based on
its assessment of various factors, including prevailing market conditions,
alternate uses of capital, liquidity and the economic environment. The Company
has repurchased, and may from time to time in the future repurchase, shares on
the open market through Rule 10b5-1 plans, which enable the Company to
repurchase shares at times when we otherwise might be precluded from doing so
under federal securities laws.

WBA Q1 2023 Form 10-Q 50

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Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
Debt covenants
Each of the Company's credit facilities described in Note 7. Debt, to the
Consolidated Condensed Financial Statements, contain a covenant to maintain, as
of the last day of each fiscal quarter, a ratio of consolidated debt to total
capitalization not to exceed 0.60:1.00, subject to increase in certain
circumstances set forth in the applicable credit agreement. As of November 30,
2022, the Company was in compliance with all such applicable covenants.

Credit ratings
As of January 4, 2023, the credit ratings of Walgreens Boots Alliance were:
Rating agency        Long-term debt rating   Commercial paper rating        Outlook

Moody's                      Baa2                      P-2              Negative watch
Standard & Poor's             BBB                      A-2              Stable outlook



In assessing the Company's credit strength, each rating agency considers various
factors including the Company's business model, capital structure, financial
policies and financial performance. There can be no assurance that any
particular rating will be assigned or maintained. The Company's credit ratings
impact its borrowing costs, access to capital markets and operating lease costs.
The rating agency ratings are not recommendations to buy, sell or hold the
Company's debt securities or commercial paper. Each rating may be subject to
revision or withdrawal at any time by the assigning rating agency and should be
evaluated independently of any other rating.

CRITICAL ACCOUNTING ESTIMATES
The Consolidated Condensed Financial Statements are prepared in accordance with
GAAP and include amounts based on management's prudent judgments and estimates.
Actual results may differ from these estimates. Management believes that any
reasonable deviation from those judgments and estimates would not have a
material impact on our consolidated financial position or results of operations.
To the extent that the estimates used differ from actual results, however,
adjustments to the Consolidated Condensed Statements of Earnings and
corresponding Consolidated Condensed Balance Sheets accounts would be necessary.
These adjustments would be made in future periods. For a discussion of our
significant accounting policies, please see the Company's fiscal 2022 Form 10-K.
Some of the more significant estimates include business combinations, leases,
goodwill and indefinite-lived intangible asset impairment, cost of sales and
inventory, equity method investments, pension and postretirement benefits, legal
contingencies, and income taxes.

NEW ACCOUNTING PRONOUNCEMENTS
A discussion of new accounting pronouncements is described in Note 17. New
accounting pronouncements, to the Consolidated Condensed Financial Statements of
this Quarterly Report on Form 10-Q and is incorporated herein by reference.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report and other documents that we file or furnish with the SEC contain
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These include, without
limitation, any statements regarding the Company's future operations, financial
or operating results, capital allocation, anticipated debt levels and ratios,
future earnings, planned activities, anticipated growth, market opportunities,
strategies, competition, and other expectations and targets for future periods.
Words such as "expect," "outlook," "forecast," "would," "could," "should,"
"can," "will," "project," "intend," "plan," "goal," "guidance," "target," "aim,"
"continue," "transform," "accelerate," "model," "long-term," "believe," "seek,"
"estimate," "anticipate," "may," "possible," "assume," and variations of such
words and similar expressions are intended to identify such forward-looking
statements.

These forward-looking statements are not guarantees of future performance and
are subject to risks, uncertainties and assumptions, known or unknown, that
could cause actual results to vary materially from those indicated or
anticipated. These risks, assumptions and uncertainties include those described
in Item 1A, Risk factors which are incorporated herein by reference, and in
other documents that we file or furnish with the SEC. If one or more of these
risks or uncertainties materializes, or if underlying assumptions prove
incorrect, actual results may vary materially from those indicated or
anticipated by such forward-looking statements. All forward-looking statements
we make or that are made on our behalf are qualified by these cautionary
statements. Accordingly, you should not place undue reliance on these
forward-looking statements, which speak only as of the date they are made.

We do not undertake, and expressly disclaim, any duty or obligation to update
publicly any forward-looking statement after the date of this report, whether as
a result of new information, future events, changes in assumptions or otherwise.
WBA Q1 2023 Form 10-Q    51

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Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

Latest news about Walgreens Boots Alliance, Inc.

Top Decliners	03/07	MT
UBS Adjusts Price Target on Walgreens Boots Alliance to $12 From $17, Maintains Neutral Rating	03/07	MT
Sector Update: Health Care Stocks Softer Late Afternoon	03/07	MT
Sector Update: Health Care Stocks Retreat Tuesday Afternoon	02/07	MT
Sector Update: Health Care	02/07	MT
Walgreens Facing Persistent Retail, Pharmacy Headwinds, RBC Says	02/07	MT
You can't escape politics	02/07
RBC Cuts Price Target on Walgreens Boots Alliance to $13 From $22, Keeps Sector Perform Rating	02/07	MT
ANALYST RECOMMENDATIONS : Adobe, Nike, Solaredge, Welltower, Spectris...	02/07
Nasdaq Closes at Record High as Markets Evaluate Manufacturing Data	02/07	MT
Nasdaq Closes at Record High as Markets Evaluate Manufacturing Sector Data	02/07	MT
Sector Update: Health Care Stocks Retreat Late Afternoon	02/07	MT
US Equities Markets End Higher Monday as Investors Parse Manufacturing Sector Data	02/07	MT
Sector Update: Health Care	02/07	MT
Equity Markets Rise Intraday as Traders Analyze Manufacturing Sector Data	02/07	MT
Correction: Top Midday Stories: Boeing to Acquire Spirit AeroSystems; Robinhood Acquires Pluto; FTC Probes Teva; BlackRock Acquires Preqin; SCOTUS Grants Trump Some Immunity	01/07	MT
Correction: Market Chatter: Walgreens Boots Alliance's Boots Unit Sees Top Executive Step Down	01/07	MT
Top Midday Stories: Boeing to Acquire Spirit AeroSystems; Robinhood Acquires Pluto; FTC Probes Teva; BlackRock Acquires Preqin; SCOTUS Grants Trump Some Immunity	01/07	MT
BofA Securities Cuts Price Target on Walgreens Boots Alliance to $11 From $12, Maintains Underperform Rating	01/07	MT
Walgreens Boots Alliance Chief Executive to Resign	01/07	MT
TD Cowen Adjusts Price Target on Walgreens Boots Alliance to $22 From $35, Maintains Buy Rating	01/07	MT
JPMorgan Adjusts Price Target on Walgreens Boots Alliance to $20 From $30, Maintains Overweight Rating	01/07	MT
ANALYST RECOMMENDATIONS : Nvidia, Broadcom, Progressive, Draftkings, Moody's...	01/07
Boots CEO Sebastian James to stand down	01/07	AN
Boots CEO James quits after Walgreens' plans for sale stalls, Sky News reporter says	29/06	RE

Chart Walgreens Boots Alliance, Inc.

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Company Profile

Walgreens Boots Alliance, Inc. specializes in the distribution of pharmaceutical products. Net sales break down by activity as follows: - retail distribution (87.2%): selling prescription drugs, OTC medicines, beauty and cosmetic products, etc. in the United States (90.9% of net sales) and internationally (9.1%). At the end of August 2023, the activity is carried out through 13,532 outlets (of which 8,706 located in the United States, Puerto Rico and the US Virgin Islands), and through the Internet; - wholesale distribution (8.1%). The remaining sales (4.7%) are from the healthcare Net sales break down geographically as follows: the United States (84%), Germany (8.1%), the United Kingdom (6.5%) and other (1.4%).

Sector

Drug Retailers

Calendar

10/10/2024 - Q4 2024 Earnings Release (Projected)

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Analysis / Opinion

Walgreens CEO on Narrowed Forecast, Shoppers Cutting Back Spending

March 29, 2024 at 01:29 am IST

Walgreens Boots Alliance, Inc. first light at the end of the tunnel?

November 27, 2023 at 08:52 pm IST

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Ratings for Walgreens Boots Alliance, Inc.

Trading Rating

Investor Rating

ESG Refinitiv

B-

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Analysts' Consensus

Sell

Buy

Mean consensus

HOLD

Number of Analysts

Last Close Price

11.1 USD

Average target price

14.12 USD

Spread / Average Target

+27.20%

Consensus

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Company calendar

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Walgreens Boots Alliance, Inc.

Equities

WBA

US9314271084

Drug Retailers

MANAGEMENT'S DISCUSSION AND ANALYSIS Item 2. Management's discussion and analysis of financial condition and results

EPS Revisions