Rite Aid(US:RAD)2023-06-29 13:30Financial Data and Key Metrics Changes - Adjusted EBITDA for Q1 2024 was $91.7 million, down from $100.1 million in Q1 2023, reflecting a decrease in performance [17][18] - The company reported a net loss of $306.7 million or $5.56 per share, with an adjusted net loss of $40.1 million or $0.73 per share [17] - The medical loss ratio at Elixir Insurance is expected to trend higher than initially forecasted, impacting adjusted EBITDA for fiscal 2024 [17][18] Business Line Data and Key Metrics Changes - Retail Pharmacy segment revenues increased by 3.4% year-over-year, driven by acute and maintenance prescriptions, but offset by reduced COVID-related revenue and front-end sales [18] - Same-store sales increased by 8.4%, with pharmacy sales up 13.3% and front-end sales down 4.4% [18][19] - Elixir's revenues decreased by 30% year-over-year to $1.2 billion, with adjusted EBITDA dropping to $21.7 million from $26.4 million [20] Market Data and Key Metrics Changes - The company experienced a 4.7% increase in same-store prescriptions adjusted to 30 days, or 7.4% excluding COVID impacts [19] - Front-end sales on a comp store basis were down 7.9%, attributed to reduced demand for respiratory products and supply chain challenges [12][19] Company Strategy and Development Direction - The company is focused on a turnaround strategy that includes controlling SG&A expenses, growing scripts, and reducing drug purchasing costs [7][8] - Plans to exit the individual Medicare Part D market effective January 2024 due to unfavorable changes in utilization and drug mix [15][17] - The company aims to improve front-end sales through initiatives like enhancing product assortment and pricing strategies [34][48] Management's Comments on Operating Environment and Future Outlook - Management acknowledged headwinds such as soft front-end sales and higher medical loss ratios but emphasized strong script growth and cost control initiatives [7][8] - The company expects front-end sales trends to improve in subsequent quarters, although overall sales for the year may be lower than initially planned [25] - Management remains optimistic about the potential for growth in the pharmacy business and is focused on long-term success [8][16] Other Important Information - The company ended the fiscal quarter with approximately $1.15 billion in liquidity, with a noted increase in leverage ratio [22] - The company is evaluating options for addressing 2025 debt maturities but did not provide specific updates [23] Q&A Session Summary Question: Impact of COVID vaccines and tests in the quarter - The company administered about 1.7 million COVID vaccines last year, dropping to less than 500,000 this year, and dispensed about 2.5 million antigen kits, lower than last year's Q1 [29][31] Question: Financial benefits of adherence programs - Strong script growth of 7.4% without COVID impacts is driven by adherence initiatives, with expectations for continued improvement throughout the year [33] Question: Impact of exiting the individual Part D market - The company serves about 300,000 lives in the Med D plan, which are expected to be lost as of January 1, 2024, and these lives are not profitable [35] Question: Debt securities and capital structure discussions - The company is in open dialogue with lenders and evaluating several pathways to address capital structure, focusing on long-term growth [38] Question: Shrink issues and new leadership - The company faced a $9 million increase in shrink compared to last year, and new leadership is expected to bring innovative solutions to address this ongoing issue [49][50] Question: Stabilization in generic pricing - The company is seeing stabilization in generic pricing and is maximizing flexibility in purchasing arrangements to capture savings [51]