Walgreens Healthcare Group Posts 30 Percent Pro Forma Growth

March 29, 2023
The segment’s EBITDA loss improved in its most recent quarter, when VillageMD also acquired Summit Health-CityMD.

The healthcare services segment of Walgreens Boots Alliance Inc. posted pro forma top-line growth of 30 percent in the Illinois-headquartered company’s fiscal second quarter and grew its gross profits to $110 million. Despite ongoing investments to expand its VillageMD clinic network and other strategic priorities, the unit’s EBITDA loss improved to $109 million.

In the three months ended Feb. 28, Walgreens’ healthcare segment—which comprises VillageMD as well as the Shields specialty care and pharmacy venture and post-acute care provider CareCentrix—booked sales of more than $1.6 billion, up from $527 million in the prior-year period and $989 million in the company’s fiscal Q1. The $109 million adjusted EBITDA loss was slightly better than the $124 million for the prior three months but more than 50 percent larger than the $62 million loss from the same period a year ago.

Driving the unit’s top-line growth for CEO Roz Brewer and her team—who are targeting positive EBITDA from healthcare by late summer and a $1 billion contribution in 2025—was VillageMD, which grew its sales to more than $1.1 billion thanks in part to the purchase of Summit Health-CityMD. The clinic operation’s pro forma growth of 30 percent was bracketed by those of Shields (41 percent versus fiscal Q2 of ’22) and CareCentrix (25 percent).

“We are moving swiftly to implement our vision, leveraging our integrated best-in-class assets and are excited with recent developments, including signing another payer partner [Horizon Blue Cross Blue Shield of New Jersey] in the Walgreens Health organic business,” CFO James Kehoe told analysts on a March 28 conference call.

As a whole, Walgreens Boots produced a net profit of $703 million in its fiscal Q2, down from $883 million in the prior-year period (and helped by the sale of stock it had held in several other companies) largely because the company booked far fewer COVID-19 testing and vaccine revenues. Adjusted earnings were down 26 percent year over year but Brewer and CFO James Kehoe said they were encouraged both by prescription growth of 3.5 percent excluding immunizations during the quarter and a “very strong” February from the company’s retail business.

Shares of the company (Ticker: WBA) rose nearly 3 percent to $33.82 after the earnings report and conference call. Over the past six months, they have risen about 7 percent, growing the company’s market capitalization to more than $29 billion.