Walgreens Boots Alliance, Inc.

WBA

US9314271084

Drug Retailers

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Apr. 15	Truist Securities Adjusts Price Target on Walgreens Boots Alliance to $20 From $25	MT
Apr. 12	RBC Capital Cuts Walgreens Boots Alliance's Price Target to $22 From $26, Sector Perform Rating Kept	MT

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

March 28, 2023 at 04:04 pm EDT

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: impact of opioid litigation
settlements, 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; adjustments to Centers for Medicare and Medicaid
Services, Medicare Advantage and Medicare rates; 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, including
changes that would negatively impact our access to capital markets.

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 Q2 2023 Form 10-Q 37

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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. As of February 28, 2023, the Company has accrued a
total $7.4 billion liability associated with the Settlement Frameworks and other
opioid-related claims and litigation settlements, including $1.0 billion and
$6.4 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, urgent and multi-specialty care services; 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

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.




Sale of AmerisourceBergen common stock
On November 10, 2022, the Company sold 13.2 million shares of AmerisourceBergen
common stock 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.

WBA Q2 2023 Form 10-Q 38

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



Summit acquisition
On January 3, 2023, Village Practice Management Company, LLC ("VillageMD"),
through its parent company, following an internal reorganization, completed the
acquisition of WP CityMD TopCo ("Summit"), a leading provider of primary,
specialty and urgent care 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 equity holders and $100 million of
cash to be paid one year following closing. The cash consideration includes
$86 million of cash paid to fund acquisition-related bonuses to Summit
Health-CityMD employees which is recognized as compensation expense of the
Company. In addition, VillageMD paid off approximately $1.9 billion in net debt
of Summit. In connection with the amended Agreement and Plan of Merger, and in
order to finance the acquisition, the Company and Cigna Health & Life Insurance
Company ("Cigna") acquired preferred units of VillageMD in exchange for
$1.75 billion and $2.5 billion in aggregate consideration, respectively.
Following the Summit acquisition, the Company remains the largest and
consolidating equity holder of VillageMD with ownership of approximately 53% of
the outstanding equity interests on a fully diluted basis.

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



Sale of Option Care Health common stock
On March 3, 2023, the Company sold approximately 15.5 million shares of Option
Care Health for a total consideration of approximately $469 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 February 28, 2023, the Company has closed 252 and 403 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. 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 Q2 2023 Form 10-Q 39

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



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.

The total pre-tax charges 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 February 28, 2023              Pharmacy            International           Corporate and Other          Alliance, Inc.
Total exit and disposal charges                $       131          $            4          $                  2          $          138
Other IT transformation costs                            6                       -                             -                       7
Total pre-tax charges                          $       138          $            5          $                  2          $          145



                                                U.S. Retail                                                                Walgreens Boots
Six months ended February 28, 2023                Pharmacy            International           Corporate and Other          Alliance, Inc.
Total exit and disposal charges                $       250          $           10          $                  6          $          267
Other IT transformation costs                           15                       1                             -                      16
Total pre-tax charges                          $       265          $           11          $                  6          $          283



                                                 U.S. Retail                                                                Walgreens Boots
Three months ended February 28, 2022              Pharmacy             International           Corporate and Other           Alliance, Inc.
Total exit and disposal charges                $         43          $            8          $                  5          $            56
Other IT transformation costs                             9                       5                             -                       14
Total pre-tax charges                          $         52          $           13          $                  5          $            70



                                                U.S. Retail                                  Corporate and          Walgreens Boots
Six months ended February 28, 2022                Pharmacy            International              Other              Alliance, Inc.
Total exit and disposal charges                $       166          $

51 $ 14 $ 231 Other IT transformation costs

                           27                      15                      -                      42
Total pre-tax charges                          $       193          $           66          $          14          $          273

See Note 3. Exit and disposal activities, to the Consolidated Condensed Financial Statements for additional information.

WBA Q2 2023 Form 10-Q 40

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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 February 28,              Six months ended February 28,
                                                       2023                  2022                   2023                  2022
Sales                                            $       34,862          $   33,756          $        68,244          $   67,656
Gross profit                                              7,055               7,708                   14,008              15,283
Selling, general and administrative expenses              6,934               6,565                   20,091              12,956
Equity earnings in AmerisourceBergen                         75                 103                      129                 202
Operating income (loss) (GAAP)                              197               1,246                   (5,954)              2,529
Adjusted operating income (Non-GAAP measure) 1            1,215               1,657                    2,229               3,434
Earnings (loss) before interest and income tax
provision (benefit)                                         749               1,047                   (4,410)              4,947
Net earnings (loss) attributable to Walgreens
Boots Alliance, Inc. (GAAP)                                 703                 883                   (3,018)              4,463
Adjusted net earnings attributable to Walgreens
Boots Alliance, Inc. (Non-GAAP measure) 1                 1,000               1,377                    2,004               2,833
Diluted net earnings (loss) per common share
(GAAP)                                                     0.81                1.02                    (3.50)               5.15
Adjusted diluted net earnings per common share
(Non-GAAP measure) 1                                       1.16                1.59                     2.32                3.27



                                                                                Percentage increases (decreases)
                                                       Three months ended February 28,                           Six months ended February 28,
                                                    2023                              2022                         2023                    2022
Sales                                                3.3                               3.0                         0.9                     5.4
Gross profit                                        (8.5)                             13.7                        (8.3)                    14.0
Selling, general and administrative expenses         5.6                               8.9                         55.1                    9.6
Operating income (loss) (GAAP)                     (84.2)                             49.7                          NM                      NM
Adjusted operating income (Non-GAAP measure)
1                                                  (26.7)                             35.3                        (35.1)                   41.8
Earnings (loss) before interest and income
tax provision (benefit)                            (28.5)                             (3.3)                      (189.2)                    NM
Net earnings (loss) attributable to
Walgreens Boots Alliance, Inc. (GAAP)              (20.4)                             (4.1)                      (167.6)                    NM
Adjusted net earnings attributable to
Walgreens Boots Alliance, Inc. (Non-GAAP
measure) 1                                         (27.4)                             25.8                        (29.2)                   38.7
Diluted net earnings (loss) per common share
(GAAP)                                             (20.3)                             (4.1)                      (167.9)                    NM
Adjusted diluted net earnings per common
share (Non-GAAP measure) 1                         (27.2)                             25.9                        (29.0)                   38.6


                                                                                 Percent to sales
                                                    Three months ended February 28,                   Six months ended February 28, 2023
                                                 2023                              2022                   2023                  2022
Gross margin                                     20.2                              22.8                   20.5                  22.6
Selling, general and administrative
expenses                                         19.9                              19.4                   29.4                  19.1



WBA Q2 2023 Form 10-Q    41

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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.

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

WALGREENS BOOTS ALLIANCE RESULTS OF OPERATIONS



Net earnings (GAAP) for the three months ended February 28, 2023 compared to
three months ended February 28, 2022
Net earnings attributable to the Company for the three months ended February 28,
2023 was $703 million compared to $883 million for the year-ago quarter. Diluted
net earnings per share was $0.81 compared to $1.02 for the year-ago quarter. The
decreases in net earnings and diluted net earnings per share reflect lower
operating income partially offset by a $454 million after-tax gain from the
partial sale of the Company's equity method investment in AmerisourceBergen.

Operating income (loss) in the quarter reflects significantly lower volumes of
COVID-19 vaccinations and testing lapping the year-ago quarter's Omicron surge,
a $306 million pre-tax charge for opioid-related claims and litigation
settlements, Summit Health acquisition costs, planned payroll investments in
U.S. Retail Pharmacy segment, investments in U.S. Healthcare segment, and higher
costs related to the Transformational Cost Management Program partly offset by
improved retail contributions in the U.S. Retail Pharmacy segment and the growth
in International segment.

Other income (expense), net for the three months ended February 28, 2023 was
$552 million compared to other expense of $198 million for the year-ago quarter.
The increase was primarily due to the $492 million pre-tax gain from the partial
sale of the Company's equity method investment in AmerisourceBergen during the
three months ended February 28, 2023 and the impairment loss of $190 million for
certain equity investments recorded for the three months ended February 28,
2022.

Interest expense, net was $141 million for the three months ended February 28,
2023 compared to $100 million for the three months ended February 28, 2022. The
increase in interest expense was primarily the result of higher short-term
benchmark interest rates and incremental facility borrowings associated with the
Summit Health transaction in the current period.

The Company's effective tax rate for the three months ended February 28, 2023
was 11.5 percent, compared to 18.2 percent for three months ended February 28,
2022. The decrease in the effective tax rate was primarily due to the reduction
in the valuation allowance and impact of the opioid-related claims and
litigation settlements. 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. See Note 5. Equity method
investments for further information. This benefit was partially offset by the
impact of certain nondeductible opioid-related claims recorded in the three
months ended February 28, 2023.

Adjusted net earnings (Non-GAAP measure) for the three months ended February 28, 2023 compared to three months ended February 28, 2022



Adjusted net earnings attributable to the Company for the three months ended
February 28, 2023 decreased 27.4 percent to $1.0 billion compared with the
year-ago quarter. Adjusted diluted net earnings per share for the three months
ended February 28, 2023 decreased 27.2 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 February 28, 2023 primarily reflects
significantly lower volumes of COVID-19 vaccinations and testing compared with
the Omicron surge in the year-ago quarter, planned payroll investments in U.S.
Retail Pharmacy, and investments in U.S. Healthcare. This was partly offset by
improved retail contributions in the U.S. and International growth.

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



WBA Q2 2023 Form 10-Q    42

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

Net earnings (GAAP) for the six months ended February 28, 2023 compared to six months ended February 28, 2022



Net loss attributable to the Company for the six months ended February 28, 2023
was $3.0 billion compared to net earnings of $4.5 billion for the year-ago
period. Diluted net loss per share was $3.50 compared to diluted net earnings
per share of $5.15 for the year-ago period. The decreases in net earnings and
diluted net earnings per share is driven by $5.4 billion after-tax charge for
opioid-related claims and litigation settlements partly offset by the $1.4
billion after-tax gain from the partial sale of the Company's equity method
investment in AmerisourceBergen in the six months ended February 28, 2023,
lapping $2.5 billion after-tax gain on the Company's investments in VillageMD
and Shields in the year-ago period, and lower operating income reflecting a
COVID-19 headwind, planned payroll and IT investments in U.S. Retail Pharmacy
segment and investments in U.S. Healthcare segment, partly offset by improved
retail contributions in the U.S. Retail Pharmacy segment and growth in the
International segment.

Operating income (loss) in the period reflects a $6.8 billion pre-tax charge for
opioid-related claims and litigation settlements, significantly 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 segment and growth in
the International segment.

Other income (expense), net for the six months ended February 28, 2023 was
$1.5 billion compared to $2.4 billion for the year-ago period. The decrease in
other income is mainly due to the gains on the Company's investments in
VillageMD and Shields in the year-ago period, partly offset by the $1.5 billion
pre-tax gain from the partial sale of the Company's equity method investment in
AmerisourceBergen.

Interest expense, net was $252 million for the six months ended February 28,
2023, compared to $186 million for the six months ended February 28, 2022. The
increase in interest expense was primarily the result of higher short-term
benchmark interest rates and incremental facility borrowings associated with the
Summit Health transaction in the current period.

The effective tax rate for the six months ended February 28, 2023 was a benefit
of 29.5 percent primarily due to a reduction in the valuation allowance and
impact of the opioid-related claims and litigation settlements. 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 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 six months ended February 28, 2023. The effective tax rate for
the six months ended February 28, 2022 was 9.4 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 were not subject to tax. See Note 2.
Acquisitions and other investments for further information.

Adjusted net earnings (Non-GAAP measure) for the six months ended February 28, 2023 compared to six months ended February 28, 2022

Adjusted net earnings attributable to the Company for the six months ended February 28, 2023 decreased 29.2 percent to $2.0 billion compared with the year-ago period. Adjusted diluted net earnings per share for the six months ended February 28, 2023 decreased 29.0 percent to $2.32 compared with the year-ago period.



Excluding the impact of currency translation, the decrease in adjusted net
earnings for the six months ended February 28, 2023 primarily reflects lower
adjusted operating income due to a COVID-19 headwind of approximately 23.7
percent, planned payroll and IT investments in U.S. Retail Pharmacy segment, and
investments in U.S Healthcare segment, partly offset by improved retail
contributions in the U.S. Retail Pharmacy segment, and growth in the
International segment.

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




WBA Q2 2023 Form 10-Q    43

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Table of Contents

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

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.

FINANCIAL PERFORMANCE                                          (in

millions, except location amounts)


                                            Three months ended February 28,               Six months ended February 28,
                                               2023                   2022                   2023                  2022
Sales                                   $        27,577          $    27,667          $        54,781          $   55,699
Gross profit                                      5,825                6,487                   11,711              12,834
Selling, general and administrative
expenses                                          5,527                5,199                   17,225              10,290
Equity earnings in AmerisourceBergen                 75                  103                      129                 202
Operating income (loss) (GAAP)                      373                1,390                   (5,385)              2,746
Adjusted operating income (Non-GAAP
measure) 1                                        1,067                1,588                    2,172               3,277

Number of prescriptions 2                         197.3                203.3                    408.6               421.3
30-day equivalent prescriptions 2,3               298.0                300.0                    609.6               613.8
Number of locations at period end                 8,779                8,906                    8,779               8,906



                                                                                 Percentage increases (decreases)
                                                       Three months ended February 28,                           Six months ended February 28,
                                                    2023                              2022                         2023                    2022
Sales                                               (0.3)                              1.2                        (1.6)                     2.2
Gross profit                                       (10.2)                             13.8                        (8.7)                    13.2
Selling, general and administrative expenses         6.3                               4.9                         67.4                     5.8
Operating income (loss) (GAAP)                     (73.2)                             67.9                          NM                      NM
Adjusted operating income (Non-GAAP measure)
1                                                  (32.8)                             36.5                        (33.7)                   41.4

Comparable sales 4                                   3.1                               9.5                         3.5                      8.7
Pharmacy sales                                       0.3                              (3.3)                       (2.0)                    (1.1)
Comparable pharmacy sales 4                          4.9                               7.3                         4.9                      7.1
Retail sales                                        (1.8)                             14.5                        (0.6)                    12.4
Comparable retail sales 4                           (1.0)                             14.7                         0.1                     12.8
Comparable number of prescription 2,4               (2.2)                              4.6                        (2.3)                     5.9
Comparable 30-day equivalent prescriptions
2,3,4                                                0.2                               4.7                         0.1                      5.4



                                                                                   Percent to sales
                                                       Three months ended February 28,                    Six months ended February 28,
                                                    2023                              2022                  2023                 2022
Gross margin                                        21.1                              23.4                  21.4                 23.0
Selling, general and administrative expenses        20.0                              18.8                  31.4                 18.5



WBA Q2 2023 Form 10-Q    44

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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.
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 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 February 28, 2023 compared to three months
ended February 28, 2022
Sales for the three months ended February 28, 2023 decreased by 0.3 percent to
$27.6 billion. Comparable sales increased by 3.1 percent for the three months
ended February 28, 2023.

Pharmacy sales increased by 0.3 percent for the three months ended February 28,
2023 and represented 72.1 percent of the segment's sales. Pharmacy sales were
negatively impacted by a 3.5 percentage point headwind from AllianceRx
Walgreens. For the three months ended February 28, 2022, pharmacy sales
decreased 3.3 percent and represented 71.6 percent of the segment's sales.
Comparable pharmacy sales increased 4.9 percent for the three months ended
February 28, 2023, benefiting from branded drug inflation, compared to an
increase of 7.3 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 0.6 percent for the three months ended February 28, 2023 compared to a
reduction of 0.2 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 February
28, 2023 compared to a reduction of 0.1 percent in the year-ago quarter. Within
comparable pharmacy sales, 30-day equivalent prescriptions filled during the
three months ended February 28, 2023 increased by 0.2% compared to the year-ago
quarter.

Retail sales decreased by 1.8 percent for the three months ended February 28,
2023 and were 27.9 percent of the segment's sales. In comparison, in the
year-ago quarter, retail sales increased by 14.5 percent and comprised 28.4
percent of the segment's sales. Comparable retail sales decreased 1.0 percent in
the three months ended February 28, 2023 compared to an increase of 14.7 percent
in the year-ago quarter. The decrease in comparable retail sales in the current
quarter was primarily driven by a 500 basis points headwind from lower sales of
over the counter test kits, partly offset by strong core growth across all
categories.

Operating income for the three months ended February 28, 2023 compared to
operating income for the three months ended February 28, 2022
Gross profit was $5.8 billion for the three months ended February 28, 2023
compared to $6.5 billion in the year-ago quarter. Gross profit decreased 10.2
percent, primarily driven by lower COVID-19 vaccine and testing volumes,
reimbursement pressure, net of procurement savings, partially offset by improved
retail gross profit driven by gross margin expansion and strong underlying
performance across categories.

Selling, general and administrative expenses as a percentage of sales were 20.0
percent for the three months ended February 28, 2023 and 18.8 percent for the
three months ended February 28, 2022. The increase is primarily driven by a $306
million pre-tax charge for opioid-related claims and litigation settlements and
planned labor investments, partly offset by cost savings from reduced labor for
lower volumes of COVID-19 vaccinations and testing and savings from the
Transformational Cost Management Program.

WBA Q2 2023 Form 10-Q 45

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating income for the three months ended February 28, 2023 was $373 million,
including $75 million 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 $103 million from Company's share of equity earnings
in AmerisourceBergen. The decrease was primarily driven by significant COVID-19
headwinds from lower vaccine and testing volumes, an approximately $306 million
pre-tax charge for opioid-related claims and litigation settlements, continued
reimbursement pressure, net of procurement, and planned labor investments.

Adjusted operating income (Non-GAAP measure) for the three months ended February
28, 2023 and 2022
Adjusted operating income for the three months ended February 28, 2023 decreased
by 32.8 percent to $1.1 billion. The decrease was primarily due lower COVID-19
vaccine and testing volumes, continued reimbursement pressure net of
procurement, and planned labor investments, partly offset by improved retail
gross profit driven by gross margin expansion and strong underlying performance
across categories.

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



Sales for the six months ended February 28, 2023 compared to six months ended
February 28, 2022
Sales for the six months ended February 28, 2023 decreased by 1.6 percent to
$54.8 billion. Comparable sales increased by 3.5 percent for the six months
ended February 28, 2023.

Pharmacy sales decreased by 2.0 percent for the six months ended February 28,
2023 and represented 73.2 percent of the segment's sales. Pharmacy sales were
negatively impacted by a 5.7 percentage point headwind from AllianceRx
Walgreens. For the six months ended February 28, 2022, pharmacy sales decreased
by 1.1 percent and represented 73.5 percent of the segment's sales. Comparable
pharmacy sales increased 4.9 percent for the six months ended February 28, 2023,
benefiting from branded drug inflation, compared to an increase of 7.1 percent
in the year-ago period. The effect of generic drugs, which have a lower retail
price, replacing brand name drugs, reduced pharmacy sales by 0.6% for the six
months ended February 28, 2023 compared to a reduction of 0.2 percent in the
year-ago period. The effect of generics on segment sales was a reduction of 0.4%
for the six months ended February 28, 2023 compared to a reduction of 0.1
percent in the year-ago period. Within comparable pharmacy sales, 30-day
equivalent prescriptions filled during the six months ended February 28, 2023
increased by 0.1% compared to the year-ago period.

Retail sales decreased by 0.6 percent for the six months ended February 28, 2023
and were 26.8 percent of the segment's sales. In comparison, in the year-ago
period, retail sales increased by 12.4 percent and represented 26.5 percent of
the segment's sales. Comparable retail sales increased 0.1 percent in the six
months ended February 28, 2023 and 12.8 percent in the year-ago period. The
increase in comparable retail sales in the current period was primarily driven
by strong cough, cold, and flu sales, and strength in the beauty and personal
care categories, benefiting from owned brand offerings, partially offset by
lower sales of COVID-19 over the counter test kits.

Operating loss for the six months ended February 28, 2023 compared to operating
income for the six months ended February 28, 2022
Gross profit was $11.7 billion for the six months ended February 28, 2023
compared to $12.8 billion in the year-ago period. Gross profit decreased 8.7
percent, primarily driven by lower COVID-19 vaccine and testing volumes and
pharmacy reimbursement pressure, net of procurement, offset by improved retail
gross profit driven by gross margin expansion, strong underlying performance
across categories and improved shrink.

Selling, general and administrative expenses as a percentage of sales were 31.4
percent for the six months ended February 28, 2023 and 18.5 percent for the six
months ended February 28, 2022. The increase is primarily driven by the $6.8
billion charge for opioid-related claims and litigation settlements, increased
labor investments, and incremental IT and digital investments, partly offset by
cost savings from the Transformational Cost Management Program.

Operating loss for the six months ended February 28, 2023 was $5.4 billion,
including $129 million of operating income from the Company's share of equity
earnings in AmerisourceBergen. This compared to $2.7 billion of operating income
in the year-ago period, including $202 million from Company's share of equity
earnings in AmerisourceBergen. The decrease was primarily driven by a $6.8
billion pre-tax charge for opioid-related claims and litigation settlements,
lower COVID-19 vaccination volumes, continued reimbursement pressure, and
planned labor investments, partially offset by improved retail gross profit
driven by gross margin expansion and higher core sales.
WBA Q2 2023 Form 10-Q    46

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

Adjusted operating income (Non-GAAP measure) for the six months ended February
28, 2023 compared to six months ended February 28, 2022
Adjusted operating income for the six months ended February 28, 2023 decreased
by 33.7 percent to $2.2 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 driven by 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."

WBA Q2 2023 Form 10-Q 47

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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 February 28,                Six months ended February 28,
                                              2023                      2022                   2023                  2022
Sales                                   $       5,651               $    5,563          $        10,840          $   11,381
Gross profit                                    1,198                    1,206                    2,248               2,413
Selling, general and administrative
expenses                                          846                    1,033                    1,789               2,186
Operating income (GAAP)                           353                      173                      459                 227
Adjusted operating income (Non-GAAP
measure) 1                                        352                      226                      468                 389

Number of locations at period end               3,975                    4,017                    3,975               4,017

Percentage increases (decreases)


                                                       Three months ended February 28,                           Six months ended February 28,
                                                    2023                              2022                         2023                    2022
Sales                                                1.6                               2.6                        (4.7)                    17.2
Gross profit                                        (0.7)                             11.8                        (6.8)                    16.6
Selling, general and administrative expenses       (18.2)                              6.2                        (18.2)                   13.6
Operating income (GAAP)                             104.0                             62.8                        102.2                    56.6
Adjusted operating income (Non-GAAP measure)
1                                                   55.8                              55.0                         20.2                    67.7

Comparable sales in constant currency 2             10.8                              13.5                         8.4                     12.8
Pharmacy sales                                      (6.2)                              2.1                        (10.6)                   7.7
Comparable pharmacy sales in constant
currency 2                                           3.1                               4.4                         2.1                     6.8
Retail sales                                         6.1                              15.2                        (0.9)                    16.6
Comparable retail sales in constant currency
2                                                   14.7                              19.0                         11.8                    16.4


                                                                                  Percent to sales
                                                     Three months ended February 28,                      Six months ended February 28,
                                                  2023                              2022                   2023                  2022
Gross margin                                      21.2                              21.7                   20.7                  21.2
Selling, general and administrative
expenses                                          15.0                              18.6                   16.5                  19.2



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. WBA Q2 2023 Form 10-Q 48

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

Sales for the three months ended February 28, 2023 compared to three months
ended February 28, 2022
Sales for the three months ended February 28, 2023 increased 1.6 percent to $5.7
billion. The adverse impact of currency translation on sales was 7.5 percentage
points. Comparable sales in constant currency, increased by 10.8 percent, mainly
due to higher sales in Boots UK.

Pharmacy sales decreased 6.2 percent in the three months ended February 28, 2023
and represented 15.9 percent of the segment's sales. The adverse impact of
currency translation on pharmacy sales was 6.9 percentage points. Comparable
pharmacy sales in constant currency increased 3.1 percent compared to the
year-ago quarter, reflecting prescription drug inflation in the UK and Mexico,
partially offset by lower demand for COVID-19 services in the UK, compared to
the year-ago quarter.

Retail sales increased 6.1 percent for the three months ended February 28, 2023
and represented 35.3 percent of the segment's sales. The adverse impact of
currency translation on retail sales was 9.5 percentage points. Comparable
retail sales in constant currency increased 14.7 percent reflecting higher
retail sales in the UK, including a recovery in store footfall, following the
trading headwind created by the Omicron variant, in the year-ago quarter.

Pharmaceutical wholesale sales increased 1.2 percent for the three months ended
February 28, 2023 and represented 48.8 percent of the segment's sales. The
adverse impact of currency translation on pharmaceutical wholesale sales was 6.3
percentage points. Excluding the impact of currency translation, the increase in
pharmaceutical wholesale sales reflects solid execution in a growing market.

Operating income for the three months ended February 28, 2023 compared to three
months ended February 28, 2022
Gross profit decreased 0.7 percent for the three months ended February 28, 2023.
Gross profit was adversely impacted by 8.2 percentage points, or $99 million, as
a result of currency translation. Excluding the impact of currency translation,
the increase was primarily due to higher UK retail sales, and solid execution in
our Germany wholesale business, partially offset by lower demand for COVID-19
related services in the UK, and the adverse gross margin impact of National
Health Service ("NHS") pharmacy funding.

Selling, general and administrative expenses in the quarter decreased 18.2
percent from the year-ago quarter to $846 million, reflecting a favorable
currency impact of 7.6 percentage points. The decrease reflects real estate
gains and effective cost management in Germany and lower acquisition related
costs. These decreases were partially offset in the UK, by increased in-store
and marketing activities, higher inflation, and lapping of temporary COVID-19
related benefits received in the UK, in the year-ago quarter.

Operating income for the three months ended February 28, 2023 increased 104.0
percent to $353 million. Operating income was adversely impacted by 11.9
percentage points, or $21 million as a result of currency translation. Excluding
the impact of currency translation, the increase in operating income reflects
execution in Germany, including real estate gains and strong growth in UK
retail.

Adjusted operating income (Non-GAAP measure) for the three months ended February
28, 2023 compared to three months ended February 28, 2022
Adjusted operating income for the three months ended February 28, 2023 increased
55.8 percent to $352 million. Adjusted operating income in the quarter was
adversely impacted by 9.9 percentage points, or $22 million, of currency
translation. Excluding the impact of currency translation, the increase in
adjusted operating income reflects execution in Germany, including real estate
gains and strong growth in UK retail.

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



Sales for the six months ended February 28, 2023 compared to six months ended
February 28, 2022
Sales for the six months ended February 28, 2023 decreased 4.7 percent to $10.8
billion. The adverse impact of currency translation on sales was 11.5 percentage
points. Comparable sales in constant currency, increased 8.4 percent, mainly due
to higher sales in Boots UK.

WBA Q2 2023 Form 10-Q    49

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
Pharmacy sales decreased 10.6 percent in the six months ended February 28, 2023
and represented 16.3 percent of the segment's sales. The adverse impact of
currency translation on pharmacy sales was 10.5 percentage points. Comparable
pharmacy sales in constant currency increased 2.1 percent compared to the
year-ago quarter, reflecting strong growth in Mexico and Chile, and higher
comparable pharmacy sales in the UK, despite lower demand for COVID-19 services
compared to the year-ago period.

Retail sales decreased 0.9 percent for the six months ended February 28, 2023
and represented 33.6 percent of the segment's sales. The adverse impact of
currency translation on retail sales was 12.9 percentage points. Comparable
retail sales in constant currency increased 11.8 percent reflecting higher
retail sales in the UK, including the impact of the ongoing recovery in store
footfall, especially in flagship, destination stores and travel locations,
compared to pre-COVID-19 levels.

Pharmaceutical wholesale sales decreased 5.2 percent for the six months ended
February 28, 2023 and represented 50.1 percent of the segment's sales. The
adverse impact of currency translation on pharmaceutical wholesale sales was
11.0 percentage points. Excluding the impact of currency translation, the
increase in pharmaceutical wholesale sales reflects solid execution in a growing
market.

Operating income for the six months ended February 28, 2023 compared to six
months ended February 28, 2022
Gross profit decreased 6.8 percent for the six months ended February 28, 2023.
Gross profit was adversely impacted by 11.6 percentage points, or $281 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 solid 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 NHS pharmacy funding in the UK.

Selling, general and administrative expenses for six months ended decreased 18.2
percent from the year-ago period to $1.8 billion, reflecting a favorable
currency impact of 11.4 percentage points reflecting real estate gains and
effective cost management in Germany and lower acquisition related costs, as
well as lower costs related to the Transformational Cost Management Program.
These decreases were partially offset by increased UK in-store and marketing
activity, higher inflation, and lapping of temporary COVID-19 related benefits
received in the UK, in the year-ago period.

Operating income for the six months ended February 28, 2023 increased 102.2
percent to $459 million. Operating income was adversely impacted by 13.5
percentage points, or $31 million, as a result of currency translation.
Excluding the impact of currency translation, the increase in operating income
reflects a strong performance in UK retail sales, execution in Germany,
including real estate gains, and lower costs related to the Transformational
Cost Management Program compared to the year-ago period. This was partially
offset by 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 lapping of temporary COVID-19 related benefits received in
the UK, in the year-ago period.

Adjusted operating income (Non-GAAP measure) for the six months ended February
28, 2023 compared to six months ended February 28, 2022
Adjusted operating income for the six months ended February 28, 2023 increased
20.2 percent to $468 million. Adjusted operating income in the quarter was
adversely impacted by 9.4 percentage points, or $36 million, of currency
translation. Excluding the impact of currency translation, the increase in
adjusted operating income reflects strong growth in UK retail sales and
execution in Germany, including real estate gains, partially offset by lower
demand for COVID-19 related services in the UK, 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 lapping of temporary COVID-19 related benefits received in the
UK, in the year-ago period.

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.

WBA Q2 2023 Form 10-Q    50

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
The U.S. Healthcare segment currently consists of a majority position in
VillageMD, a leading national provider of value-based primary, urgent and
multi-specialty care services; 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 February 28,            Six months ended February 28,
                                                    2023                  2022                 2023                2022
Sales                                          $      1,634          $       527          $     2,622          $      577
Gross profit                                             32                   15                   49                  36
Selling, general and administrative expenses            504                  227                  958                 292
Operating loss (GAAP)                                  (472)                (212)                (909)               (257)
Adjusted operating loss (Non-GAAP measure) 1           (159)                 (77)                (311)                (90)
Adjusted EBITDA (Non-GAAP measure) 1                   (109)                 (62)                (233)                (72)

Number of payor/provider partnerships at
period end                                                3                    2                    3                   2
Number of locations with Walgreens Health
Corners at period end                                   117                   47                  117                  47
Number of VillageMD co-located clinics at
period end                                              210                   94                  210                  94
Number of VillageMD2/Summit/CityMD locations
at period end                                           729                  270                  729                    270



1See "--Non-GAAP Measures" below for a reconciliation to the most directly
comparable financial measure calculated in accordance with GAAP and related
disclosures.
2Locations 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 locations 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 February 28, 2023 compared to three months
ended February 28, 2022
Sales for the three months ended February 28, 2023 were $1.6 billion. This is
reflective of VillageMD sales of $1.1 billion inclusive of Summit which closed
January 3, 2023, Shields sales of $125 million, and CareCentrix sales of $399
million. Sales for the three months ended February 28, 2022 were $527 million
reflecting VillageMD sales of $446 million and Shields sales of $81 million.

Operating loss for the three months ended February 28, 2023 compared to three
months ended February 28, 2022
Gross profit for the three months ended February 28, 2023 was $32 million.
Shields and CareCentrix gross profit was offset by the VillageMD expansion as
VillageMD added 133 VillageMD clinics compared to the year-ago quarter.

Selling, general and administrative expenses were $504 million for the three
months ended February 28, 2023 compared to $227 million for the three months
ended February 28, 2022. The increase is driven by the impact of acquisitions,
including Summit and higher investments in the organic business.

Operating loss for the three months ended February 28, 2023 was $472 million,
compared to $212 million in the year-ago quarter. The increase was driven by the
VillageMD clinic expansion inclusive of the Summit acquisition and higher
organic business investments.

WBA Q2 2023 Form 10-Q    51

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
Adjusted operating loss (Non-GAAP measure) for the three months ended February
28, 2023 compared to three months ended February 28, 2022
Adjusted operating loss was $159 million for the three months ended February 28,
2023 compared to a loss of $77 million in the year-ago quarter, reflecting
VillageMD expansion and growth in organic business investments, partially offset
by positive contributions from Shields and CareCentrix.

Adjusted EBITDA for the three months ended February 28, 2023 compared to three
months ended February 28, 2022
Adjusted EBITDA loss was $109 million, for three months ended February 28, 2023
compared to a loss of $62 million in the year-ago quarter, reflecting VillageMD
expansion and higher investments in the organic business, partially 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.



Sales for the six months ended February 28, 2023 compared to six months ended
February 28, 2022
Sales for the six months ended February 28, 2023 were $2.6 billion. This is
reflective of VillageMD sales of $1.7 billion inclusive of Summit which closed
January 3, 2023, Shields sales of $229 million, and CareCentrix sales of $732
million. Sales for the six months ended February 28, 2022 were $577 million
reflecting a partial period for both VillageMD and Shields.

Operating loss for the six months ended February 28, 2023 compared to six months
ended February 28, 2022
Gross profit for the six months ended February 28, 2023 was $49 million,
reflecting results from Shields, VillageMD inclusive of approximately two months
of Summit results, and CareCentrix. Shields and CareCentrix gross profit was
offset by the VillageMD expansion as VillageMD added 133 VillageMD clinics
compared to the year-ago quarter.

Selling, general and administrative expenses were $958 million for the six months ended February 28, 2023 compared to $292 million for the six months ended months ended February 28, 2022. The increase is driven by the impact of acquisitions, including Summit and higher investments in the organic business.

Operating loss for the six months ended February 28, 2023 was $909 million, compared to a loss of $257 million in the year-ago period. The increase was driven by the VillageMD clinic expansion inclusive of the Summit acquisition and higher organic business investments.



Adjusted operating loss (Non-GAAP measure) for the six months ended February 28,
2023 compared to six months ended February 28, 2022
Adjusted operating loss was $311 million for the six months ended February 28,
2023 compared to a loss of $90 million in the year-ago period. The current
period represents a full six months of VillageMD, Shields, and CareCentrix
results compared to a partial period of VillageMD and Shields in the year-ago
period. The increase is mainly driven by VillageMD clinic expansion inclusive of
the recent Summit acquisition and higher investments in the organic business,
partly offset by positive contributions from Shields and CareCentrix.

Adjusted EBITDA for the six months ended February 28, 2023 compared to six
months ended February 28, 2022
Adjusted EBITDA loss was $233 million, for six months ended February 28, 2023
compared to a loss of $72 million in the year-ago period representing a partial
period of VillageMD and Shields. The increase is mainly driven by VillageMD
clinic expansion inclusive of the recent Summit acquisition and higher
investments in the organic business, 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.



WBA Q2 2023 Form 10-Q    52

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
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" to
"Adjusted net earnings & Net (loss) earnings per share to Adjusted earnings per
share" and "Operating (loss) income" to "Adjusted EBITDA for U.S. Healthcare
segment" reconciliation tables 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.

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

Three months ended February 28, 2023


                                              U.S. Retail            International           U.S. Healthcare          Corporate and        Walgreens Boots
                                                Pharmacy                                                                  Other             Alliance, Inc.
Operating income (loss) (GAAP)              $         373          $          353          $           (472)         $        (56)         $

197


Certain legal and regulatory accruals
and settlements                                       427                       -                         -                     -

427


Transformational cost management                      138                       4                         -                     2

145


Acquisition-related amortization                       78                      15                       154                     -                    247
Acquisition-related costs                               -                     (20)                      158                    10                    148
Adjustments to equity earnings in
AmerisourceBergen                                      31                       -                         -                     -                     31
LIFO provision                                         20                       -                         -                     -                     20

Adjusted operating income (loss)
(Non-GAAP measure)                          $       1,067          $          352          $           (159)         $        (44)         $       1,215



WBA Q2 2023 Form 10-Q    53

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  Table of Contents
                WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                                                                                  Three months ended February 28, 2022
                                               U.S. Retail            International           U.S. Healthcare          Corporate and        Walgreens Boots
                                                 Pharmacy                                                                  Other             Alliance,

Inc.


Operating income (loss) (GAAP)               $       1,390          $          173          $           (212)         $       (106)         $

1,246


Transformational cost management                        52                      13                         -                     5


Acquisition-related amortization                        99                      17                       135                     -                    250
Acquisition-related costs                                -                      23                         -                    21                     44
Adjustments to equity earnings in
AmerisourceBergen                                       51                       -                         -                     -                     51
LIFO provision                                          (5)                      -                         -                     -                     (5)

Adjusted operating income (loss)
(Non-GAAP measure)                           $       1,588          $          226          $            (77)         $        (79)         $       1,657



                                                                                 Six months ended February 28, 2023
                                              U.S. Retail                                                            Corporate and          Walgreens
                                               Pharmacy             International           U.S. Healthcare              Other                Boots
                                                                                                                                          Alliance, Inc.
Operating (loss) income (GAAP)              $     (5,385)         $          459          $           (909)         $       (119)         $    (5,954)
Certain legal and regulatory accruals
and settlements                                    6,981                       -                         -                     -                6,981
Transformational cost management                     265                      11                         -                     7                  283
Acquisition-related amortization                     155                      29                       392                     -                  577
Acquisition-related costs                              1                     (32)                      206                    12                  187
Adjustments to equity earnings in
AmerisourceBergen                                    117                       -                         -                     -                  117
LIFO provision                                        38                       -                         -                     -                   38

Adjusted operating income (loss)
(Non-GAAP measure)                          $      2,172          $          468          $           (311)         $       (100)         $     2,229



                                                                                       Six months ended February 28, 2022
                                              U.S. Retail Pharmacy           International           U.S. Healthcare          Corporate and        Walgreens Boots
                                                                                                                                  Other             Alliance, Inc.
Operating income (loss) (GAAP)               $          2,746              $          227          $           (257)         $       (188)         $

2,529


Transformational cost management                          193                          66                         -                    14

273


Acquisition-related amortization                          238                          34                       143                     -                    415
Acquisition-related costs                                  (3)                         62                        24                    32                    115
Adjustments to equity earnings in
AmerisourceBergen                                          94                           -                         -                     -                     94
LIFO provision                                              9                           -                         -                     -                      9

Adjusted operating income (loss)
(Non-GAAP measure)                           $          3,277              $          389          $            (90)         $       (143)         $       3,434


WBA Q2 2023 Form 10-Q    54

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

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


                                                                 Three months ended February
                                                                             28,                     Six months ended February 28,
                                                                    2023              2022               2023              2022

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

$     703

$ 883 $ (3,018) $ 4,463



Adjustments to operating income (loss):
Certain legal and regulatory accruals and settlements 1               427                 -              6,981                 -
Acquisition-related amortization 2                                    247               250                577               415
Transformational cost management 3                                    145                70                283               273
Acquisition-related costs 4                                           148                44                187               115
Adjustments to equity earnings in AmerisourceBergen 5                  31                51                117                94
LIFO provision 6                                                       20                (5)                38                 9

Total adjustments to operating income (loss)                        1,018               411              8,183               906

Adjustments to other income (expense), net:
Gain on sale of equity method investments 7                          (544)                -             (1,513)                -
Net investment hedging loss 8                                           -                 -                  -                 1

Impairment of equity method investment and investment in equity securities 9

                                                     -               190                  -               190
Gain on previously held investments 10                                  -                 -                  -            (2,576)

Adjustment to gain on disposal of discontinued operations 11

                                                                      -                38                  -                38
Total adjustments to other income (expense), net                     (544)              228             (1,513)           (2,347)

Adjustments to income tax provision (benefit):



Equity method non-cash tax 12                                          14                12                 23                30
Tax impact of adjustments 12                                         (122)             (109)            (1,560)             (135)
Total adjustments to income tax provision (benefit)                  (108)              (97)            (1,537)             (105)

Adjustments to post-tax earnings from other equity method
investments:
Adjustments to earnings from other equity method
investments 13                                                         13                10                 22                24

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

                                                     13                10                 22                24

Adjustments to net loss attributable to non-controlling interests: Transformational cost management 3

                                      -                 -                  -                (1)
Acquisition-related costs 4                                           (40)               (3)               (54)              (20)
Acquisition-related amortization 2                                    (42)              (56)               (78)              (88)

Total adjustments to net loss attributable to
non-controlling interests                                             (82)              (59)              (133)             (109)

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

$   1,000

$ 1,377 $ 2,004 $ 2,833

Diluted net earnings (loss) per common share (GAAP) 14 $ 0.81

$ 1.02 $ (3.50) $ 5.15 Adjustments to operating income (loss)

                               1.18              0.48               9.47              1.05
Adjustments to other income (expense), net                          (0.63)             0.26              (1.75)            (2.71)


WBA Q2 2023 Form 10-Q    55

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
Adjustments to income tax provision (benefit)          (0.12)            (0.11)            (1.78)            (0.12)
Adjustments to post-tax earnings from other
equity method investments                               0.02              0.01              0.03              0.03
Adjustments to net loss attributable to
non-controlling interests                              (0.09)            (0.07)            (0.15)            (0.13)
Adjusted diluted net earnings per common share
(Non-GAAP measure) 15                                 $ 1.16          $

1.59 $ 2.32 $ 3.27



Weighted average common shares outstanding,
diluted (in millions) 15                               863.4             865.2             863.8             866.4



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

                                                     Three months ended February 28,                Six months ended February 28,
                                                        2023                   2022                   2023                   2022
Operating loss (GAAP) 16                         $           (472)         $     (212)         $           (909)         $     (257)
Acquisition-related amortization 2                            154                 135                       392                 143
Acquisition-related costs 3                                   158                   -                       206                  24
Adjusted operating loss (Non-GAAP measure)                   (159)                (77)                     (311)                (90)
Depreciation expense                                           34                  11                        49                  13
Stock-based compensation expense 17                            16                   5                        29                   5
Adjusted EBITDA (Non-GAAP measure)               $           (109)         $      (62)         $           (233)         $      (72)

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 and six months ended

February 28, 2023, the Company recorded charges related to the previously announced

opioid litigation settlement frameworks and certain other opioid-related matters. 2 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. 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. 3 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. 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, stock compensation and employee transaction success bonuses. 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.

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

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 Includes significant gains on the sale of equity method investments. During the three and

six months ended February 28, 2023, the Company recorded a gain of $492 million and $1.5

billion, respectively, in Other income (expense), net, due to a partial sale of its equity

method investment in AmerisourceBergen. 8 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

(expense), net. We do not believe this volatility related to mark-to-market adjustment on

the underlying derivative instruments reflects the Company's operational performance. 9 Impairment of equity method investment and investment in equity securities includes

impairment of certain investments. The Company excludes these charges when evaluating

operating performance because these do not relate to the ordinary course of the Company's

business and it does not incur such charges on a predictable basis. Exclusion of such

charges enables more consistent evaluation of the Company's operating performance. These

charges are recorded within Other income (expense), net. 10 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. 11 During the three months ended February 28, 2022, the Company finalized the working capital

adjustments with AmerisourceBergen related to the sale of the Alliance Healthcare

business, resulting in a $38 million charge recorded to Other income (expense), net in the

Consolidated Condensed Statement of Earnings. 12 Adjustments to income tax provision (benefit) 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 provision (benefit). 13 Adjustments to post-tax earnings 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 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. 14 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

calculation of weighted-average common shares outstanding for diluted EPS for the six

months ended February 28, 2023. 15 Includes impact of potentially dilutive securities in the calculation of weighted-average

common shares, diluted for adjusted diluted net earnings per common share calculation

purposes.

16 The Company reconciles Adjusted EBITDA for the 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. 17 Includes 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/Summit/CityMD locations, 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.

WBA Q2 2023 Form 10-Q    57

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
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 to meet the Company's needs for
at least the next 12 months. See Item 3. Quantitative and qualitative disclosure
about market risk, below for a discussion of certain financing and market risks.

Cash, cash equivalents, marketable securities and restricted cash were $2.0
billion (including $197 million in non-U.S. jurisdictions) and $2.6 billion
(including $188 million in non-U.S. jurisdictions) as of February 28, 2023 and
August 31, 2022, respectively. 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 entered into a definitive agreement to acquire
the remaining 45% equity interest of CareCentrix for approximately $392 million
of cash consideration, less transaction expenses. The transaction is expected to
close in the third quarter of fiscal 2023. See Note 2. Acquisitions and other
investments to the Consolidated Condensed Financial Statements for further
information.

As of February 28, 2023, the Company has recorded a $7.4 billion liability to
resolve a substantial majority of opioid-related claims and litigation
settlements 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 March 2, 2023, the Company entered into a $900 million unsecured 364-day
revolving credit facility. Borrowings under the 2023 Revolving Credit Agreement
bear interest at a fluctuating rate per annum. See Note 19. Subsequent events to
the Consolidated Condensed Financial Statements for further information.

On March 3, 2023, the Company sold approximately 15.5 million shares of Option
Care Health for a total consideration of approximately $469 million. See Note 5.
Equity method investments to the Consolidated Condensed Financial Statements for
further information.

At February 28, 2023, the Company had no guarantees outstanding and 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 six months ended February 28,
2023 was $1.2 billion, compared to $2.2 billion for the year-ago period.

WBA Q2 2023 Form 10-Q 58

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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
The decrease in cash provided by operating activities is primarily driven by
lower earnings due to lapping COVID 19 vaccine and testing volumes partially
offset by net working capital. Improvements in net working capital are primarily
driven by higher cash inflows from trade accounts payable and lower cash
outflows from inventory, partially offset by lower cash inflows from accounts
receivable. Changes in accounts payable, inventories, and accounts receivable
are mainly driven by ongoing working capital optimization efforts and timing.

Cash flows from investing activities
Net cash used for investing activities was $3.6 billion for the six months ended
February 28, 2023 compared to $2.2 billion for the year-ago period.

Net cash used for investing activities for the six months ended February 28,
2023 includes the Summit business acquisition, net of cash acquired of
$6.7 billion partially offset by sale proceeds of $3.0 billion related to the
Company's sale of 19.2 million shares of AmerisourceBergen common stock, and
proceeds from sale and leaseback transactions of $942 million.

Net cash used for investing activities for the six months ended February 28,
2022 includes business acquisitions, net of cash acquired of VillageMD and
Shields for $0.8 billion and $0.9 billion, respectively, and proceeds from the
sale and leaseback transactions of $475 million.

See Note 2. Acquisitions and other investments and Note 5. Equity method 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):

Six months ended February 28,


                                                                          2023                      2022
U.S. Retail Pharmacy                                              $              756          $          632
International                                                                    143                     155
U.S. Healthcare                                                                  208                      83
Total additions to property, plant and equipment                  $

1,108 $ 870




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 provided by financing activities for the six months ended February 28,
2023 was $1.8 billion compared to net cash provided by financing activities of
$769 million in the year-ago period.

In the six months ended February 28, 2023, the Company received $2.5 billion in
proceeds from the issuance of preferred units in VillageMD to Cigna as part of
the Summit acquisition.

In the six months ended February 28, 2023, there were $2.8 billion in proceeds
from debt, primarily from issuance of commercial paper and credit facilities,
compared to $11.2 billion in proceeds from debt, primarily from revolving credit
facilities, commercial paper and the issuance of notes, in the year-ago period.
In the six months ended February 28, 2023 there were $1.5 billion in payments of
credit facilities, compared to $7.3 billion, primarily for revolving credit
facilities and commercial paper, in the year-ago period. See Note 7. Debt, to
the Consolidated Condensed Financial Statements for further information.

The Company acquired $1.0 billion of Shields non-controlling interests in the six months ended February 28, 2023. The Company acquired $2.1 billion of non-controlling interests, primarily related to VillageMD, in the year-ago period. See Note 2. Acquisitions and other investments to the Consolidated Condensed Financial Statements for further information.



The Company repurchased shares to offset dilution from equity incentive plans
totaling $150 million and $187 million in the six months ended February 28, 2023
and 2022, respectively.

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

The Company paid cash dividends of $829 million and $833 million in the six months ended February 28, 2023 and 2022, 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 February 28, 2023. 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.

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 February 28,
2023, the Company was in compliance with all such applicable covenants.

Credit ratings
As of March 27, 2023, the credit ratings of Walgreens Boots Alliance were:
Rating agency        Long-term debt rating   Commercial paper rating     Outlook

Moody's                      Baa3                      P-3              Negative
Standard & Poor's             BBB                      A-2               Stable



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 10-K. Some
of the more significant estimates include business combinations, leases,
goodwill and indefinite-lived intangible asset impairments, 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.

WBA Q2 2023 Form 10-Q 60

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Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
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 the 2022 10-K, 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 Q2 2023 Form 10-Q    61

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Table of Contents

WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES

Latest news about Walgreens Boots Alliance, Inc.

Truist Securities Adjusts Price Target on Walgreens Boots Alliance to $20 From $25	Apr. 15	MT
RBC Capital Cuts Walgreens Boots Alliance's Price Target to $22 From $26, Sector Perform Rating Kept	Apr. 12	MT
UBS Cuts Walgreens Boots Alliance's Price Target to $22 From $25, Maintains Neutral Rating	Apr. 03	MT
Economic Data Leave Equity Markets Mixed; Yields Surge	Apr. 01	MT
Economic Data Leave Equity Markets Mixed; Yields Surge	Apr. 01	MT
News Highlights : Top Company News of the Day - Thursday at 7 PM ET	Mar. 28	DJ
S&P closes higher to secure strongest Q1 since 2019	Mar. 28	RE
News Highlights : Top Company News of the Day - Thursday at 5 PM ET	Mar. 28	DJ
Dow, S&P 500 Close at Record Highs as Traders Parse Macro Data	Mar. 28	MT
Dow, S&P 500 Close at Record Highs as Traders Parse Macro Data	Mar. 28	MT
US Equity Markets Mixed Thursday Following Upwardly Revised Q4 Economic Growth	Mar. 28	MT
Sector Update: Health Care Stocks Rise Late Afternoon	Mar. 28	MT
Walgreens CEO on Narrowed Forecast, Shoppers Cutting Back Spending	Mar. 28	MT
Walgreens Boots Alliance's Fiscal Q2 Non-GAAP Earnings, Sales Rise; Fiscal 2024 Adjusted EPS Outlook Revised	Mar. 28	MT
News Highlights : Top Company News of the Day - Thursday at 3 PM ET	Mar. 28	DJ
Equities poised to wrap up strong quarter on quiet note	Mar. 28	RE
Economic Data Leave Equity Markets Mixed Intraday	Mar. 28	MT
Top Midday Stories: Bankman-Fried Gets 25-Year Prison Sentence; Home Depot Acquiring SRS Distribution; Walgreens Lowers FY 2024 Outlook; Analyst Says Short MicroStrategy; Canadian School Boards Sue Social Media Platforms; Eli Lilly Weight-Loss Drug Facing Shortage	Mar. 28	MT
Sector Update: Health Care Stocks Advance in Afternoon Trading	Mar. 28	MT
Sector Update: Health Care	Mar. 28	MT
News Highlights : Top Company News of the Day - Thursday at 1 PM ET	Mar. 28	DJ
News Highlights : Top Company News of the Day - Thursday at 11 AM ET	Mar. 28	DJ
Walgreens Lowers Top End of Fiscal 2024 Earnings Outlook Following Second-Quarter Beat	Mar. 28	MT
Investors only care for Easter	Mar. 28
News Highlights : Top Company News of the Day - Thursday at 9 AM ET	Mar. 28	DJ

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

2024-06-26 - Q3 2024 Earnings Release (Projected)

Related indices

Dow Jones Industrial , S&P 500

More about the company

Income Statement Evolution

More financial data

Analysis / Opinion

Walgreens CEO on Narrowed Forecast, Shoppers Cutting Back Spending

March 28, 2024 at 03:59 pm EDT

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

November 27, 2023 at 10:22 am EST

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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

17.59 USD

Average target price

23.34 USD

Spread / Average Target

+32.67%

Consensus

EPS Revisions

Estimates Revisions

Quarterly earnings - Rate of surprise

Company calendar

Sector Other Drug Retailers

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WALGREENS BOOTS ALLIANCE, INC.	-30.10%	15.18B
JD HEALTH INTERNATIONAL INC.	-41.56%	9.47B
MATSUKIYOCOCOKARA & CO.	-10.75%	6.15B
YIFENG PHARMACY CHAIN CO., LTD.	+6.59%	6.04B
ALIBABA HEALTH INFORMATION TECHNOLOGY LIMITED	-38.44%	5.44B
NAHDI MEDICAL COMPANY	+2.34%	4.86B
CORPORATIVO FRAGUA, S.A.B. DE C.V.	+50.00%	4.23B
CLICKS GROUP LIMITED	-13.27%	3.55B
DASHENLIN PHARMACEUTICAL GROUP CO., LTD.	-10.36%	3.51B
WELCIA HOLDINGS CO., LTD.	-8.27%	3.05B

Other Drug Retailers

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