Walgreens Boots Alliance, Inc. (NASDAQ:WBA) 41st Annual J.P. Morgan Healthcare Conference January 10, 2023 2:15 PM ET
Company Participants
Roz Brewer – CEO
James Kehoe – CFO
Conference Call Participants
Lisa Gill – JPMorgan
Lisa Gill
Good morning. My name is Lisa Gill, and I’m the healthcare services analyst with JPMorgan. It is with great pleasure this morning that we have with us Walgreens Boots Alliance. Presenting for Walgreens will be Roz Brewer, CEO. After Roz does her presentation, she’s going to join myself and their CFO, James Kehoe, over here at the table for some Q&A.
With that, let me hand it off to Roz.
Roz Brewer
Thank you, Lisa. Hello, everyone. It looks like we still have a few people filing in, but we’ll go ahead and get started. So welcome, and thank you, JPMorgan, for hosting us today. Before we start, I will note the harbor statements that are on Slide 2 here. But today, I’d like to spend just a few moments to recap our first quarter results. We’re just leaving earnings last week, Thursday.
But just to recap those earnings, we had a solid first quarter performance, and we offered incremental color on our second half of the growth drivers. And today, I’m going to focus on also the accelerated transformation we’re having in healthcare right now. So this was a landmark quarter for us, and it really showed the build-out of our next growth engine. And it showed that we invested to support VillageMD’s acquisition of Summit Health creating one of the leading independent provider groups in the country.
At the same time, we are taking divisive and very clear action to unlock value and strengthen the company and simplifying the portfolio. Now we’re taking the next steps in our journey. We have new efforts underway to accelerate our global risk opportunity. We are also building out our clinical trials business with our first two contracts signed. Our strategy is working, and we will be relentless in driving continued progress ahead.
So our execution to date really reinforces our confidence in achieving our full year guidance for adjusted EPS of $4.45 to $4.65. And we have raised our sales guidance, and we have greater visibility toward the strong 8% to 10% core growth that underpins our results. We are quickly scaling U.S. Healthcare with a defined path to achieve profitability exiting this fiscal year.
So our bold investments today are enabling our future growth as WBA is building a differentiated healthcare services business with best-in-class assets across the entire care continuum.
So with that in mind, moving to Slide 4. We are making progress against each of our four strategic priorities that we introduced in October of ’21 when we had our Investor Day and as demonstrated with our first quarter results announced on this past Thursday.
Let me walk you through the recent highlights and while I’ll show you how they contribute to each of these priorities. And you’ll hear us talk about these priorities, not only in this quarter, but quarter after quarter, so that you can attach to the milestones that we’ve set for ourselves and understand just how important execution is to us at this company. So first, transform and align the core. U.S. and Boots UK retail comp sales were both strong in the first quarter, with the U.S., excluding tobacco, up over 2% on top of almost 12% last year and Boots up 9% on top of 16% last year.
Turning to our second strategic priority. Our healthcare strategy is coming to life through all of our best-in-class assets, which drove a combined 38% pro forma sales growth in the quarter. The addition of Summit Health will further enhance our portfolio of leading assets. This growth is funded through actions we continue to take to better align our investment portfolio, marking our third strategic priority. In November and December, we unlocked $3 billion in after-tax cash proceeds from the sale of 19 million AmerisourceBergen shares.
Lastly, we have a strong team that is fully aligned with our strategy, including a new structure for U.S. Retail Pharmacy and John Driscoll, leading our U.S. Healthcare. And I think he’s here with us. He is — there, he is in the room with me today.
So as we move on to the next slide, let me talk to you a little bit about our guidance and our acceleration in growth.
So WBA, we entered fiscal 2023 with good momentum, and we delivered a solid start to the year. With earnings on Thursday, we’ve reconfirmed our full year EPS guidance shown on Slide 5 here. Our projection for the number of COVID-19 vaccinations is unchanged and creates year-on-year headwind of 16% to 18%. Now excluding COVID and currencies, we continue to project core business growth of 8% to 10%. In terms of phasing, at the midpoint of our guidance, we see a balanced 50-50 cadence between the first half and the second half of the year. Our full year guidance requires second half EPS growth of around 30%. And we have very good visibility into the key drivers.
So let me walk you through why we believe we can deliver this strong growth. There are a handful of factors that comprise the approximately 60-point delta from the first half decline to the expected strong second half growth outlined here on Slide 6.
While COVID will remain a headwind in the second half of the year, we expect that it would be a lot lower with an impact that is less than 50% of what we saw in the first half of the year. This will boost growth by 11 to 12 percentage points versus the first half. So it’s important to note the shift there.
Next, the first half of the year is the peak investment period for U.S. Healthcare.
Consistent with prior guidance, we expect the segment to achieve positive adjusted EBITDA exiting the year. The overall segment will flip from being a headwind in the first half to a significant mid-teens EPS tailwind.
Now moving to International. We expect to return to strong profit growth in the second quarter, moving past the adverse gross margin impact of NHS pharmacy funding and the expiration of temporary rental reductions received in the prior year. This segment has delivered a strong Christmas trading period, with comp sales growth of around 15% at Boots. We expect International to contribute an additional 5 percentage points in growth in the second half compared to the first half. We expect significant second half momentum in U.S. Retail Pharmacy. So we have a clear line of sight to favorable trends in reimbursement that led to a tailwind of $350 million in the second half of the year relative to the first half. This accounts for 12 to 14 percentage points of growth versus the first half.
Second, the timing around pharmacy cost of goods sold represents 13 to 15 percentage points of growth.
Finally, ongoing script volume recovery should drive accelerating growth into the balance of the year as we normalize store operations and then we implement marketing win-back initiatives and that equates to about 12 to 14 percentage points of growth. So the factors I’ve outlined add up to a swing in about 75 percentage points of EPS growth from the first half to the second half, driving our positive inflection. There are partial offsets from higher tax, increased interest expense and the impact of prior sales of ABC and that those shares bridge to the roughly 30% growth we expect in the second half.
Our first quarter execution and the good visibility for these drivers across the board combine to give us confidence in our plans and that they are achievable.
So now let’s dive into the second strategic priority on Slide 7 because that’s why we’re all here is to talk about how our healthcare assets are helping us deliver across the care continuum.
Our Retail Pharmacy business provides a foundation for our leading healthcare assets to deliver value across the full care continuum. We are able to unite our digital and physical models to guide consumers through the complex healthcare landscape. We’re building the scale and the resources to help health plans and patients, improve outcomes and lower costs is only Walgreens can do. There are significant opportunities for synergies, allowing us to pursue value-based care and risk arrangements, which will demonstrate the value of an integrated approach.
We are focused on expanding our risk business, supporting integrated care models and expanding our pharmacy value proposition, while driving operational efficiencies.
Now as shown here in on Slide 8, we’re making important strides across the U.S. Healthcare segment. We’re executing our strategic vision that we set out just over a year ago. Our investments have been significant. We invested $3.5 billion to support VillageMD’s acquisition of Summit Health. We recognize the critical importance of scale in value-based care delivery and the density in attractive markets. This highly strategic transaction expands VillageMD’s addressable market with primary care, multi-specialty and urgent care and reinforces our approach across the care continuum. The deal was also immediately EPS accretive and accelerates profitability for U.S. Healthcare. Now Shields, our Shields Health Solutions and CareCentrix continue to perform well, which led to the accelerated acquisition of both entities.
Shields closed on December 28, and CareCentrix is scheduled to close in the third quarter of fiscal ’23. VillageMD is leading the way in value-based care for the country, with 393 clinics as of year-end, including 200 of those are co-located with Walgreens, achieving the calendar 2022 target. We also exceeded our goal for Health Corners within our stores with 112 now versus 100 we had expected by the end of December. So we’re ahead of plan there.
Finally, as we’ll cover today, we’re working to accelerate our global risk business. We have also signed our first two clinical trial contracts.
So moving to Slide 9. While our existing portfolio of best-in-class healthcare assets supports a strong future outlook, the addition of Summit Health is transformational. It’s creating one of the largest multi-payor integrated provider platforms in the U.S., delivering quality, affordable care for all patient populations regardless of insurance or payor type.
Our investment to support VillageMD’s acquisition enhances the value of our largest U.S. Healthcare business. These complementary capabilities extend our reach across the care continuum further expand the addressable market and position us well to capture the full potential of the integrated care model across existing and new markets.
So Summit Health, they operate at scale in the attractive New York and New Jersey markets. So on a combined basis, VillageMD now has over 4,100 providers across 680 locations in 26 markets. Now if you combine that with roughly the 9,000 U.S. Walgreens stores, of which 75% are within 5 miles of every U.S. household, you can begin to see how powerful this combination is and how we can impact the healthcare continuum.
The combination allows us to manage more of total health spend than an expanded scope of services under an integrated connected model. This leads to a more seamless patient journey and drives high-quality care, better patient health outcomes and lower costs. In addition to the strategic benefits, Summit Health drives attractive financial returns for WBA and catapults the U.S. Healthcare business to scale and profit as outlined on this slide here.
We expect $0.07 to $0.11 of EPS contribution in fiscal ’24 and increasing thereafter. Importantly, we expect Summit Health to accelerate the path to profitability for the segment by one year, one year earlier as we now anticipate exiting ’23 with positive adjusted EBITDA. The enhanced visibility also gives us confidence to raise our 2025 sales and adjusted EBITDA goals for the U.S. Healthcare segment.
Our new sales goal of $14.5 billion to $16 billion is over 30% higher than our October forecast when we came forward in our Investor Day in October ’21, while we expect roughly $1.1 billion in adjusted EBITDA, up by approximately $500 million versus October. We believe there remains opportunity to continue to grow sales and margins as the business scales beyond 2025 based on a maturing clinic profile and a shift to risk managements and unlocking synergies and across all the businesses.
So we see meaningful synergy opportunities over time. And I just want to take a moment with this slide that you have in front of you to further elaborate on the $150 million run rate expected to calendar in ’27. This is driven by two factors: accelerating Summit Health’s transition to risk and cost savings; VillageMD had 441,000 value-based lives as of the end of the first quarter.
While Summit Health is largely a fee-for-service model today, the company has been on a path to greater adoption of value-based and risk models. Now VillageMD can speed up that journey, leveraging their expertise, operational capabilities in tech platform. These can drive incremental value across a number of areas, including improving clinical documentation accuracy, growing the number of attributed lives, accelerating negotiations with payors to enter into risk contracts and improving the MLR through better care coordination.
Primary care physicians play a crucial role in managing population health. And under these risk models serving as a quarter back for patients’ care, Summit Health really increases the number of PCPs at the combined entity by over 50%. So leveraging the integrated multi-specialty capabilities that we see here can lead to tighter clinical integration, which is really important and better management of downstream medical costs, and patients remain within the Summit Health network, bringing a strong continuum of care. There is significant potential to grow risk-based lives in Summit Health’s core markets. For example, as of 2020, there were 1.6 million Medicare lives in New Jersey, with roughly 32% of those in Medicare Advantage plans. This is below the national MA penetration rate of 40% and points to a larger, longer-term opportunity as penetration rises over time. The transition to risk accounts for roughly 60% or $90 million of run rate synergy target.
So moving on to the second bucket that you see here, cost savings. And the cost savings opportunities will account for the other 40% of the target or about $60 million. This includes optimizing teams, process improvements and automation as well as improving vendor costs by leveraging scale and consolidating shared vendors. While this is the smaller of the two pieces, it is likely to drive a larger portion of synergy realization in the early years.
We also see additional opportunities that are not currently baked into the $150 million target that could drive additional upside in the outer years. So just briefly, there is a potential to unlock value by leveraging Summit Health’s experience in evaluating and building multi-specialty practices, which wasn’t really at the top of our funnel at the beginning of our arrangement. But it does give us the opportunity to export the integrated primary and specialty care model beyond the New Jersey and New York’s markets and into existing VillageMD markets and new markets ahead.
So in addition, there are roughly 750 Walgreens pharmacies across the New Jersey and New York area, providing an opportunity to generate incremental store traffic and deploy pharmacy services such as adherence programs and medication therapy management and develop integrated pharmacy and healthcare offerings across eligible VillageMD and Summit Health patients. So you can now begin to see how this comes together.
So let’s shift gears a little bit here and talk about our organic healthcare business outside of the acquisitions that we’ve made. We see a natural path forward to taking risk, leveraging our integrated capabilities to align economics with value creation with an opportunity to drive significant incremental sales and profit contribution to WBA over time. The value-based care market opportunity across all payment types is expected to nearly double over the next five years, reaching $2.8 trillion by 2027.
We finished the first quarter with 2.9 million contracted lives in our Walgreens Health organic business, exceeding our goal of 2 million lives by the end of calendar year 2022. So we’re ahead. Our existing Walgreens Health payor relationships have started with more traditional fee-for-service arrangements tied to care gap closures and clinical quality services, such as health risk assessments, blood pressure screening, A1C test and mammography care coordination.
Performance and execution under these relationships have led to increasing discussions around moving up the risk continuum. Under risk agreements, we are able to leverage our integrated assets across the care continuum, including VillageMD, Summit Health and CareCentrix as well as our full suite of clinical capabilities with our core Walgreens business. So this will drive engagement, improve outcomes and lower overall health costs, and we have efforts underway to accelerate our aspirations and global risk, and I look forward to updating you ahead.
So now just to give you a real clear illustration of how our integrated strategy can come to life.
Let me take you on a little journey of a woman named Flora. So Flora, she’s a 71-year-old Medicare Advantage enrollee. She has multiple chronic conditions, including type 2 diabetes, high cholesterol, arthritis and depression and values our existing provider relationships, given her complex conditions, but has experienced poor care coordination in the past. Now many of us in this room can probably think about someone in our family that’s probably facing a few of these things. But as part of a payor partnership, a Walgreens Health advisor from Flora’s local pharmacy contacts her to discuss additional benefits now available through her plan, including an annual wellness visit, which can be completed in the convenience of her home. The visit is conducted by a licensed Village Medical at home practitioner, who spends time to listen to Flora, collects your health history and get biometrics and labs. The practitioner then works with Flora and her caregiver to create a personalized plan outlining health goals and recommended next steps. Following this initial visit, a Walgreens Health advisor is assigned to essentially serve as a quarterback of Flora’s care. The health advisor reviews Flora’s care plan and listens to understand Flora’s motivations, barriers and support system she can lean on. The health advisor also helps Flora coordinate recommended screening opportunities and appointments, along with her provider visits. Despite her best efforts to follow the care plan, unforeseen adverse events can always happen. Let’s say, Flora ends up in emergency room with COVID. She is diagnosed with acute bacterial pneumonia and admitted to the hospital for fluids, IV antibiotics and close monitoring. Following her three-day hospital stay, Flora has discharged from the hospital to her home. Prior to discharge, a CareCentrix nurse reaches out to walk her through her discharge instructions and her care plan and to help coordinate any additional post-acute needs, including follow-up appointments, prescriptions and special equipment. The CareCentrix nurse also provides ongoing support to keep Flora healthy and avoid being readmitted. During a routine visit to her Walgreens Pharmacy, the following month, Flora meets with her health advisor, who understands her situation, answers questions, provides the support to ensure Flora is staying on her health journey. This includes network alternatives for any specialist care that is needed.
As you can see, Flora is a dedicated care team — she has a dedicated care team that knows her, is accessible and understands and supports her needs, every step of her health journey. This is how our integrated portfolio can improve outcomes, reduce costs and improve the consumer experience and the engagement. Real-life example.
So now let’s discuss our last topic today on this slide, the build-out of our clinical trials business. So we launched that business last June to redefine the patient experience and increase access, diversity and patient retention and sponsor-led drug development research. Walgreens Healthcare portfolio supports the journey of a typical clinical trial’s patient and our foundational investments in technology and data solutions and offer a strong point of differentiation.
Nearly 80% of trials failed to meet their enrollment goals in the stated timeframes, contributing to billions of dollars in delays and increasing costs. And we can improve that metric by rapidly scaling three portfolio integrated patient-centric service lines. First, our insights-driven patient recruitment business enables better precision and speed in identification and recruitment of trial eligible patients. Our extensive foundation of pharmacy and patient authorized clinical data enables proactive match of diverse patient populations to trials with culturally competent outreach to engage and empower communities.
And this reminds us all of the hesitation that many had during the time when it was so critical for us to deploy vaccinations across diverse communities. Second, hybrid trials administration enables convenient, accessible participation via flexible formats, including virtual in-store and at home. And this leads to reduced drop-off rates and also addresses barriers to clinical trial participation, particularly among underserved communities.
Finally, real-world evidence and informatics enable pharma companies to realize better long-term therapeutic performance through an integrated evidence strategy. Our commercial strategy is well underway, and we’ve signed our first two contracts with the development of additional priority accounts. Our offering is resonating with many of the top pharma companies and active engagement with our team.
So in closing here, I’m confident, first of all, let me tell you in our — the future growth potential of this company. And we’ve enabled the work that we need to do through strong execution and making bold investments consistently. We’re building a differentiated consumer-centric healthcare services organization, and we’ve been expanding the U.S. Healthcare business rapidly, and we’re expected to grow to $15 billion in sales and over $1 billion in EBITDA by fiscal ’25.
Our vision is being carried out by an experienced team of leaders, bringing significant industry experience together. And having met or exceeded our ’22 — fiscal year ’22 objectives, I feel confident. So we have a winning strategy. And when you think about this, we’re doing this with our payor-agnostic model, and we’re integrating capabilities across the care continuum.
We’re uniquely positioned to engage consumers and their individual health and wellness whenever, wherever they need.
So with that, I’d like to entertain any questions with Lisa
Question-and-Answer Session
Q – Lisa Gill
Thank you so much, Roz, for all that detail. And sitting in this seat and having followed Walgreens now for a number of years, you’ve made this pivot to healthcare fairly quickly and fairly deeply and the assets that you’ve acquired. So maybe can we just spend a couple of minutes talking about how you really view your competitive advantage in the marketplace versus some of the others? And then on the flip side, what do you think are some of the bigger risks as we think about the future of putting these businesses together?
Roz Brewer
Sure. So the reason why I think we all feel so bullish about this is that we start with a very strong base. For what we do on the retail side of our business and the number of customers that we see every day in our stores, we have almost 9,000 stores, and we get the chance to see customers consistently. We have digital relationships with them. We have physical relationships with them. We know their treatment history in terms of what pharmaceuticals they’ve been taking.
And so when you think about that, it’s not too different than the consumerization where you need to have on the healthcare side. So I think we’re credible. We’ve built some strong relationships there. And also too, we have in terms of the digital engagements that we have, we have close to almost 60 million digital engagements. And so that’s where this all starts is how do we tie these relationships together.
To the second part of your question is where do I see the risk in this is that I think, collectively, we all need to think about collectively, not just Walgreens alone and not what we’re building, but how do we jointly reduce the cost of healthcare because that’s what this is all about. Because when we get to that point, we also begin to deliver better care. And so we put care in the right places at the right cost to the patient. And I think that’s the part we all have to be concerned about.
Lisa Gill
And that’s so much around value-based care, which we talked about for years. As we think about each of these different components of your business really brings something different to the table as they think about value-based care. So one of the things we’ve talked about for a long time is the opportunity in pharmacy. And that that’s the most interaction you have with the patient, right?
If you think about the trusted advisor and the pharmacist, now you’ve put together this clinic model with VillageMD bringing in primary care doctors, the specialists, et cetera. You talked a lot today about taking risk. So as I think about value-based care and I think about the different ways that Walgreens Boots Alliance can come at value-based care, maybe just kind of highlight some of the way you view it? Like I said, I think of it as pharmacy, I think of it taking on risk in the clinic setting, I think about bringing people to the home for CareCentrix, what are some of the other things that we should think about for value-based care?
Roz Brewer
Yes. I think some of the other things we should think about is putting the patient in the position to take control of their health because either you’re going to need an advocate for your health at any point in your life. And so I think the part of this is the data and analytics and then bringing the data together and putting the actual patient and their caregiver in the position to do that. So I think that’s one piece around it.
The other piece is how do we get the math to show the improvements, right? And I think that’s an opportunity for us at WBA as to further grow our technology base. So that when it is time for us to think about, are we really reducing cost, how do we prove that in real life? And so I think that’s one more thing that you’ll see come from us as a stronger tech underpinning in what we need to do because I think that’s really important because we have to be trusted and people need to see the data around that.
Lisa Gill
Is that an incremental investment, James, that you’ll need to make from a technology perspective? Or do you get that with these acquisitions?
James Kehoe
I think with these acquisitions, we get a lot — what we have said on prior occasions, we still need to build out slightly on provider enablement and call it population health on the tech side. But we’re not looking at anything more than $200 million to $500 million of an acquisition.
If you talk about value-based care, Village already has 440,000 on value-based, of which 125 are fully delegated risk. Summit has actually started. They’ve already signed contracts on value-based care. They probably this year have 15,000. So they won’t start from zero. The other part you could think about is we do intend to take risk at Walgreens Health overall entity, true master contracting.
And what will happen over time is we will go to payors with a suite of assets and sign a master contract and sub-delegate the risk out to Village, it could be Summit, it could be independent primary care physicians, and it definitely will be CareCentrix, right? So we do intend to take risk at multiple levels and where we’ve built the capabilities internally.
Lisa Gill
And would that be in the commercial market? Are you looking at that more in the Medicare Advantage area?
James Kehoe
I think the first thing you’ll hear from us will be Medicare Advantage. And it’s — we’re talking about months, not years.
Lisa Gill
And so as I think about that conversion from fee-for-service to risk and a lot of the companies that people have seen in the last few days have talked about cohort data because it takes time, as you know, with Village where you get to know the patient, the patient’s needs. And over time, they become more profitable. Will there be a step down when we think about Summit because it’s primarily fee-for-service today if you are shifting towards risk?
Roz Brewer
Well, Summit already was on the trajectory to go from fee-for-service to value-based care. And what we are so excited about is that relationship between Village and the Summit team because Village has that expertise already. So we see an acceleration there and the large population that Summit already has under its management is I just think it’s a strong connection there, and it’s immediate.
James Kehoe
It’s actually profit enhancing for Summit because right now, they’re on fee-for-service, which means that out of the total profit pool, they’re getting a relatively small amount of it. And the more they can shift patients, they’ve already got the relationship with the patient. It’s signing a new contract, right, and dividing the returns between the parties. So this was built in their forecast on building it over time. So there will be no — we won’t be coming back and saying there’s a huge investment required.
Lisa Gill
And then if I think about VillageMD and the overlap with Summit today, right, there’s not a lot of overlap. You’ve talked about taking maybe some of the learnings from Summit from a specialty perspective and being able to replicate that in the other markets where VillageMD is. What’s your anticipation there around the time line to be able to do that? And again, as the analyst, I always have to ask about the dollars, James. Are there incremental investments that you’ll have to make?
James Kehoe
Yes, I think we said it very clearly though, we didn’t count on it in the return on investment or the EBITDA multiples. There will be incremental investment. And that’s why I think this is something you measure in years. So I think you’ll see it in two, three, five years. You won’t see it in the first 18 months of the integration. I think the challenge right now is to bed in the company in Village’s. They’re both similar sizes, and it’s not going to be an easy integration. So they’ll be very focused on operations.
Lisa Gill
And then if I think about CityMD, which is part of Summit, and I think about traditionally your clinic strategy, right? And you don’t have the clinic strategy that you had several years ago. Is there an opportunity to maybe bring some of that clinic strategy into your footprint of a Walgreens store?
Roz Brewer
Yes. So we haven’t fully explored that. One of the things about CityMD, it’s really nice to have because one of the things we do like about WBA is being able to deliver localized healthcare. And if you’ve been to a CityMD in the New York area, they’re instrumental, they especially during the COVID period, I mean it was a place to go. And so I think they deliver a high-quality immediate service, and it’s something for us to further explore. But no plans on right now.
Lisa Gill
Okay. Great. James, I know you feel like you probably have answered this question in so many different ways, but it’s the one we just keep getting and that’s around script growth. And I think that it was really helpful on the call for you to talk about 50% of the incremental script growth coming from market growth and adherence. And the other 50% coming from the win back as you rehire pharmacists.
When we — and it’s again primarily back-end loaded towards the guidance that you’ve given us. I think the big question that we’ve received is just the level of visibility that you have around those scripts coming back. And I think the first quarter may be not lower than your expectation, but maybe lower than some of The Street’s expectation?
James Kehoe
Yes. The — our scripts actually came in higher than budget, but we got maybe less from the store opening and more from market growth. Looking forward, we were — we’ve basically said that there’s 30 million scripts that we have to capture from this, and 2/3 of that will come from the marketing programs. We haven’t even switched on the marketing programs only selectively on a test basis.
So as we roll into the second, third and fourth quarter, we’ve basically said we’ll go from 2% script growth in the first quarter, probably closer to 3% in the second quarter. And then there is a big step-up as the marketing programs are in full flight. Effectively, today, we still have 2,400 stores with some restriction on ours. It’s down from the peak of 3,100, but we’re still not out of the — out of it yet. But most is coming from the marketing program, not the store opening.
Lisa Gill
And one of the things that we’ve talked a lot about has been respiratory illness, not just flu. We’ve been writing this tracker from tracking COVID vaccines, flu vaccines, flu trends, et cetera. And I was surprised to hear on the most recent call, you talk about pushing back maybe the next level of a booster from the more near term to — I think you talked about in the third quarter.
Can you maybe just talk one about the trends you’ve seen? Two, you just reported, you talked about how strong the flu was, right, at the beginning of December. Does that mean we won’t have incremental respiratory benefits in the first quarter? Somebody pointed out to me yesterday that we’ve never had a double flu season in the United States. So we probably are past that.
Roz Brewer
Well, we have to listen to a national conversation on that, and we try and follow the science. But this has been an extraordinary period, almost a tridemic when you put in the RSV in small children. We are waiting to understand what could happen with maybe another booster coming soon. And the other thing that we’re keeping our eyes on is the fluidity coming from China, right? And so those are the factors that we monitor and try and predict and forecast as best we can.
The one thing I can tell you is that we outperformed our vaccination delivery in the first quarter. We did 8.4 million vaccinations. And we’ll just continue to be there when this happens. But we’re keeping close contact with national regulations that are happening and outcomes.
Lisa Gill
I have like 19 more questions, but we actually have 1 minute left. So Roz, I know that there’s been a lot of change with Walgreens over the last several years. What do you think investors will better appreciate about Walgreens a year from now as we’re sitting together at JPMorgan 2024?
Roz Brewer
Yes. So my hope for this company and all my executive team is that you’ll see great execution out of us. We have built a foundation on three very strong acquisitions. The Shields business, which really supports what we need to do in our specialty pharmacy, which is one of the fastest-growing areas in pharmacy. Our CareCentrix business, which is at home care and then the Village MD business. We have to integrate those and provide a — we’ll call it master contracting when you see us go to market as one. And I hope next year, when we’re sitting here, you can see our go-to-market strategy in real life. And you’ll see that this team is executing every day. We wake up every day to think about how do we serve this customer in a way that we outperform their expectations, right? And so when they begin to think about their healthcare needs, it’s Walgreens for healthcare services as well as pharmacy.
James Kehoe
And Roz, the other part is the inflection point. I think people will look back in 12 months, and we will — if we hit our goals, we’ll have delivered two quarters of EPS growth of 30%. And we’ll have issued guidance for a healthcare segment with, I think it’s $10 billion to $11 billion of revenue with [$600 billion] of EBITDA. And I think it will be in a very different place in terms of the perception in the market.
Lisa Gill
Great. I’m looking forward to it.
Roz Brewer
Me, too.
Lisa Gill
Thank you very much for coming today.
Roz Brewer
Thank you. Thanks, everyone.
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