Lisa Gill : I’m going to take it more from a strategic standpoint. So when I think about your U.S. Healthcare business and Summit, CityMD as well as VillageMD. Can you maybe just spend a minute and talk about how you think about them, integrating and fitting together. As I understand it, both Summit and CityMD today are primarily fee-for-service. I think the reason that VillageMD was at a loss is that they have at-risk lives. So as you think about this over the next few years, is the goal to move more people onto the platform from an at risk perspective. Where do you see those opportunities? Summit is in a single market. Do you think you can replicate some of that multispecialty and other markets? James I know you did some numbers around some of the synergies. But just more conceptually, I want to try to understand how you’re viewing this going forward?
James Kehoe : Yes. And I think we — I did allude to it. And I think there’s two pieces you should think about. One of them is easier and one of them is tougher. The easier one is the capabilities that VillageMD have in value-based care. So right now, they have roughly 440,000 patients, I’ll call it on a value-based arrangement out of roughly 1.6 million total patients. So they’re in their own evolution. And of that 440,000, 125,000 are fully at risk. So that is delegated — full delegated risk from the insurance company. So Village’s standalone is they want to grow the 125 and they want to grow the 440 as a percentage of the total 1.6. But bear in mind here, it’s really, really, really, really important to have commercial patients.
They pay the bills, right? And they allow a very effective procurement and negotiation model in the local markets. Strategically, I think, Lisa, the one difference versus a year ago is there’s a decision by Village to get bigger in fewer markets. And what I mean by that is scale locally is critically important. And that’s why Summit and CityMD was a very attractive acquisition. So the game that they have to play in Village is, they’ll probably run the businesses somewhat independently for a period of time and transfer of value-based care management into City — sorry, into Summit Health and Summit Health will grow its patient population that is at risk. So that’s the opportunity. That’s the $19 million. The other one is a little bit more complex, which is — the beauty of the Summit model is they have a multi-specialty business and they have a primary care physician business.
And they are feeding, if you like, patients between each other and cross referring between the two. So when and if they take on risk, they will manage a much greater proportion of the total cost of care because you know how much specialty or multispecialty care cost. So instead of village, which firms out its business to local providers, Summit will be able to use its own providers to directly manage the cost of care. And I would argue, have a much higher return on the risk-based patients. The question is how do you push the multispecialty into the Village practices? I know the Village team are looking at bigger primary care physician practices that incorporate more multi-specialty type activities and testing. So — but I would take the second — the first one, the move to value-based care will happen in the first contract year.
So I would call it in the current contract year. In the case of the multispecialty, I think that’s a 5-year journey and that does require investment because you’ll have to change the structure of your local practices. But I think it’s quite exciting because none of the multispecialty opportunity and none of the synergy between Walgreens and Summit is built in the projections that we provided to The Street back in November. So we see a fair amount of opportunity.
Operator: Your next question comes from the line of Ann Hynes from Mizuho Securities.
Ann Hynes : I know you know there’s a lot of debate on The Street of the company’s ability to gain back that 30 million of scripts that is embedded in guidance. And I know some of that 30 million scripts is just regaining market share, of stores closed, hiring pharmacies. But I know Summit also is just regaining like people that haven’t left Walgreens that maybe have been compliant to therapy and pharmacists during COVID due to the basic blocking and tackling. And to me, that feels like an easier get than bringing someone back to Walgreens. So could you let us know how much of that 30 million maybe break it down, what is actually having people come back to a Walgreens versus what is versus people being more compliant to therapy? And secondly, your free cash flow was negative. Can you give us any type of free cash flow guidance for the year? That would be great.
Roz Brewer : James, why don’t we start with the free cash flow? And then, Rick, just go into the detail around the script performance on the core script business.
James Kehoe : Yes, we’re not going to give guidance on the full year. Honestly, we’re still working through some of the implications of the Summit acquisition. But I think you’ll see some progress year-on-year on an absolute basis. The first quarter is traditionally quite weak as a start in the company. So I wouldn’t get very concerned by it. We are looking carefully at the investments in the rest of the business and to optimize cash flow for the rest of the year. But we’re not going to start giving guidance on that.
Rick Gates: And just to — this is Rick. Just to walk into the 5% script growth, there’s actually building blocks that are part of that. And I think you are correct. Part of it is just market growth that we have that is the first part of the building block then it goes into the adherence and services, which are a key part of all the programs we’ve invested in. So that is a huge part of how we’re going to continue to grow scripts — the marketing win-back plans based off of staffing is the third one, then obviously, core staffing and reopening of store hours is the fourth building block. And I would say that as you look at the cadence of scripts and how it’s going to grow into the second half of the year, Roz has talked a lot about the hiring pieces, but it actually goes into — there’s kind of a time line to get there, right?
You have to hire. We have to train appropriately, get our pharmacists ready, then we will reopen our stores to full store hours that we have before and then obviously, the win-back program. So there is a timing element to the scripts and how the growth will really start to ramp up in the second half of the year.
Operator: And our final question comes from the line of Michael Cherny from Bank of America.
Michael Cherny : I guess one just quick clean-up question and one broader one. First, on the clean-up side, is it possible if you could give us the after-tax proceeds from sale-leaseback transactions for the quarter? That would be great. And then maybe on the international side, I understand the success that you’ve had on the various different holiday items for the UK. But can you give us a sense whether it’s FX oriented beyond that, how to think about the confidence level you have in raising the adjusted OI for segment for the year and all the moving pieces beyond simply the contribution that you got from the Black Friday, Black Thursday, I apologize if I missed a couple of the holidays there, James.
