Rite Aid — Investor Day (March 2020)

135 slides from Rite Aid's investor day presentation, Mar 16, 2020

Slide 1: Welcome to the Rite Aid Analyst Day 2020
WELCOME TO T E RITE AID Analyst Day 2020
Slide 2: Safe Harbor Statement
Safe I-Iarbor Statement CAUTIONARY STAT M NT REGARDING FORWARD LOOKING STATEMENTS Statements in this presentation that are not historical, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements include, but
Slide 3: Safe Harbor Statement (cont.)
Safe I-Iarbor Statement (cont.) These and other risks, assumptions and uncertainties are more fully described in Item 1A (Risk !=actors) of our most recent Annual Report on l=orm 10-K and in other documents that we file or furnish with the Securities and E:xchange Commission (the "SE:C"), which you
Slide 4: Non-GAAP Financial Measures
Non-GAAP Financial Measures The following presentation includes the non-GAAP financial measures, Adjusted EBITDA, EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share. Rite Aid defines Adjusted EBITDA as net income (loss) excluding the impact of income taxes, interest
Slide 5: Heyward Donigan
Heyward Donigan President & Chief Executive Officer RITE wy
Slide 6: Jim Peters
Jim Peters Chief Operating Officer RITE wy
Slide 7: Dan Robson
Dan Robson President of EnvisionRxOptions RITE w
Slide 8: Matt Schroeder
Matt Schroeder EVP and Chief Financial Officer RITE wy
Slide 9: Justin Mennen
Justin Mennen EVP and Chief Information Officer RITE wy
Slide 10: Rite Aid
RITE AID
Slide 11: Introduction & Overview
Heyward Donigan Introduction & Overview RITE
Slide 12: Pharmacists positioned to serve communities during crisis
Our pharmacists are uniquely positioned to serve our communities during Taking measures to protect our customers and associates this crisis • Cleaning surfaces rigorously in stores • • Contingency planning to ensure we can serve customers Instituting work from home policies Pandemic pay policy-flexi
Slide 13: Business Overview
Business Overview • • $22 billion in revenue We are a pharmacy services and retail company 6,400 pharmacists 2,400+ stores so,ooo associates 18 states with our retail pharmacies-we are heavily penetrated in key markets sooK scripts filled per day nvisionRxOptions: • • • • • • Almost $7 billion in re
Slide 14: Agenda
Agenda l:illEI 14 © 2020 Rite Aid. All rights reserved. Closing and Q&A l='inancial Overview Digital and Omnichannel Strategy Retail Unlocking the Value of the Pharmacist l-lealthcare Strategy Introduction and Overview
Slide 21: EnvisionRxOptions
nvisionRxOptions PHARMACY BENEFITS & SERVICES COMPANY RxBenefits Rxlnsurance DIVISIONS Individual Part D plans: RxPius & RxSecure mployer Group Waiver Plans ( GWP) Commercial Pharmacy Benefit Management Specialty Pharmacy Mail Pharmacy Laker Software Rx Savings PRODUCTS lmifi 21 © 2020 Rite Aid. All
Slide 22: PBM market represents a significant opportunity
PBM market represents a significant opportunity... I I I I I I ENVISION@ OPTIONS I I I I ... but has been largely operated as separate entities lm:TII 22 © 2020 Rite Aid. All rights reserved.
Slide 23: EnvisionRxOptions
ENVISION®@)OPTIONS | Supports our bigger enterprise MEDICARE PART D S Makes us more competitive Drives Enterprise EBITDA
Slide 27: Prescription Growth
Prescription Growth 4.38 BILLION 2019 27 Source : Statista.com; IVIcKin s ey
Slide 28: [LOGO]
[LOGO]
Slide 29: Pet care market
70% $75B 5% ofhouseholds _pet care market CAGR owna pet
Slide 30: million Source: National Alliance for Caregiving and AARP. (2015). Caregiving in the U.S
million Source: National Alliance for Caregiving and 30 AARP. (2015). Caregiving in the U.S
Slide 31: 2o/o
31 2o/o
Slide 32: Millennial GenX
Millennial GenX . 32
Slide 34: Digital and Omnichannel Experience
Digital and Omnichannel E:xperience 34
Slide 35: Store of the Future
ae Store of the Future was) MIST cS
Slide 36: Radiate wellness
radiate wellness - ,_1 • • 36
Slide 38: [LOGO]
[LOGO]
Slide 43: [LOGO]
[LOGO]
Slide 48: Rite Aid is a healthcare company
Rite Aid is a healthcare company... with a deliberate 80°/o+ of revenue from medications & pharmacy services retail footprint pharmacists 175M pharmacy transactions per year ook transactions each day lm:TII 48 © 2020 Rite Aid. All rights reserved.
Slide 50: Strong counter share in key states
Strong counter share in key states California Pennsylvania Michigan Ohio New York Washington Oregon 32°/o 21°/o 3°/o 15°/o 10°/o 42°/o 10°/o 18°/o 7°/o 10°/o 3°/o 25°/o 11°/o 25°/o 541 519 260 208 318 136 72 35°/o 66°/o 72°/o 62°/o 30°/o 42°/o 55°/o lmifi 50 Represents our position in CBSA's where w
Slide 52: [LOGO]
[LOGO]
Slide 53: Supporting health plans
SUPPORTING health plans • • • • • • • • • 53
Slide 54: @ 2020 Rite Ald.All rignts
54 @ 2020 Rite Ald.All rignts reserved.
Slide 55: Providers
| PROVIDERS
Slide 56: Wellness Rooms
Wellness Rooms M AY VV!::. H(;LP YOU? e Get to a healthier Yo ? 9 Quit tobacco? learn t ips on nutri tion? f) Sl eep better? Feel less anx i ous? Stop the sniffles? Avoid the flu? Connect with an expert? Underslard your med:. (or your pets meds)? ---56
Slide 58: Key Takeaways
Key Takeaways • Rite Aid is a healthcare company with a retail footprint • We are deep in our communities with local density required to win • Trust, access and independence important to health plans • Partner, not compete with health plans and providers • Focus on whole being health solutions lmifi
Slide 59: Pharmacy Benefits & Services
Dan Robson Pharmacy Benefits & Services RITE
Slide 60: Our business continues to grow with new wins and key renewals
Our business continues to grow with new wins and key renewals. AVIS® GoodA< - - T H E - University of Vermont MEDICAL CENTER RBTH'S HO PITALITY G R OUP Ohio .I, BOSTON MEDICAL CENTER HEALTHNet PLAN l li!Wl Cox HEALmPLANs CoxHealth THINKING HEALTH FORWARD Department of Aging OHIO Saver By RetaiiMeNot
Slide 61: EnvisionRxOptions is a pharmacy benefits and services company
E:nvisionRxOptions is a pharmacy benefits and services company with a significant opportunity EnvisionRx MedTrakRx Laker Software EnvisionPharmacies EnvisionSavings EnvisionertiIity EnvisionInsurance lmifi 61 © 2020 Rite Aid. All rights reserved. Rx Cash Discount Programs Pharmacy Benefit Management
Slide 62: A RS.
Sa A RS. . c~ PBM $400B 9.2% PBM market CAGR
Slide 63: We have a significant opportunity for continued growth
We have a significant opportunity •cvscaremark® for continued growth Magellan HEALTH. wel!dyne Y, II, I OPTUMRx· ENVISION@OPTIONS•-----------•• lv1ARKT SI-IAR : 1°/o 8PRIME T H E R A P :: lJ T I C s·• .-.... ? •, ,EXPRESS SCRIPTS• · Medimpact lmifi Source: Drug Channels Institute, 2020 Economic Repo
Slide 64: Value propositions aligned to target segments
Our value propositions are aligned to drive growth in our target segments Number of lives by target segment mployers:Mid-market mployers:Labor unions mployers:State & local gov't l-lealth Plans:Regional (all lines) l-lealth Plans: Provider-led (all lines) 24M 14M nM 79M 17M TOTAL: 145M lm:TII 64 Sou
Slide 66: EnvisionRx tvledTrakRx Laker Software EnvisionPharmacies EnvisionSavings Envision ertility EnvisionInsurance 66 Rx Ca…
EnvisionRx tvledTrakRx Laker Software EnvisionPharmacies EnvisionSavings Envision ertility EnvisionInsurance 66 Rx Cash Discount Programs Pharmacy Benefit tvlanagement
Slide 70: Rebranding is an important part of Rite Aid's future
elrf<lr is an important part of Rite Aid's future • • Rebranding to establish a clear identity in the Investing in our capabilities market • • • Improving service nhancing our technology Driving consumer engagement and clinical outcomes lmifi 70 © 2020 Rite Aid. All rights reserved.
Slide 71: [LOGO]
[LOGO]
Slide 73: [LOGO]
[LOGO]
Slide 74: Pharmacists today
Pharmacists today are... l-lighly educated Knowledgeable Trusted Accessible ....but not working to their education the top of 74
Slide 75: Empower the Pharmacists
mpowerthe Pharmacists Comprehensive Wellness
Slide 76: Empowering pharmacists as health advocates
We will I=rom empower our pharmacists as whole To health advocates Inaccessible Underutilized l=ront-and-center Top-of-education lm:TII 77 © 2020 Rite Aid. All rights reserved.
Slide 77: Changing pharmacist behavior
Changing pharmacist behavior TODAY TOMORROW 80°/o 20°/o 20°/o away from consumer 80°/o engaging with consumer away from consumer engaging with consumer lm:TII 78 © 2020 Rite Aid. All rights reserved.
Slide 78: Enabling more interaction
nabling more interaction by... Implementing workflow changes Changing workspace nhancing roles& responsibilities ... to empower and energize pharmacists to deliver on- demand guidance 79
Slide 79: Pharmacists well-positioned to empower whole being health
Our pharmacists are well-positioned to empower whole being health 26 15K of Rite Aid pharmacists would like to spend more time with consumers of consumers trust their pharmacists as healthcare advocates Annual consumer retail pharmacy visits, versus -2 primary care office visits pharmacists are grad
Slide 80: Empowering whole-being health
E:mpowering whole-being health • Immunizations, diabetes education, etc. help pharmacists support Shifting from: Inaccessible Underutilized consumer's overall wellbeing • • • • Shifting to: J=ront-and-center Performing at top of • • • license and education Equipped with empowering technology lmifi 8
Slide 81: Going beyond healthy
Going beyond "healthy"... Wellness Concierge approach Keep consumers up to date on the latest breakthroughs NO MOR : • • • Assembly line pharmacy Confusion over truth or hype Wondering who to call ... to help our consumer TI-IRIV ! 82
Slide 85: Rebalancing roles and labor mix
Rebalancing roles and labor mix • L AN Process Identifying opportunities to streamline pharmacy workflow to free up time for our pharmacists • • Improve quality and quantity of support staff Pharmacists who love being there, doing what they were trained to do Proactively engaging consumers Providing
Slide 87: Key Takeaways
Key Takeaways 6,400 pharmacists are our greatest resource • • • Maximize pharmacist potential Improve consumer experience • We want to be the consumer's choice for prescriptions • Pharmacy is central to Rite and wellness destination Aid's positioning as a health lmifi 88 © 2020 Rite Aid. All rights
Slide 88: Welcome to the Rite Aid Analyst Day 2020
WELCOME TO T E RITE AID Analyst Day 2020
Slide 89: Retail
Jim Peters Retail RITE a
Slide 91: We will radically change consumer brand perceptions
We will radically change consumer brand perceptions rom: Indifferent Dispensing medication Selling everything Old/ stodgy Single generational Patient focused To: Warm and welcoming Consum.er and Dispensing whole health guidance Wholesome curation Fun and fresh Multi- generational lmifi careg1ver foc
Slide 92: Growing Households
Growing Households
Slide 96: Own Brands
Own Brands million margin benefit +$100 VITAMIN ZINC·C ullimat her peppermint eucalyptus BAR SOAP IO!t I .. c .. ' t ----- e- t.o V['l 3fl0ltlhij 97 © 2020 Rite Aid. All rights reserved. WITH ESSENTIAL OILS GlUTEN • NO Wl.fAT($ t.-...'" uoao v.. lOI DUITARYSUPPUEM!NT
Slide 97: [LOGO]
[LOGO]
Slide 99: [LOGO]
[LOGO]
Slide 101: 102
102
Slide 103: Key Takeaways
Key Takeaways • Millennial, Gen X women as new growth target consumer • Targeting growing households • Relaunching the Rite Aid brand • Overhauling merchandising to support whole-being health • Store of the Future to be rolled out in a staged market approach lmifi 104 © 2020 Rite Aid. All rights res
Slide 104: Digital Strategy
Justin Mennen Digital Strategy RITE
Slide 109: Omnichannel
Omnichannel: • • • • • • • Increase foot traffic Enhance in-store and drive thru Convenient checkout Digital signage Scan-and-go Buy online, pick up in-store Pay and Go Technologies: • • • • Endless aisle Digital kiosks Self-checkout Mobile scan and checkout 110
Slide 110: Digital app experience
• Welcome back, Judy Search PHARMACY COUPONS WEEKLY AD PHOTO Your FLU SHOT is avai lable Schedule an > e ppointment Your 2 PRESCRIPTIONS e re eligible for refill > wellness+ BonusCash $5.00 available SHOP NOW > HEAL NATURALLY:A GUIDED MEDITATION PLAYLIST ) Get over $100 IN COUPONS on your favorite b
Slide 111: Digital app features
Auto Refill 8 Prescriptions 0 Transfer R x e SHOP DIET & FITNESS Link Family Members My R x Score MORE) f) Chat Medication Reminders i Pharmacy § Shop CD Weekly Ad § Pharmacy Shop Coupons CD (Ql Photo (Ql Coupons Weekly Ad Photo 112 © 2020 Rite Aid. All rights reserved.
Slide 112: Key Takeaways
Key Takeaways • Radically transforming digital landscape • Focus on customer experience, digital and physical • New PBtv1 digital platform provides differentiated member experience • Opening new revenue streams while providing much greater holistic care • Making interaction more efficient and conven
Slide 113: Financial Overview
Matt Schroeder Financial Overview 114
Slide 114: Substantial Progress Made to Date
Substantial Progress Made to Date: • Business performance has steadily improved throughout the year: Strong script comp growth and improving J: xpanding PBM BITDA margins - - sales - Strong expense control • Significant debt reduction and leverage ratio improvement Proforma leverage ratio reduced fr
Slide 115: Strategic turnaround to deliver meaningful value
We ex ect our strate ic turnaround to deliver meanin ful value Longer-term: Realize significant benefits Revenue growth, particularly in PBM Script growth Adjusted EBITDA growth Improve leverage ratio lmifi 116 © 2020 Rite Aid. All rights reserved.
Slide 116: Focus on Efficiency and Expense Control
l=ocus on Efficiency and Expense Control • Owned brand expansion • Reduce reliance on promotional sales • Retail and PBM back-office consolidation • Renewed focus on decreasing indirect procurement costs • Central Fill expansion • Self-checkout expansion • Call center rationalization • Reduction of
Slide 117: Investments focused on the greatest return
Investments Focused on the greatest return Brand roll out, physical refreshes and Store of the Future remodels Continue to aggressively spend on prescription buys Technology and digital initiatives 118 © 2020 Rite Aid. All rights reserved.
Slide 118: FY 2021 Guidance
J=Y 2021 Guidance* • xpect strong prescription count growth Growth in revenues in the PBtv1 Aggressively control costs • • • Continued reimbursement rate pressure lm:TII *Does not include impact from coronavirus 119 © 2020 Rite Aid. All rights reserved.
Slide 119: FY 2021 Guidance (cont.)
J=Y 2021 Guidance* (cont.) Total Revenue in the range of $22.5 - $22.9 billion • • Retail Pharmacy Segment Same store sales increases of 1.5°/o-2.5°/o • • Pharmacy Services Segment PBM revenue in range of $6.75 - $6.85 billion • Adjusted E:BITDA to be between $500 and $540 • million $0.22 per share
Slide 120: FY 2021 Guidance (cont.)
I=Y 2021 Guidance* (cont.) • Restructuring charges of approx. $60 million in iscal 2021 • Will not be included in Adjusted EBITDA • Include costs to relaunch the brand and transition out of certain merchandise lines • Cash flow from operations of $400 - $450 million • Includes working capital benefi
Slide 121: Long-Term Guidance (year-end FY 2023)
Long-Term Guidance (yearend FY 2023) PBM Revenue igh-Single to Low-Double Digit Growth Same Store Scripts Mid-Single Digit Growth l=ront nd Revenue Low-Single Digit Growth l=ront nd & PBM Margins SG&A Adjusted BITDA l=ree Cash Flow -4.0x Leverage Ratio lm:TII 122 © 2020 Rite Aid. All rights reserved
Slide 122: Current Maturity Profile
Current Maturity Profile $ in millions FILO Term Loan. ABL Funded. Senior Secured Notes • Senior Unsecured Notes •Senior Unsecured (Guaranteed) Notes 0 4 123 Note: !vraturities reflect calendar year. Amounts reflect face value and are not net of unamortized debt issuance costs. © 2020 Rite Aid. All
Slide 124: #1 Pharmacy for Removing Harmful Chemicals
#lPharmacy for Removing Harmful Chemicals 125
Slide 125: Key Takeaways
Key Takeaways Shareholder value to be driven by: • • • • PBM revenue growth Script count and front-end sales growth xpense control Working capital management This will enable us to: • • • • Invest in the business Reduce debt Generate free cash Grow adjusted BITDA lm:TII 126 © 2020 Rite Aid. All righ
Slide 126: Rite Aid
ITE
Slide 128: Welcome to the Rite Aid Analyst Day 2020
WELCOME TO T E RITE AID Analyst Day 2020
Slide 129: [LOGO]
[LOGO]
Slide 130: Appendix
APPENDIX
Slide 131: FY 2020 Guidance
FY 2020 Guidance $in thousands igh $ Total Revenues $ 21,900,000 21,925,000 Same store sales 1.10°/o Gross Capital Expenditures $ 215,000 $ 215,000 Reconciliation of net loss to adjusted EBITDA: Net loss Adjustments: Interest expense Income tax expense Depreciation and amortization LIO charge Lease
Slide 132: FY 2021 Guidance
FY 2021 Guidance $in thousands Range Low $ $ Total Revenues 22,500,000 22,900,000 PBM Revenues $ $ 6,750,000 6,850,000 Same store sales 2.50o/o Gross Capital xpenditures $ $ 350,000 350,000 Reconciliation of net loss to adjusted Net loss Adjustments: Interest expense Income tax expense BITDA: $ $ (1
Slide 133: FY 2021 Guidance (cont.)
FY 2021 Guidance (cont.) $in thousands Net loss Add back-income tax expense Loss before income taxes $ $ (119,000) 3,000 (91,000) 15,000 (116,000) (76,000) Adjustments: Amortization expense Ll1=0 credit Restructuring-related costs 64,000 (35,000) 60,000 64,000 (35,000) 60,000 Adjusted (loss) income
Slide 134: FY 2021 Guidance (cont.)
FY 2021 Guidance (cont.) $in thousands Adjusted BITDA Cash interest expense Restructuring-related costs Closed store rent Working capital benefit Cash flow from operations Gross capital expenditures ree cash flow $ $ 500,000 (210,000) (60,000) (30,000) 200,000 540,000 (210,000) (60,000) (30,000) 210
Slide 135: FY 2021 Capital Expenditure Guidance
FY 2021 Capital Expenditure Guidance $in millions FV2021 New and Relocated Stores Remodels $ 10 50 85 75 50 80 External Refreshes IT Investments File Buys and Merchandising Maintenance CapEx $ 350 lmifi 137 © 2020 Rite Aid. All rights reserved.

Rite Aid — Investor Day (March 2020) on 6ix

Rite Aid — Investor Day (March 2020)

Slide 1: Welcome to the Rite Aid Analyst Day 2020

Slide 2: Safe Harbor Statement

Slide 3: Safe Harbor Statement (cont.)

Slide 4: Non-GAAP Financial Measures

Slide 5: Heyward Donigan

Slide 6: Jim Peters

Slide 7: Dan Robson

Slide 8: Matt Schroeder

Slide 9: Justin Mennen

Slide 10: Rite Aid

Slide 11: Introduction & Overview

Slide 12: Pharmacists positioned to serve communities during crisis

Slide 13: Business Overview

Slide 14: Agenda

Slide 15: PRESENTS • •

Slide 16: ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Slide 17: 17 © 2020 Rite Aid. All rights reserved.

Slide 18: 18 © 2020 Rite Aid. All rights reserved.

Slide 19: Strategic priorities

Slide 20: PBM Opportunity

Slide 21: EnvisionRxOptions

Slide 22: PBM market represents a significant opportunity

Slide 23: EnvisionRxOptions

Slide 24: 30% 13%

Slide 25: 25 © 2020 Rite Aid. All rights reserved.

Slide 26: 26 © 2020 Rite Aid. All rights reserved.

Slide 27: Prescription Growth

Slide 28: [LOGO]

Slide 29: Pet care market

Slide 30: million Source: National Alliance for Caregiving and AARP. (2015). Caregiving in the U.S

Slide 31: 2o/o

Slide 32: Millennial GenX

Slide 33: 33 © 2020 Rite Aid. All rights reserved.

Slide 34: Digital and Omnichannel Experience

Slide 35: Store of the Future

Slide 36: Radiate wellness

Slide 37: Strategic priorities

Slide 38: [LOGO]

Slide 39: PRESENTS • •

Slide 40: • • • • • • • • • •

Slide 41: 41 © 2020 Rite Aid. All rights reserved.

Slide 42: Institute for Healthcare Improvement

Slide 43: [LOGO]

Slide 44: Fragmenting care

Slide 45: • •

Slide 46: • • • • • • •

Slide 47: • • • • • • • •

Slide 48: Rite Aid is a healthcare company

Slide 49: 49 © 2020 Rite Aid. All rights reserved.

Slide 50: Strong counter share in key states

Slide 51: Health Plan Partnerships

Slide 52: [LOGO]

Slide 53: Supporting health plans

Slide 54: @ 2020 Rite Ald.All rignts

Slide 55: Providers

Slide 56: Wellness Rooms

Slide 57: • • • •

Slide 58: Key Takeaways

Slide 59: Pharmacy Benefits & Services

Slide 60: Our business continues to grow with new wins and key renewals

Slide 61: EnvisionRxOptions is a pharmacy benefits and services company

Slide 62: A RS.

Slide 63: We have a significant opportunity for continued growth

Slide 64: Value propositions aligned to target segments

Slide 65: • • • •

Slide 66: EnvisionRx tvledTrakRx Laker Software EnvisionPharmacies EnvisionSavings Envision ertility EnvisionInsurance 66 Rx Ca…

Slide 67: 67 © 2020 Rite Aid. All rights reserved.

Slide 68: • • • • • • • •

Slide 69: Family with kids / dog and pets

Slide 70: Rebranding is an important part of Rite Aid's future

Slide 71: [LOGO]

Slide 72: Stop the spread of germs

Slide 73: [LOGO]

Slide 74: Pharmacists today

Slide 75: Empower the Pharmacists

Slide 76: Empowering pharmacists as health advocates

Slide 77: Changing pharmacist behavior

Slide 78: Enabling more interaction

Slide 79: Pharmacists well-positioned to empower whole being health