Cencora, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Value Creation: Leveraging expertise and insights to support patient care, with examples like supporting independent pharmacies and providing biopharma insights.
• Customer Partnerships: Deepening relationships by actively learning from customers, engaging in industry events to understand needs and enhance capabilities.
• Specialty Medications: Strengthening global leadership by expanding offerings across geographies and customer channels, integrating 3PL businesses and enhancing logistics in Europe, and deepening offerings in U.S. health systems.

Segment Performance

• U.S. Healthcare Solutions: Revenue was $68.3 billion, up 11%. Operating income increased 23% to $1.0 billion. Driven by strong utilization trends, including growth in GLP-1s and specialty products to specialty physician practices and health systems. Excluding GLP-1 sales, revenue growth was 9%.
• International Healthcare Solutions: Revenue was $7.2 billion, up ~1% as-reported and 6% constant-currency. Operating income was $159 million, down 17% as-reported and 14% constant-currency. Impacted by softness in clinical trial and outsourced pharma services, offset by weakening of the U.S. dollar.

Guidance

• EPS: Raised to $15.70 to $15.95, up from previous range. The increase includes a higher-than-expected EPS contribution from RCA due to accounting changes.
• Revenue: Consolidated revenue guidance unchanged at 8%-10% growth. International Healthcare Solutions revenue growth revised to 3%-4% as-reported and 6%-8% constant-currency.
• Operating Income: Consolidated operating income growth expected 13.5%-15.5%. U.S. Healthcare Solutions operating income growth 17.5%-19.5%. International Healthcare Solutions operating income down 4%-1% as-reported, flat to down 3% constant-currency.
• Share Count: Expected diluted weighted average shares outstanding 195 million to 195.5 million.

Risks

• International Softness: Market softness in some international businesses, particularly clinical trial and outsourced pharma services, impacting International Healthcare Solutions.
• Tariffs: Uncertainty around tariffs in the pharmaceutical market, though no material impacts identified yet.

Question and Answer

• Q: Elizabeth Anderson on AOI strength in U.S. Healthcare business A: Bob Mauch discussed market growth in specialty, positioning with providers, and the growth mindset at Cencora.
• Q: Michael Cherny on specialty growth contributors A: Jim Cleary talked about broad-based performance in specialty, including physician practices and health systems, and RCA acquisition adding value.
• Q: Lisa Gill on tariffs impact A: Jim Cleary stated no material impacts from tariffs, focusing on patient access and supporting partners.
• Q: George Hill on RCA impact and specialty segments A: Jim Cleary explained RCA's impact on gross margin and accounting changes, and Bob Mauch discussed MSO operations.
• Q: Charles Rhyee on international softness A: Jim Cleary mentioned subdued clinical trial activity impacting International Healthcare Solutions.
• Q: Eric Percher on MSO profit streams A: Bob Mauch discussed excitement about MSO income streams and clinical trial services expansion.
• Q: Steven Valiquette on international customer base A: Bob Mauch noted market-based subdued clinical trial activity and Cencora's positioning.
• Q: Allen Lutz on specialty verticals and utilization A: Bob Mauch and Jim Cleary discussed broad-based growth in specialty across sites of care.
• Q: Daniel Grosslight on health systems focus A: Bob Mauch explained focus on health systems as part of broad specialty growth positioning.
• Q: Kevin Caliendo on EPS guide and upside A: Jim Cleary discussed EPS increase from RCA accounting change, COVID headwind, and mix benefits.
• Q: Erin Wright on RCA and GLP-1s A: Jim Cleary talked about RCA and MSO investments, and GLP-1s being profitable but minimally so.