Q2 2021 Amerisourcebergen Corp Earnings Call
Good day and welcome to Amerisourcebergen second quarter of fiscal year 2021 earnings Conference call.
Good day, all participants will be in a listen only mode.
Should you need assistance during todays conference. Please signal for a conference specialist by pressing the Starkey followed by zero.
After today's events there will be an opportunity to ask questions. Please note that today's event is being recorded.
I would now like to turn the conference over to Mr. Bennett Murphy head of Investor Relations. Please go ahead Sir.
Thank you good morning, and thank you all for joining US for this conference call to discuss Amerisourcebergen fiscal 2021 and second quarter results I value.
The senior Vice President of Investor Relations. Joining me today are Steve Collis, Chairman, President and CEO and Jim Cleary.
The vice President and CFO.
On today's call I will be discussing non-GAAP financial measures.
But even some of these measures. The GAAP are provided in today's press release and are also available on our website investor Amerisourcebergen com.
We have also posted the slide presentation to accompany today's press release on our Investor website. During this conference call moving forward looking statements about our business and financial expectations on the adjusted non-GAAP basis.
But not limited to EPS operating income in the income tax.
Forward looking statements are based on management's current expectations.
Jack the uncertainty and change for a discussion of just curious of assumptions refer to todays press release interest.
SEC filings, including our most recent form 10-K.
Interest Bergen assumes no obligation to update any forward looking statements on this call cannot be rebroadcast of the express permission of the company do on.
Of an opportunity to ask the questions. After today's remarks by management, we ask that you limit your questions to one per participant per <unk>.
For us to get to as many price, especially as possible within the hour with that I'll turn the call. It is the.
Thank you Beth and good morning to everyone joining us today.
It's hard to for the one year ago on this call a range for the first kind of on how Amerisourcebergen was responding to the global COVID-19 pandemic the amount.
Yes.
Net about how COVID-19 will impact the lives of families and our communities.
Purpose of the United in our responsibility to create healthier futures Amerisourcebergen exit Isaacs of D. J.
Day and support our associates Bain.
And the business continuity and help our customers navigate increased complexity.
Our people and businesses proved resilient and the pharmaceutical distribution industry demonstrated a vital role as a key pillar.
The <unk> system.
I remain incredibly proud of and inspired by the way.
Yes indeed.
Adapted and innovated to support our partners needs at the same pace.
Interest expense Alexander.
Culture and enabled by the infrastructure and technology Amerisourcebergen is providing value added data driven solutions to power out of office was and always on and solutions.
Importantly, our differentiated capabilities.
As you continue to support the pharmaceutical innovation.
And any of the response.
In the U S and increasingly abroad.
As far as important put out people of community and our partners.
The volume output, while creating value for all of our stakeholders.
Now for the financial results.
The announced earlier this morning, Amerisourcebergen delivered year over year of growth for the second quarter of fiscal 2021.
Revenue from $49 billion, representing growth of all the sand on the same periods of last year and on.
Adjusted EPS grew 5% year over year.
These results were driven by strong customer relationships leadership in specialty and the.
The managed service business the nations Alpha.
Opus driven culture at unite test in our responsibility to create healthier futures.
One way that we are living our purpose.
The lead volume, providing COVID-19 on godly.
In the U S. We continue to distribute the angst of bottle and antibody therapy is the health systems across the country.
Through our work on the strategic National Stockpile, we are supporting governments preparedness of current and future potential pharmaceutical needs members of the type of pharmacy network, all providing vaccine exits in the community as we facilitate the participation in the Fayetteville on retail pharmacy program.
The assets are especially important in the nationwide inoculation movements, because they allow us highly trusted medical professionals in the communities enables vantage safely efficiently and exited the share of hard to reach the already populations.
Outside the United States, we continue to of that extra broadly global vaccination of assets.
Canada for example.
Small business is working off the ship with Phoenix to distribute the COVID-19 vaccine on behalf of the Canadian governments.
I mentioned earlier Amerisourcebergen is focused on providing value added services.
Other net of customer centric solutions and that focus has only been amplified throughout the COVID-19 pandemic.
All of this so it's opposite of attaining an efficient and resilient supply chain to ensure patients have access to the critical many case 98.
Without the support of pharmaceutical innovation, we are providing key commercialization and distribution solutions for our partners to help them of that the current dynamic environments. We are leveraging all of these issues, especially distribution and services to further enhance our differentiated value.
The proposition rock hardness.
This includes expanding our of our suite of specialty type of apex data and analytic solutions to further solidify our position as the partner of choice and the faithful to the supporting pharmaceutical innovation and access.
This past week, we were able to leverage the full breadth of amerisourcebergen the capabilities, including our logistical expertise and efficient execution to be a solution provider for harmony and profit partners.
The other thing with the U S government and our manufacturing partner.
Able to facilitate the transportation.
The vital therapies to GAAP.
I am both on it and humble and we were able to those outfits in this time of need.
Around the world.
The standard would not have been possible without the world Courier business.
The global specialty logistics flow.
We're on Korea continues to support the innovation of manufacturers as they navigate the logistical complexities.
The importance of world class expertise and net.
The Tara and I will take the posture as our partner shifted to perform all clinical trials are used homes through the industry, leading direct to patient type of things given the challenges in obtaining some of the patients in the traditional wholesale.
World Courier's unparalleled logistical services.
With partnerships and I Haven of broadband first of all of field based services have proven invaluable in 'twenty.
The cold calls moving forward.
Our teams have been adaptable and creative as they provide solutions to the syndicate.
Okay.
On the community on Ace partnership.
On <unk> animal health business also continued its strong performance this quarter.
The strong manufacturing to provide the relationships as well as its ability to facilitate kind of held for both on any of the production.
Production of animals.
To support the continued growth of the end of that'd be our business and goodwill of our operational efficiency. We recently opened a new state of the animal health distribution in the U S.
This new facility most of the animal health distribution neighborhood and enhances I'll share this expertise in areas and how the animal outpaced the buys nationwide.
Amerisourcebergen to continue the ability to provide differentiated value to our customers and partners and deliver on how COVID-19 is the big United The our responsibility to create healthier futures is enhanced by our ability to execute on our core growth strategies.
We remain focused on our estimates of.
One of them on all Differentiators is our portfolio of key anchor customers across each segment of our business.
This customer base enabled us to lead with market leaders and facilitate patient access wherever prescription is needed.
We paid two continued strength in our key customer relationships and of course, our customer centric solutions globally.
Second we will continue to both the part of our leadership position, we have the strongest portfolio of customer relationships and value added services in the industry, which enables us to advance and benefit on pharmaceutical innovation enhancing our capabilities in specialty to support growth.
Upstream partners and downstream customers make important area of focus for Amerisourcebergen.
Third we continue to focus on delivering big draw of service and developing innovative approaches to best serve our customers on <unk>.
Pricing had loss of technology data analytics, we provide solution oriented value added innovations and enable all of our customers to grow this positive chop various growth strategies, because we're out of customers.
We broke.
We seek to enable other prescription pharmaceutical the outcomes globally opposite of any market exits and supporting pharmaceutical innovation on.
Providing value added services that facilitate the commercialization as well as the enterprise installations to consider the patient the exits on top of class.
The health scale and expertise, we are able to get therapies are small and large patient populations.
The approach enables partnerships and loss on our potential and move forward.
Our associates remain key to our success.
The purpose on diversity equity and inclusion as well as investments in our people and culture have long been pivotal in advancing these growth strategies and positioning of Amerisourcebergen for long term success.
Our strategy and culture of foundational to reinforcing our legacy of strong corporate stewardship, which focuses on putting people first and ensuring the continued financial health of our businesses, while creating long term value all of our stakeholders.
To ensure that the value we create is sustainable we are embedding ESG principles.
I'll chat businesses in process.
I hope and of the cohorts out overall broad strategy.
All of environmental strategy focuses on adapting to changing some of it and advancing our resilient and responsible supply chain.
We are in the energy infrastructure and technology to create an efficient and secure a pharmaceutical supply chain and also allows us to reduce waste dollar of our global carbon footprint and prepare for unexpected events.
Solvable.
We collaborate with our partners and customers to create packaging and transportation efficiencies that result in significant process cost and of the environmental improvements.
Also I understand Amit provided physical risks and have robust business continuity of that.
Pace to ensure we can continue to deliver life saving medications.
On the social side, our strategy is centered around the corporate responsibility and focused on investing in our people and communities.
Had key Memphis and foster healthy communities.
We continue that as we have throughout the pandemic to ensure we protect and it says out of associates Amanda families with enhanced toggles additional bonuses physical and mental health resources, and child and N Kid benefits as part of a strong benefit programs.
Now at the St. Jude the extended range the Lee.
From our frontline associates.
Maintenance additional important medicines, such as enhanced cleaning protocols, social distancing protections and providing them with PPE.
For the long term, we advanced our talent and culture on.
And the development of our people.
One of these investments from the new leadership competency model and development programs supported by World Class technology.
I'm, just kind of our purpose and guiding principles. The program focuses on lead us on creating an end of Jos.
This increased support of base leveraging collaboration to create and realize the opportunities innovating and executing to prepare for the future with creative resourcefulness and the action base to rapidly adapt chart on Ami landscape.
All of our associates unlock the full potential and empower them to reach based on vehicles. We have also launched a new enterprise value model.
As of modern intuitive and tailored learning experience that is also consistent with what we expect and developed on diesel.
On the arming our people strategy with our business strategy.
We create value now and for the long term.
And the other way, we inspire Memphis, the strip commodity diversity equity and inclusion and ensuring that the nature of voices empty spaces organic.
And I remain the key focus of ours.
Instruments.
The culture, and we encourage our associates to participating and employee resource groups and the.
The past 12 months, we have introduced three new <unk> and participation in Brg's assets from 88 per schemes to further on community impact.
Had elevated and strength in opus on supply of that adversity with the.
Elaborate data driven open approach to ensure the diversity of our supply of partners and the alignment of this function without broader ESG efforts.
Additionally, amerisourcebergen empowers our associates to participate in an E compensations and help shape the future.
What you see.
For example, our associates are passionate about social Justice and Amerisourcebergen Foundation has eliminated the impact of May change the nature of two to one ratio for organizations focused on diversity inclusion and the outlines I am proud of the foundation has taken the states because I.
Personally believe I mean quality is the fundamental rot in any of these important to support social justice.
How's the equity has also be right out of the posture as one of the many social issues facing assets highlights and yeah I want to highlight the work.
The pharmacy elevate provided an adequate Memphis on doing the phosphate healthy communities.
As time has been help providers with well established relationships make communities April about health equity on a daily basis.
I am major role in ensuring positive outcomes locally.
Craig will work on bonds of the National COVID-19 bags niceness to.
To reach all parts of the country populations quickly and efficiently.
Separately Amerisourcebergen Foundation recently made as the nation supply do you think those cap of America to support COVID-19 vaccine education and awareness.
Inventory of new areas to bottom of healthcare access and improve the health of the op communities.
How grateful and proud of half the.
The opportunity to support healthy communities across the U S of quality with nonprofits independent pharmacies.
Finally, the governance elements of our ESG strategy is embracing a culture of transparency ethics, and integrity, which informs everything that we do and which ensures the highest standards of governance.
The commitment to doing the raspy this quarter of Amerisourcebergen purpose and principles.
Advancing environmental social and governance initiatives Amerisourcebergen aims to create healthier futures around the world.
This is not only the right thing to do but it also enables us to further enhance the value we create all of Amerisourcebergen stakeholders.
In closing, we remain confident in our ability to provide differentiated value to all stakeholders net.
Average all leadership in specialty distribution and capitalize on our innovative mindset and benefit from our focus on strong corporate stewardship.
Looking ahead, we have strong confidence in our business and are focused on closing the acquisition of alliance healthcare, which will extend our distribution capabilities into key markets and further strengthen our global platform of manufacturing services.
We look forward to building upon our strong tenant base with the on boarding of the lines helped the cleaning the a fantastic management team and we are excited to begin the next evolution of enhancing our ability to provide innovative and global health care institutions.
We are well positioned to create long term stakeholder value and remain United in our responsibility to create healthier of coupons.
Now I will turn the call over to Jim from a more in depth review of our results Jim.
Thanks, Steven and good morning, everyone in the East mentioned, it's hard to believe the over a year has passed since the publically addressed the COVID-19 pandemic and Amerisourcebergen responds.
Last thing on the past year.
Moved by the diligence our teams have shown and supporting our partners. During these complex times, our sales gaps have latest our purpose of being United in our responsibility to create healthier futures and Theyre on the foundation of the buyer continued the performance I am appreciative of the hard work of <unk>.
Over the past year and I'm proud of the Amerisourcebergen continues to focus on cultivating and advancing our talent and culture.
While the pandemic presented new challenges on a long term commitment to investing in our businesses allowed us to successfully manage through them and to demonstrate the strength and we're selling on some of our business model.
As I said I'm going to call of this time last year.
Able to leverage significant internal resources and capabilities to meet the evolving needs of our upstream and downstream partners.
As we sit here today with our highest on the SKU chart Amerisourcebergen is continuing to invest internally in our business and talent to ensure the amerisourcebergen is not only delivering strong results. This fiscal year, but we will continue to do so over the long term for the differentiated value from our end of.
<unk> of services and solutions.
Turning now to discuss our second quarter results on.
I'll review, our adjusted quarterly consolidated results our segment performance and the updated elements of our fiscal of 2021 guidance, including the increase to our EPS guidance I will note that this updated financial guidance.
Does not include any contribution from the proposed alliance healthcare acquisition announced in January of 2021.
My remarks today will focus on our adjusted non-GAAP financial results, unless otherwise stated growth rates and comparisons are made against the prior year on March quarter.
The detailed discussion of our GAAP results. Please refer to our earnings release.
We finished the quarter with adjusted diluted EPS of $2 on 53 cents, an increase of 5% primarily due to solid operating income growth across our businesses to reflect our continued strong performance. We are raising the bottom end of our full fiscal year EPS.
Items, bringing it to a range of $8 45, and $8 60.
On the range of $8 40 to $8 60.
Our consolidated revenue was $49 2 billion up 4% driven by revenue growth in both of the pharmaceutical distribution services segment and other which includes our global commercialization services and animal health group of businesses.
Solid organic gross profit increased 7% to $1 5 billion driven by increases in gross profit in each operating segment in the quarter gross profit margin increased 90 basis points from the prior year quarter.
Gross margin improvement is due to continued growth in the sales of specialty products, including COVID-19 therapies and growth in some of our higher margin businesses, such as world Courier and MW on the animal health.
Regarding the consolidated operating expenses operating expenses grew 8% year over year due to a number of payroll related cost to operate in the current environment and investments and internal initiatives being base throughout 2021 with the.
The focus on continuing to differentiate our value proposition for future growth.
We are narrowing our operating expense guidance for the year from growth in the mid to high Thank all of kitchen range to growth and the highest since all patients as.
The reminder, last year in the second half of fiscal 2020, and if any of them from an opex tailwind from lower corporate administrative costs, notably lower travel and lower health care expenses.
Turning now to consolidated operating income.
Our operating income was $707 million up five.
And comparing to the prior year quarter.
The increase was driven by the increased gross profit in both of the pharmaceutical distribution services segment, and our global commercialization and animal health businesses, which I will discuss in more detail when I review segment level performance.
Operating income margin grew two basis points to 144% as a result of the continued strong performance by our higher margin businesses.
Net interest expense was $35 million roughly flat year over year during the corner, we issued $2 5 billion.
On the new debt ahead of closing of the alliance healthcare acquisition.
In new debt is comprised of approximately one 5 billion of senior notes due 2023, which have a coupon of 0.7 hundred 37% and $1 billion of senior notes due 2031, which had a coupon of two 7%.
So we do not guide interest expense I will note that due to the interest and fees associated with the debt raise net interest expense will likely be up roughly 15% for the fall.
Full year.
Our updated fiscal 2021 adjusted EPS guidance includes the incremental interest expense.
Does not include alliance healthcare operating income, which of course would be included in our future consolidated P&L after the transaction closes.
Moving now to our effective income tax rate from the second quarter. Our tax rate was 21, 9% up from 21, 5% in the second quarter of fiscal 2020.
On a diluted share count.
207, 3 million shares roughly flat compared to last year's share count. We now expect our average share count for the fiscal year to be approximately 207 to 208 million shares up from approximately 207 million shares the river.
Guidance range for cash the impact of dilution from <unk>.
Stock comp and does not reflect the share count impact of the 2 million shares that we want the labor at the close of the alliance healthcare transaction.
As you begin to revisit your model.
To remind you the way we announced the alliance acquisition. We noted that we will immediately begin a period of deleveraging following the transaction close.
Accordingly, and level of share repurchases, we are committed to paying down over $2 billion and total debt over the next two years to ensure the amerisourcebergen maintains its strong investment grade credit ratings.
Turning now to the adjusted free cash flow, our adjusted free cash flow year to date was $298 million keeping us on track with our adjusted free cash flow guidance of approximately $1 $5 billion for the fiscal year.
Our cash balance.
We ended the quarter.
The $6 billion on cash, including approximately $2 $5 billion of proceeds from the issuance of the senior notes that I just discussed.
This completes the review of our consolidated results now I will turn on until our segment results.
First regarding the pharmaceutical distribution services segment.
It is important to keep it.
Context, the environment last year in the month of March last year, we experienced increased pharmaceutical demand as many of our customers increase their purchases at the onset of COVID-19.
<unk> and higher revenue and gross profit.
Elevated levels of sales in the prior year period.
Having impact on euro per year growth rate comparisons of the quarter.
This year pharmaceutical distribution services segment revenue was $47 1 billion up.
3% per the quarter driven by increased sales of specialty products, including COVID-19 therapies and growth rate may have been negatively impacted on your bank two less business days in the current year March quarter.
<unk> to the prior year period.
Segment operating income increased about 5% to 589 billion.
<unk> operating income margin up one basis point to 1.25%.
We saw continued solid performance related to sales of specialty products, including COVID-19 therapies and four of our ion the solutions business, which continues to be a differentiator.
As a reminder, the bad debt reserve that we were first in the fourth quarter of fiscal 2020 was originally recorded in the second quarter.
The reserve.
<unk> per parcel both happened in fiscal 2020 out of order, resulting in a tailwind to the kind of quarter operating income growth and while the headwind to operating income growth in the fourth quarter, but will have no impact when comparing to Paul that's the 2021 with fiscal 2020.
Now I will turn into other which includes businesses the focus on global commercialization services and animal health, including World Courier, Amerisourcebergen consulting and <unk> Wi <unk>.
In the quarter total revenue was $2 $1 billion of 12% driven by growth across the three operating segments, particularly from wireless carrier.
Operating income for the group was up 14% to of $123 million.
Primarily due to the continued growth and performance of World Courier and <unk>.
World Courier's direct to patient capabilities differentiate the business and has gained meaningful traction in the market at the clinical trials have begun utilizing and hold steady.
Additionally, our traditional commercial offerings and industry expertise of World Courier continues to be valued by manufacturer partners, resulting in higher volumes and waste and the time when global logistics continued to be complex.
And as of the why is maintaining its strong growth trajectory, particularly in the companion animal market, where pet ownership has been on the rise of pet parents of paying closer attention to their pets' health or.
Our investments across our businesses, including a new animal health distribution center and the data analytics technologies have allowed us to remain best in class provider and offer innovative services and solutions to our partners.
As the result of exceptional performance and strong business fundamentals and other we are.
Or anything of our operating income guidance for the group from mid to high single digit growth to.
Low double digit growth for the fiscal year I will note that this new guidance range of both double digit growth on <unk>.
<unk> of two year compound annual growth rate the fruit and the high single digits helped by the continued performance of wireless carrier Wi.
Turning now to touch on the third quarter to provide some color and reminders and you look at your models.
Given the continued strong performance across our business and the favorable comparison to last year, we expect revenue and gross profit to be strong and the operating expense growth rates remain elevated.
One of the operating income by when you expect EPS to be up only slightly in the third quarter due to the three main factors first higher tax rate year over year as we lap discrete items in the third quarter of fiscal 2020.
Second higher interest expense due to the database and third higher share count, let's share repurchases on call as a result of the alliance healthcare transaction debt, we expect share count to continue to move up to the stock comp.
At this point in the year, we are happy to have been able to range. Our EPS guidance again, driven by the strong performance, we are seeing across our business.
The new EPS range represents growth of 7% of 9% versus 2020, and it's clearly driven by the strong operating income growth expected in both the pharmaceutical distribution services segment and in our global commercialization services and animal health growth.
Before I conclude my prepared remarks. This morning, I will provide a brief update on the alliance healthcare transaction.
We continue to make progress toward closing the transaction and continuing to have valuable discussions, but the leadership and teams at alliance in preparation for closing.
We remain on track to close the acquisition by the end of our linear with the possibility of closing in our fiscal third quarter.
As a reminder, we expect the acquisition to generate high <unk> percent of pretend to adjusted EPS in the first 12 months post close.
This acquisition is an important strategic and financial steps into the future assets will enhance our scale and margin profile and to free cash flow generation and build on our global pharmaceutical manufacturer service and distribution capabilities.
Amerisourcebergen is well positioned to create long term value of our commercial partners, who are key differentiators of the strong customer relationships leadership in specialty and our commitment to innovation.
We're also continuing to build on our corporate stewardship initiatives to ensure the value we create benefits all of our stakeholders as an executive sponsor of our ESG Council I'm excited by this quarters release of our fifth annual global sustainability and corporate responsibility report, which aligns the.
The global sustainability frameworks, including status feet Cri, and the UN sustainable development goals for the first time of the report also combines with PTSD and the World Economic Forum frameworks and is presented on its own sustainability micro site.
As a member of the SaaS based standard advisory firm Amerisourcebergen, leading ESG reporting approach was featured as the case study on a recent workshop I encourage everyone to visit the micro site and we must of Orient to continuing to provide updates on our approach to ESG.
I would be remiss if I did not also take a moment to highlight an important recent acknowledgment and CEO, Steve Collis Amerisourcebergen received an.
In April the anti defamation, Philadelphia percentage of the American NSM of warranty scheme and Amerisourcebergen.
Net to finding a locally across the country and the world.
This award is value recognition of steam and Amerisourcebergen living our purpose.
In closing Amerisourcebergen remains committed to running our business.
In short and will continue investing in our businesses people and communities to serve all of our stakeholders. We are building on our strengths enhancing our differentiation in the marketplace and positioning our business of our long term growth and value creation from.
And by our purpose of being United in our responsibility to create healthier futures.
Thank you for your interest in Amerisourcebergen now I'll turn the call over to the operator to start our Q&A operator.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you are using a speaker phone please pick up your handset before pressing the keys.
I would like to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Today's first question comes from Glenn at Santander flow with Guggenheim.
Yeah. Thanks, good morning, and congrats and thank you for taking my question, Steven Jim I'm guessing you've heard by now but early of this earning season. We've received very reports from different companies with respect to changes in generic pricing could you maybe comment on what you've been seeing in your generics business both in terms of pricing.
And the supply chain and any notable changes worth calling out on thanks in advance.
Hello.
Generic price things are trending relatively in line with our original expectations for the year with regard to the generic deflation. The you asked about the overall deflation rates are relatively in line with the last couple of years.
There are currently a few product specific pockets of pressure, but overall the rate is still relatively in line with our expectations for the year supply and demand dynamics remain balance.
Do you spend the balance of the year, we expect overall deflation to be generally consistent with year to date and then on the generic sales side on <unk>.
The market continues to be competitive, but stable with no significant update.
Thanks for the question.
The next question comes from Eric Coldwell with Baird.
Okay.
Thanks, very much and unfortunately, I joined a little bit late but I thought I heard you mentioned something about two less selling days I was hoping to get a little more specificity on that what that was in relation to <unk>.
And.
Our selling day and distributions, obviously, a tremendous amount of money. If that's what that was in relation to so I'm. Just curious if that was one of the factors in the revenue update versus the.
On the street, which was a bit higher.
Yeah, Let me, let me comment on balance and those of us the.
The pending distribution for a long time, which includes about everyone on the call and then exposed to any selling day are sorts of things that we tend to track and yes, there were two less selling days.
This quarter for Amerisourcebergen versus the same quarter last year, one was simply due to the calendar. The other was due to the fact that this year, we did not operate our distribution centers on MLK day, which we felt was important and so that's the list.
Why we had the second less selling day during the quarter itself on the selling days do plenty of probably have some impact on the <unk>.
Revenue during the quarter by one of I would say overall we.
We feel quite good about the revenue growth during the quarter on we're comping against the quarter last year, where there was the real uptick in revenue on <unk>.
In the month of March during the onset of the pandemic and so we work.
I'm pleased with the <unk>.
Revenue growth during the quarter end of the we're comping against the highest revenue growth quarter last year on that call.
So I think most importantly, the stake.
We're keeping our revenue growth guidance the same on which is strong in the high single digit percent range for the fiscal year.
The next question comes from Lisa Gill with J P. Morgan.
Hi, Good morning, and thank you for taking my question.
Jim I just wanted to go back to your comments around the higher.
Net interest cost tax range and share count.
By my math, it looks like those three things combined with the somewhere in the neighborhood of close to 10 cents.
Doing the math correctly.
We think about the fact that you raised your numbers today.
But at the lower end up by five cents with her.
If everything else were equal weight would there have been another incremental upside to your numbers.
On the guidance.
Yes. Thank you very much for the question and answer.
We don't give quarterly guidance, but any thoughts on what's important to give that color.
And if all the indicators.
I'm expecting for our adjusted EPS to be up only slightly during the third quarter and I think really the key thing is we're expecting revenues to continue to be strong GP to continue to be strong and we're expecting very solid operating income growth. So it's really the below the line items that are driving.
Yes.
The higher tax rate year over year, because we had a discrete tax item the benefit in the third quarter of last year, we have the higher interest expense during the third quarter, because we've done the alliance acquisition financing before closing the acquisition. So we have the interest expense related to it in our guidance, but of course, we will.
Have the alliance operating income in our guidance until we close the deal and then we have a slightly higher share count also and so yes. Those are the kind of things that are driving kind of what I said on the third quarter, but I think kind of the key thing against the big from that from an operating standpoint.
And in our in our guidance of some we expect the business to.
Continue to perform well and we have on operating income guidance overall for the business in the high single digit percent growth range.
The next question comes from Robert Jones with Goldman Sachs.
Hey, guys. Thanks for the question I guess, Jim maybe just to follow up on that you talked about <unk> being up slightly just to be clear as debt is that mostly below the line that would maybe have that EPS growth looking a little bit more subdued and then last quarter you called out the COVID-19 treatment.
In the quarter, specifically I was wondering if you'd be willing to share of that specific contribution for this quarter as well. Thanks.
Yes, so there were.
Two things there all the address both.
Both of those on the first one was the.
The detail that we did on the third quarter, yes, all of those all of the things the cards.
The adjusted EPS of be only slightly in the quarter and they are below the line of sight.
Right.
Just kind of went through.
And yes.
We are expecting.
Solid.
Sales and operating income growth on our operating income guidance once again for the year of some high single digit percent growth and on the COVID-19 treatment.
The benefit during the quarter it was roughly.
<unk> is large and half is impactful and our second quarter as it was during the first quarter of our fiscal year and so while it's still when it still had a positive impact of it was only about half as much during the second quarter and we do expect it to continue to decline over the balance of the fiscal year.
The next question comes from Ricky Goldwasser with Morgan Stanley.
Yeah, Hi, good morning, I wanted to focus on the pharma segment, you reported three 5% of revenue growth and 5% operating income growth.
Prescriptions pick up to a more normalized level should we see more leverage flowing to the bottom line in along these lines.
What are you seeing in terms of utilization trends.
In April in early in May.
Thank you.
Yeah with regard to.
Utilization.
Broadly speaking our sales had been resilience of our across our businesses during the pandemic.
The got.
Got it to lap the onset of the COVID-19 pandemic of course, there's been a lot of external noise around cough, cold and flu, which isn't a significant driver of our business, but that being said moving forward the script data.
We'll compare against a past year, they had very low coal cost on flu season now their spend.
Some lower preventative and diagnostic the section activity, but we're optimistic now.
We booked.
Two of them.
On a situation on the balance of the year debt with vaccines and lower incidence of COVID-19 in many parts of the country people will be scheduling these diagnostic procedures and gain referrals the predictions dupree conditions.
The next question comes from Eric Percher with Nephron research.
Thank you.
The comment on supporting from innovation and commercialization struck a chord and I'm thinking of the relative to.
Okay.
Bring specialty customers upstream and world Courier, having a expanded role is it time to consider and the value proposition of working with the <unk> a little bit more intently then.
It was worth a couple of years ago, and even if not on large scale.
Combination are there areas in oncology of regulatory affairs that could fit well with the business.
Yes, Hi, Hi, Eric.
You know.
We very broadly industry, the commercialization services and helping helping.
Helping with particularly the specialty positions with market challenges, which would include patient accruals and helping them find those patients.
How is the post pandemic, we expect that there'll be other role of resumption of innovation in clinical trials.
The use of FDA from outstanding has been very focused on the pandemic hitting those therapies approved so we.
We always do stand waiting to share, but we can see all of our power portfolio as various adequately positioned and we don't have any specific needs of holes right now and have had a history of working with our physician customers on analytics and data mining. So we feel like we well position.
But.
To keep in mind.
The benefits that could come from using community oncologists and particular in clinical trial the accruals from.
The importance.
The next question comes from Charles <unk> with Cowen.
Yeah. Thanks for taking the question.
James I wanted to talk about the follow up with the.
Of course, it from Lisa when you talk about the puts and takes on the rest of the guidance here and with some of the offsets I think you've talked about the higher expense related to the alliance financing et cetera, but you know given the in the.
The other segment the U.
The raise the guidance there.
Broker of seems to be doing quite well here can you talk a little bit more about the trends that youre seeing here and then the rest of the fiscal 'twenty, one and then I guess with the World Courier you've built this great infrastructure.
Have you guys thought about adding more capabilities to support form of manufacturers in the clinical trial process itself would you be at can you see yourself of adding more different capabilities. Besides maybe the the listed logistics base. Thanks.
Yes sure of it and I said I think the first part of your question was about down kind of.
Some of them moving piece of the same guidance in general on the second part of more specifically on World Courier and I think kind of on the key thing is that we are seeing positive trends across our businesses, particularly in our higher margin businesses. We're also seeing just really strong execution across our businesses both in pharmaceutical distribution.
And then the commercialization and animal health businesses and so some of these kind of positive trends, we're seeing is of course and.
Continued very good performance in the specialty physician services, we're seeing strong performance also in <unk>.
Health systems, and then as you've called out of hand, other we're seeing strong growth of both the world Courier business and the <unk> businesses and we expect to see positive trends on there on those businesses for the rest of the year and beyond. These overall positive trends there are there are.
A number of.
And of moving pieces that we talked about in the prepared remarks and on this call.
The beginning to lap some significant year over year growth rates related to biosimilar utilization and so the operating income from Biosimilars will continue to growth, but probably not at the same on percentage growth rates that we saw as utilization was really increasing during the last three quarters of last year in the first quarter of this.
Fiscal year.
Our guidance as I said thats assumed debt of COVID-19.
The therapy sales will be lower in the second half than they were.
We're in the first half and of course.
And we're very proud of what we're doing there and it is clear that we do feel of that of course utilization of Gulf of therapy, We do feel will be lower in the second half and then we are lapping of part of the fiscal year that had very low expense growth.
On the back half of last year, we had on the back half of last year, we had less than 1% operating expense growth. So we're lapping that that operating expense growth. We also have the six months of interest associated with the alliance healthcare transaction and so those are some of the thanks debt.
Net are impacting our guidance, but overall, we feel very good about the positive trends in execution across our businesses and Steve is there anything that you'd like to add there.
Let's say that.
We found World Korea for HOS from so I would now under the <unk>.
I think its continued use of process is the management team and our board how resilient the innovative they are.
We've talked a lot of abstract clinical trials of home, but we keep on finding new ways for this business to the importantly relevant stakeholders.
All of we can give you is just wanted to close this week with EPS.
We were able to facilitate the shipment of any important anti infective products of India really using the types of these of world Courier because it is such a high capability highly targeted niche area of excess that we continue to find useful I also do believe that.
Part of our synergy thesis is looking at the combination of <unk>.
World Courier on the bonds held in different markets.
Having more of a footprint more presence I do believe events of course theyre going to be another strong added to the characteristics that will accrue to us.
Opportunities in the future.
Next question please.
The next question is from Steven Valiquette with Barclays.
Thanks, Good morning, guys.
Jim It seemed that the first 10 or 15 seconds of of your answer around the approved.
Generic pricing question might of been cut off a little bit.
Andrew you mentioned the pockets of pressure on the generic pricing on the buy side.
Yes, I was just curious whether or not of the dynamics in relation to better such that the clinical pockets of growth for <unk>.
Or is that just more of a permanent reduction but different zone.
<unk> range and the other quick question on that just given the COVID-19 <unk> impact.
How many of their equity book.
Back to the board.
Are there any early signals of it all from generic suppliers of India that there could be disruption to supply of generics in the U S. So something under the radar screen or youre not really worried about that.
Thanks.
Yes, what I'll do is I'll I'll handle the first part of that and then Steve will take the second part of that and on.
Obviously, it's a really important question and you can be taken say I cut out.
During part of the question. So let me kind of go for the answer again, because obviously it is such an important topic again based on the so while we don't have specific guidance metrics broadly speaking both brand and generic pricing are trending relatively in line with our original expectations for the year.
Overall, the deflation rates on a relative fleet in line with the last couple of years regarding generic deflation and then as I said and as you've noticed they are counting on past Ben.
A few price specific pockets of pressure, but overall the range is still relatively in line with our expectations for the year on <unk>.
Supply and demand dynamics remain balanced and for the balance of the year. We expect the overall deflation to be generally consistent with year to date and with that I'll turn it over to Steve.
As far as the.
The situation in India, obviously, the heartbreaking of course, most of the immediate attention would be focused on the high oil price the areas.
We've seen this.
Unfortunately pay out in other areas.
It's just a point of view.
A few of mitigating factors here first of all.
We believe that manufacturers have had some business continuity planning and the expectation that it could be outbreaks of nitro painted with us.
So we don't expect any.
The very large interruptions in the supply chain on call.
Cause I always continuing to to be transported as usual of operations continued China is currently functioning was also very important supply at normal levels, which is especially important for raw materials and <unk>.
Amerisourcebergen is throughout the process I would of very closely on supply chain partners we have.
<unk> been able to how much of the solutions into the whole muscle of situations. So we.
We feel the equity can we can get through it all very cognizant of and empathetic with what's going on when we were just tremendously proud of an organization about the work we were able to do just this week to get.
This other unique products going to consume.
No.
And we will support the if it's if you can get through our foundation and corporate grants as well.
Okay alright. Thanks.
The next question comes from Kevin Kelly Anne Day with UBS.
Yeah.
Great. Thanks, Thanks for taking my call.
You mentioned youre going to start to lap some of the COVID-19 therapies and also some of the Biosimilar benefit.
The Biosimilar uptake continue increase every month, so I'm wondering why that wouldnt be a little bit of a tailwind for you guys.
And if you could in any way shape or form sort of size.
The benefit you've gotten from Biosimilars I know, you've always sort of given us some heads up around the COVID-19 therapy sales, but we can also include biosimilars that'd be really helpful.
Think about modeling going forward.
Yeah, so with regard to Biosimilar yourself.
We absolutely believe in our guidance. The sales continues to will continue to grow on the operating income dollars from Biosimilars. So we do expect to have continued meaningful growth there.
The way, we're making interest the growth percentage range.
I'll not be as high as what was last year when biosimilar utilization was growing from a much smaller base, but we absolutely do.
The expense.
Operating income dollars from Biosimilars to continue to grow.
In our specialty business and we Havent, we havent specifically size of the dollar figure, but has been on meaningful contributor to both of the dollar growth and gross profit percentage improvement.
We continue to see positive trends in biosimilars, including non health systems.
And we've begun to see significant utilization of Biosimilars in the second quarter.
And the health systems, but also on oncology, where it sounds therapies, we've seen 40% utilization or by some of them.
Very important to us.
For the most of it as we've mentioned before to create room for other innovative therapies to come out.
And the other specialties it hasnt BNS prevalent the adoption is not being quite as great, but oncology when it comes through community on when it comes due to specialty and trials tends to be on the cutting edge. So.
On either the trade will be led by oncology, but will continue into the other specialties as well.
So we think biosimilars of.
Our on and we will continue to be very important for our future.
With battery of top of one more question. Please.
The next question is from George Hill with Deutsche Bank.
Hey, good morning, guys and thanks for sneaking me in I guess, Jim if I could just ask a follow up kind of as it relates to the volumes I was wondering if you could talk about the outperformance of specialty versus kind of the regular way business in the quarter. You mentioned the two the two fewer days in the quarter, which I think explains a lot of the revenue numbers.
Coming in a little bit below street expectations, but I'd kind of love to hear commentary around how things like oncology performed during the quarter.
Yes.
Happy to.
The address that.
We saw on <unk>.
Continued strong performance in our specialty physician services business.
And oncology supply and in other parts of the business, including our ion <unk>.
<unk>.
We also saw very strong performance as we noted during the quarter during health systems, but I will say if we look overall of the company, we had really strong performance and execution across many of our businesses and focusing in on the revenue growth rate during the quarter of course once again, we were comping.
Against the quarter last year, whether it's a real surge in business during the month of March during the onset of COVID-19. So we werent quite.
I'm pleased by our performance during the March quarter, and the and the.
The trends that we're seeing for the balance of the year, which is included in our in our guidance.
Okay.
To wrap up by just thanking everyone for the attention today.
Preparing for the score hours of consult to abandon these people and they were telling me how many more common share will typically covering stock. We really appreciate your attention as we focus on half of the remainder of future ahead for Amerisourcebergen as we've said many time ever in this outfit the speed more clear during this pandemic.
And then during the pandemic I'm incredibly proud of the role of the industry's plate and repayment of that industry.
Very confident in our business and value proposition, we looking forward in the mass the hedge of closing the alliance transaction, which is the key.
The developments and the Medisoft Bergen history and were looking for jobs, where the year anniversary coming up late this fiscal year and to broadening our distribution and global footprint as we are United in our responsibility to create healthier futures. Thank you for your time today.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
[music].
Okay.
[music].
Okay.
[music].
Yes.
[music].
Sure.
[music].
Yes.
Okay.
Okay.
Yes.
[music].