Q4 2021 Amerisourcebergen Corp Earnings Call
Okay.
Yes.
Good day and welcome to the nurse Horsburgh in fourth quarter of fiscal year 'twenty, One earnings conference call.
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I would now like to turn the conference over to Bennett Murphy Senior Vice President Investor Relations. Please go ahead.
Thank you good morning, and thank you all for joining US for this conference call to discuss Amerisourcebergen fourth quarter and fiscal year 2020. One results my embedded Murphy senior Vice President of Investor Relations. Joining me today are Steve Collis, Chairman, President and CEO, and Jim Cleary Executive Vice President and CFO on today's.
Paul will be discussing non-GAAP financial measures reconciliations of these measures to GAAP are provided in today's press release, which is available on our website at investor Amerisourcebergen Dot com.
We've also posted a slide presentation to accompany today's press release on our Investor website.
During the conference call, we will make forward looking statements about our business and financial expectations on an adjusted non-GAAP basis included but including but not limited to EPS operating income and income taxes forward.
We're looking statements are based on management's current expectations and are subject to uncertainty and change for a discussion of key risks and assumptions.
For you to today's press release, and our SEC filings, including our most recent 10-K.
Bergen assumes no obligation to update any forward looking statements and this call cannot be rebroadcast without the express permission of the company you will have an opportunity to ask questions. After today's remarks by management, we ask that you limit your questions to one per participant in order for us again to as many participants as possible within the hour with that I'll turn the call over to Steve.
Thank you Beth and good morning to everyone on the call.
Today, we will focus our remarks on the exceptional progress Amerisourcebergen team has made on our strategic priorities during fiscal 2021, and how we will capitalize on that momentum to continue executing and innovating in fiscal 2020 two.
Before I begin I want to take a moment to comment on the distribution industry's recent milestone regarding the proposed settlement agreement to a trace of opioid related claims of U S State attorney generals and political subdivisions can participate space throughout the litigation process, we have been.
Consistent in stating our desire to addressing the enormity of the opioid challenge by bringing solutions to the table.
If the industry's proposed agreement and settlement process leads to a final settlement.
Connectivity provides thousands of communities across the United States with substantial financial support.
Yeah, He's a processes in an advantaged page and we will not comment D. C. At this time, we take our role in the supply chain seriously and continue to work closely with stakeholders concerning these complex matters.
Whereas salzberg and will continue to work diligently and a long stars partners to combat drug diversion, all supporting Red solutions, you all agree with the process and the communities, where we live work and serve.
In fiscal 2021 amerisourcebergen advanced its role as a key pillar of pharmaceutical innovation in excess as we live our purpose, albeit not in our responsibility to create healthier futures by supporting our partners customers and our own team members.
Through challenging Cogs.
As the pandemic persists.
ZIP output purpose in an evolving environment and an efficient global pharmaceutical supply chain is being felt by all our stakeholders. We are proud to be able to offer our expertise capabilities and infrastructure as part of the solution.
While facilitating the national distribution of COVID-19 therapies to supporting the distribution of more than 75 million vaccines to patients in over 30 countries through our expanded global footprint.
Our business is leveraging its position of market strength to become an increasingly vital partner of choice through differentiated solutions for our upstream and downstream customers, our continuous investments and ongoing focus on being a strategic partner for our customers have deepened our relationships.
With all our stakeholders. During this time of increased focus on the pharmaceutical supply chain.
Hansen, our position as a provider of key solutions for our customers.
Both big and small.
We also leverage our core capabilities as a leader in pharmaceutical distribution and a differentiated provider of unique solutions for manufacturers globally and health care providers.
In the U S. We are a key partner for our community pharmacies veterinarians and physician practices.
In community Pharmacy, we are particularly proud to support our good neighbor pharmacy members trusted role throughout innovative tools and programs.
Independent pharmacists to optimize their operations and spending the most possible shelving.
<unk> and communities.
In July for the fifth year in a row.
They take care of the past 12 years. Good neighbor Pharmacy network was ranked highest amongst bricks and mortar chain corrects full pharmacies by J D power.
Our animal health business, we support veterinarian practices in similar ways to help them manage their practices.
<unk> continued to experience increased demand for these services due to growth in pet ownership.
The Cherry schroll of pace within families and increased importance placed on ensuring health and wellbeing or all family members.
We also continue to differentiate ourselves as the leader in specialty distribution and commercialization services.
This fiscal year, we launched a variety of new services and solutions bolting upon our historic investments to further drive our leadership in specialty with our customers and partners.
Alright.
For example, two of ion and other value added solutions, we formed new partnerships and offer industry, leading technologies to specialty physician services customer practices.
Enabling them to be EBIT more efficient, while enhancing their ability to improve the patient experience and ultimately outcomes.
We are also pleased to continue to support the growing adoption of Biosimilar products in physician offices and community hospitals and health systems, facilitating patient access to important treatment choices to improve the health and wellbeing.
Internationally, we remain a leading provider of global pharmaceutical distribution services and differentiated solutions in key markets across the globe.
Earlier, I mentioned the distribution of tens of millions of doses of the COVID-19 vaccines to patients in more than 30 countries.
Throughout all competing manufacturer solutions, including our global specialty logistics and commercialization offerings. We're also facilitating direct to patient and clinical trials and helping manufacturers around the world navigate the ever increasing complexities of global logistics.
Furthermore, we are leveraging our expanded portfolio of international relationships partnerships and solutions to facilitate patient access to the rapidly evolving landscape of new pharmaceutical technologies.
As we continue to differentiate our business. We remain we remain focused on being strategic partners with our customers as we help them achieve operational efficiencies and support growth in these businesses.
Native solutions.
In fiscal 2021, we completed a significant technology investments are bringing the specialty distribution business onto the SAP platform, which will help improve efficiency.
Increased flexibility and support continuity is there.
Global Healthcare company, we understand and appreciate the importance of ensuring our businesses have the technology they need to support the operations and enhance their capabilities.
Courtney an increasingly critical part of our global role and responsibility is being strong corporate students that is ensuring our financial health investing in our people and culture, and ensuring long term and sustainable value creation.
In terms of our financial health, we continue to take a thoughtful and strategic approach to capital deployment that focuses on value creation and maintaining financial strength.
This includes a focus on maintaining a strong investment grade credit ratings and we remain on track to delivering on our commitments to the rating agencies.
Notably our financial and strategic position has enabled the continued enhancement of our healthcare capabilities, including the acquisition of Alliance healthcare, which we completed in June.
Stan are culturally aligned teams have worked diligently to integrate our teams and businesses.
<unk> deep dive into strategically optimizing our operational and business development synergies to exploring ways to enhance the value we create for our partners.
As we are seeing through financial results and expectations. Our new team members are talented and our thanks to combine Amerisourcebergen and alliance health care teams for their ongoing support of our integration efforts.
Our financial strength also enables us to continue to invest in our people and culture at.
At Amerisourcebergen, we know our team members are our most valuable assets and we are committed to inspiring them to achieve their potential.
Our efforts go well beyond the table stakes of offering market a lot of PE and we understand.
And the long term advantage of being a fair and equitable and player who offers competitive wages at all levels. We have surveyed our team members to find out what he's most value too valuable to them and have invested in attractive benefit programs such as increased paid parental leave child independently.
And enhanced mental health and wellness programs.
Key members also value of our culture of flexibility and we responded with a full study design new way of working and provides options for flexibility.
And seeing the need for in person connection connection and innovation.
I'm, ensuring the safety of themselves and their loved ones during the pandemic to investing in world class drilling technology models, we understand that is absolutely critical and our challenge is cultivated and empowered to help drive our long term growth.
Our efforts have been recognized and we are once again being certified as a great place to work company and named a best place to work for LGBTQ equality by the human rights campaign.
Equal value can also be unlocked when individuals are empowered to bring their whole selves to work and we embrace our collective differences.
This year, we furthered our diversity equity and inclusion efforts with the rollout of new employee resource groups and Utah based candidate slate objectives.
Further a lot our people strategy with our business strategy. We also introduced a new leadership competency model and it will be embedded throughout all of our tenant programs based on our collective feedback from team members across Amerisourcebergen. The new model focuses on developing leadership competencies and logic for key business.
And cultural calls adversity equity inclusion collaboration innovation and execution.
Excellence and purpose.
As a foundation for how we recruit engage and develop our people this new model and the principles behind them will enable us to create value now and for the long term.
Another aspect of our culture, one which helps ensure sustainable value creation is our dedication to operating in a sustainable and responsible manner.
To supporting healthy and resilient communities, where we live and work.
During the quarter, we are proud to have become a participant of the UN global compact the world's largest corporate sustainability initiatives. We also held our third annual Amerisourcebergen Foundation Conference, which helps foundation grantee is connect and learn from each other and the foundation team to help them become even more effective.
And they work to positively impact local communities around the world.
Our continued progress in areas like ESG diversity equity and inclusion and strategic planning are made possible by the expert oversight and guidance of our board.
As well as the ability of our management team to drive execution and operational excellence.
Looking ahead our COO.
Key growth pillars enable us to maintain our leading market position and to solidify our differentiated value proposition in fiscal 'twenty two and beyond.
First.
We are focused on our customers.
Through our unique partnership model, we formed long term lasting relationships and integrate us operationally and enable us to provide value added solutions that help further strengthen our ability to lead with market leaders.
Second we are focused on expanding on our leadership in specialty <unk>.
Bridging our global reach market, leading capabilities and ability to support rapidly accelerating global pharmaceutical innovation, we strengthen our capabilities to support both upstream partners and downstream customers.
Third we are focused on execution excellence.
This increase continuously investing in our business, which increases our flexibility expands our suite of capabilities and enhances our customer experience.
Fourth we are focused on supporting pharmaceutical innovation around the world.
With a global manufacturer service platform, we aim to be the strategic partner of choice to global manufacturers as we help them innovate solve the complex challenges of global logistics and market access and capture the opportunities of rapidly accelerating pharmaceutical innovation.
Downstream, we provided data driven insights efficiency solutions.
Unmatched scale to help optimize customer operations and support access for patients in need from the smallest to largest populations.
Across all sites of care and across all classes of trade.
And finally, our growth is supported by investments in our people culture and all dimensions of ESG.
Basically in our people and culture, we advanced our most important resource are committing to ESG, we create healthier futures around the world and unlock the added value of being a responsible and impactful enterprise.
Which ultimately enables a strong and healthy financial position to achieve long term sustainable value creation.
For all of our stakeholders.
Amerisourcebergen has made exceptional progress on our strategic priorities further enhancing our differentiated value proposition.
And driving consistent outperformance throughout the year.
As we continue to capitalize on our positive momentum into fiscal 2022.
We remain driven by our purpose of being United in our responsibility to create healthier futures.
Now powered by 42000 team members globally, we remain confident in our pharmaceutical centric strategy and capabilities as a leader in pharmaceutical distribution services and differentiated manufacturer solutions. Thank.
Thank you to all our team members for their inspiring dedication this year and we look forward to a great you're ahead.
Now I will turn the call over to Jim for a more in depth review of our fourth quarter and fiscal 2021 results and to discuss fiscal 'twenty two guidance Joe.
Thanks, Steve and good morning, everyone for Amerisourcebergen fiscal 2021 lets a momentous year as we celebrated the 20th anniversary of Humira source in Bergen Brunswig merger completed both the acquisition of Alliance healthcare and the extension of the Walgreens contract through 2029.
And our teams delivered another year of strong performance driven by our continued execution and strategic positioning our pharmaceutical centric business.
Plus customer relationships and leadership in specialty distribution and services position us to be a partner in supporting pharmaceutical innovation and access on a global scale.
Before I turn to our results as a reminder, 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 September quarter for a detailed discussion of our GAAP results. Please refer to our earnings release.
I will provide commentary in three main areas. This morning first I will review, our consolidated results and segment performance in fiscal 2021.
And then will discuss our new reporting segments beginning in fiscal 2022.
And we'll conclude with fiscal 2022 guidance beginning with our fourth quarter results. We finished the quarter with adjusted diluted EPS of $2 39.
An increase of 26, 5%, which was driven by both a full quarter's worth of contribution from alliance healthcare and the strong performance in our pharmaceutical distribution services segment.
Our consolidated revenue was $58 $9 billion up approximately 20% reflecting growth in our pharmaceutical distribution and other.
Excluding alliance healthcare, our consolidated revenue would have been up 9% from the prior year quarter.
Consolidated gross profit was $2 billion.
Up 51% driven by increases in gross profit in both the pharmaceutical distribution and other which benefited from the inclusion of alliance healthcare <unk>.
Quarters gross profit margin up three 4% and 71 basis points higher than the prior year quarter as we had a full quarter of alliance healthcare in our consolidated results.
Consolidated operating expenses were $1 $3 billion versus $795 million in the prior year period, primarily due to the addition of alliance healthcare as well as investments in our talent and initiatives to support the company's current and future growth.
This quarter's operating expense margin of 2% to 3% is 61 basis points higher than the prior year quarter, primarily reflecting a full quarter impact of alliance healthcare in our consolidated results.
Also as a reminder, in the fourth quarter of fiscal 2020, we had a bad debt reversal of $13 million that impacts the year over year comparison of operating expenses.
Turning now to consolidated operating income our operating income was $694 million.
31% compared to the prior year quarter.
This growth was driven by increases in both the pharmaceutical distribution services segment.
And the other which I will discuss in more detail when I review segment level performance operating income margin was 1.18% an increase of 10 basis points. As a result of the contribution from alliance healthcare and the continued benefit from some of our higher margin.
Businesses.
Moving now to our net interest expense and effective tax rate for the fourth quarter net interest expense was $55 million up 57% due to debt related to alliance healthcare.
Our effective income tax rate was 23% compared to 21, 7% in the prior year quarter. The lower effective tax rate was due to a change in mix of domestic and international income from the prior year quarter.
Our diluted share count was $210 8 million shares at two 2% increase due to the impact of the issuance of accumulating shares delivered to Walgreens as part of the alliance healthcare acquisition and dilution related to employee stock compensation.
This completes the review of our consolidated results now I will turn to our segment results for the fourth quarter.
Pharmaceutical distribution services segment revenue was 51 $2 billion up 8% for the quarter driven by increased sales of specialty products.
Strong execution across our pharmaceutical distribution businesses and overall positive prescription utilization trends.
Pharmaceutical distribution services segment operating income increased by 11% to $472 million.
Operating income margin expanded by two basis points zero point, 92% in the quarter of.
Amerisourcebergen has continued leadership in specialty distribution allowed us to capture the benefits of strong utilization trends during the quarter.
I will now turn to other which includes alliance healthcare <unk> World Courier and Amerisourcebergen insulting.
In the quarter other revenue was $7 $7 billion.
Up from $2 billion in the fourth quarter of fiscal 2020, driven by a full quarter's worth of contribution from alliance healthcare as well as growth in the global commercialization services and animal health businesses.
Other operating income was $223 million up from $105 million in the fourth quarter fiscal 2020 due to the inclusion of alliance healthcare.
That concludes our fiscal fourth quarter discussion now I will turn to a discussion of our full year fiscal 2021 results.
Our consolidated revenue was $214 billion up 13% driven by growth in pharmaceutical distribution and other which includes four months of contribution from alliance healthcare <unk>.
Excluding alliance healthcare, our consolidated revenue was up 9% from the prior year.
Consolidated operating income grew 20% for the year to $2 $6 billion driven.
Driven by strong performance across our businesses and the four months contribution of alliance healthcare excluding.
Excluding alliance healthcare, our consolidated operating income increased by an exceptional 12% from the prior year.
Driven by growth in our higher margin businesses.
<unk> fundamentals across our business.
And the important work our team has done to support Covid therapy distribution for hospitalized patients.
From a segment perspective pharmaceutical distribution services had operating income growth of.
13%.
Strong performance across our portfolio of businesses and customers.
Fiscal 2021, we continued to capitalize on our leadership in specialty distribution, both in the physician space and health systems. We saw a significant contribution from health systems as our differentiated solutions that was leveraged by manufacturers to meet the complex majestic.
For the distribution of Covid, 19, antivirals and therapies to hospitals across the country.
Additionally, we continue to have strong performance in specialty physician services this fiscal year.
The health care system has become more accustomed to operating in the current environment.
This supported physician diagnosis and related testing and screening processes, resulting in more normal levels of new patient starts.
In other operating income grew 54% year over year to $615 million.
<unk> meaningfully benefited from the four months of contribution from Alliance healthcare results, while World Courier and <unk> also delivered strong results.
As global logistics continued to be challenged by the pandemic World Courier provided its expertise and innovative solutions to manufacturer partners around the world.
In the four months contribution from alliance healthcare.
Adjusted free cash flow for the year was $2 $1 billion, which was better than our expectations due primarily to the timing of certain customer payments in September.
That will reverse in the December quarter due to higher supplier payables.
There was also better than expected cash flow at alliance healthcare.
If you normalize for the timing related benefit our adjusted free cash flow for the year would have been roughly $1 7 million.
We ended the year with a cash balance of $2 $5 billion, excluding restricted cash of approximately $500 million.
That completes the review of our fiscal 2021 results.
I will now discuss updates to our segment reporting which will go into effect in fiscal 2022.
Following the acquisition of Alliance healthcare and the subsequent change to the geography of our business, we undertook a strategic evaluation of how we report our segments in order to provide alignment with business operations.
Knowing this review, which concluded in October we will begin reporting our results in two new segments in the first quarter of fiscal 2022.
U S health care solutions and international Health care solutions.
The U S Health care solutions segment will consist of our legacy pharmaceutical distribution services segment, excluding pro farm in distribution.
Plus the following businesses, which had previously been reported in other.
<unk> animal health Extender, Lash group and Ics three PL.
The International Health care solutions segment will consist of our non U S based pharmaceutical distribution and services solutions, including Alliance healthcare World Courier, and EMR and pro farm in distribution and pro farm is specialty.
As a reminder, we consolidate pro farm's results due to our ownership interest in governance of the publicly traded entity.
Pro forma specialty was previously reported in other.
This morning, we are also filing a form 8-K with re segmented financials for fiscal 2021 in order to help with your quarterly modeling.
Our new reporting segments like Amerisourcebergen are built on the foundation of leading in pharmaceutical distribution and differentiated by complementary higher margin businesses offering value added solutions in key markets.
Turning now to discuss our fiscal 2022 guidance.
And as a reminder, we do not provide forward looking guidance on a GAAP basis. So all of the following metrics are provided on an adjusted non-GAAP basis.
<unk> with revenue, we expect consolidated revenue to grow in the high single digit to low double digit percent range.
On a segment level, we expect U S healthcare solutions revenue to be approximately $207 billion to $212 billion representing growth of two 5% year over year.
In International Health care solutions, we expect revenue of approximately $26 billion to $27 billion.
Moving on to operating income, we expect consolidated operating income to grow in the mid to high teens percent range.
On a segment level, we expect U S health care solutions operating income to be between two <unk>, two 5 billion and $2 4 billion.
Representing growth of 3% to 6% on a year over year basis.
The only business that was included in pharmaceutical distribution services that is not going into U S health care solutions as pro forma distribution, which contributed less than 1% of revenue for pharmaceutical distribution services in fiscal 2021.
Roughly 1% of segment operating income.
As a reminder, as I said back in February and again in August we had a significant tailwind in fiscal 2021 related to the financial contribution from sales of COVID-19 therapies.
We did have higher than expected COVID-19 therapy sales in the fourth quarter, primarily driven by sales in the month of August with the subsequent substantial decline in September.
The final EPS benefit from Covid therapy sales for full year fiscal 2021 was 30.
14 of which was in the first quarter.
If you estimate the first quarter of fiscal 2022 based on the even lower October trends the contribution from Covid therapy sales would be <unk>, which means the first quarter would have an 11% headwind for U S health care solutions segment.
While this reduces the segment's growth rate in the first fiscal quarter, we expect full year operating income growth of 3% to 6% in U S health care solutions.
We expect international Health care solutions to have operating income between $685 million and $715 million.
Alliance healthcare represents a little over two thirds of operating income in the segment with World Courier, making up the majority of the remainder of segment operating income.
As you think about your first quarter models, we expect about 25% of the international segment's operating income to occur in the first quarter.
As you look at fiscal 2022 for the International segment. There are a couple of things to keep in mind.
First we have agreed to sell a pro pharma specialty as we focus on our core operating assets. The transaction is under regulatory review and is expected to be completed in the first half of fiscal 2022.
Access for completion of the divestiture is factored into our guidance and represents a 2% headwind to our international health care solutions segments operating income.
And in fiscal 2022, we will have a step up in expenses at alliance healthcare that was fully contemplated when we announced the acquisition and is generally related to.
Modernization as Steve said earlier, we view technology and systems is fundamental to our operations and business continuity and this step up in fiscal 2022 expense will help align alliance healthcare's business technology, Operability and infrastructure with Amerisourcebergen.
Alliance healthcare continues to deliver on our expectations for the business and we expect alliance to be high teens accretive to our Standalone adjusted diluted EPS in fiscal 2022.
Since closing the transaction our teams are engaged both in person and virtually and have furthered our strong relationships. Most recently, we held a deep dive with leaders across Amerisourcebergen and alliance healthcare focused on alliance healthcare's manufacturer services businesses I continue to be impressed by the strong and efficient business.
<unk> team at Alliance and appreciate the collective thoughtfulness around creating long term value for stakeholders through our innovative solutions.
Moving on to interest expense tax rate and share count we expect interest expense to grow in the mid teens percent range as a result of debt related to the alliance healthcare acquisition.
We expect our tax rate to be approximately 21% to 22% for fiscal 2022 based on current tax rates in effect for fiscal 2022.
Without the tax rate benefit from alliance Healthcare's operations, our range would have been 1% higher on both the top and bottom ends of the range.
Finally, we expect our share count will increase to approximately 212 million shares as a result of the full year impact of the 2 million shares delivered to Walgreens as part of the closing of the alliance healthcare acquisition and normal dilution from stock compensation expense.
As a reminder, as part of our commitment to maintain our strong investment grade credit rating, we are committed to paying down $2 billion in total debt over the next two years and doing share repurchases.
We currently expect to pay down roughly half that amount towards the end of fiscal 2022.
As a result of these expectations, reflecting the strength of our business. We are guiding for adjusted diluted EPS to be in the range of $10 50 SaaS.
$10 80.
Reflecting year over year growth of 13% to 17%.
Turning now to capital expenditures and cash flow expectations Capex is expected to be in the range of $500 million.
As we continue to invest to further advance our business or to buy alliance healthcare it infrastructure and support additional growth opportunities.
For adjusted free cash flow, we expect adjusted free cash flow to be in the range of $2 billion to $5 billion.
Which includes the benefit of alliance healthcare and our results for the entire fiscal year.
In closing fiscal 2021 was another successful year for Amerisourcebergen as we continued to execute on our strategic priorities, while the pandemic precipitated I am proud of our 42000 team members, who work tirelessly to support our customers partners and patients and drove our.
Strong financial results given the steps we took in 2021 to advance our business I'm excited about our 2022 fiscal year as we continued to deliver stakeholder value.
As we continue to drive our business forward, we will maintain our focus on our differentiated capabilities supported by our dedicated team members Amerisourcebergen is guided by our purpose of being United in our responsibility to create healthier futures built on our foundation of leadership in pharmaceutical distribution and differentiated by.
Complementary higher margin businesses that leverage our pharmaceutical scale and expertise to create unparalleled value for our manufacturer partners and healthcare provider customers with that I'll turn the call over to the operator to open the line for questions operator.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
We're using a speakerphone please pick up your handset before pressing the keys.
Withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And the first question will be from Lisa Gill from JP Morgan. Please go ahead.
Good morning, and thank you for all the detailed commentary Jim.
Tim I just wanted to go back to your comments around the U S drug distribution I understand that there is a number of incremental businesses that are now within that segment.
But you made a comment about COVID-19 therapies. So when we think about 2022, one is there nothing built into your expectation around that and two just given the number of new therapies that are coming to market. For example, they think about the new Merck therapy that that's just been announced.
Is it not reasonable to think that theres going to be some benefit as we go into 2022 for Covid therapies would be my first question and then secondly can you just help us to understand the underlying trends. So for example.
What are your expectations around utilization trends, what's your expectation around cough cold flu acute script kind of coming back and people visiting the office their physician's office again et cetera. If you can just help us to better understand that that'd be great. Thank you.
Lisa Thank you great question.
Answer that question from a financial perspective, and then I think Steve will want to add in and talk a little bit more about the business, but as you know our guidance for this year.
Year for our U S Health care solutions segment is revenue growth of 2% to 5% and adjusted operating income growth of 3% to 6% and it's based on continued strong performance really across the business, where we continue to benefit from our differentiated.
Now with regard to your question on Covid.
Covid therapies, we don't expect to repeat the benefit that we had in fiscal year 'twenty one from our exclusivity on the distribution of the main commercial Covid therapy. The benefit we got from Covid therapies in fiscal year 'twenty, one as I said in my prepared remarks was.
30 cents and kind of let me give you some of the breakdowns there during the first quarter. It was 14 second quarter was <unk> third quarter was <unk> in fourth quarter was <unk>. So I'm sure that'll help you in your.
Modeling and as we're looking at fiscal year 'twenty, two we expect the benefit that we get in the first quarter of fiscal year 'twenty two to be <unk>. So we have an 11% headwind in the first quarter of fiscal year 'twenty two and so we do expect to have lower operating income growth in U S health care solutions.
In the first quarter of fiscal year 'twenty, two but we are of course as I said expect 3% to 6% operating income growth for the full year, which includes of course Q Q1, now you asked about other COVID-19 therapies and of course, it's early but we may very well get some benefit from other COVID-19 therapies and Thats exactly.
While we have one of the reasons why why do we have a range and we have a 30 range in our EPS between $10 50, and $10 80, we don't expect a lot of incremental benefit in the first quarter, but it could come later on in the year. Now you also asked about utilization trends, which is great.
And we are seeing strong utilization trends across our business, which has improved sequentially from the positive trends that we noted in our third fiscal quarter and prescription trends are strong and have returned to pre COVID-19 levels and we did see have seen.
Strong utilization improvement trends across the business in the second half of 'twenty, one and expect that to continue to benefit us.
In fiscal year, 'twenty, two across our businesses and customers and I say that Steve would like to just add a couple of things on the overall business.
Sure.
Entering 'twenty two with all of our businesses performing very well and benefiting from.
Somewhat normal environment.
But.
It is a database and effects of it remains and I saw that the Merck Cologuard voluntary while we open the call to move <unk> got approved in the U K tomorrow.
Continued innovation.
Possible that we could be working with some therapies in the future as we have in the past, particularly in the emergency use authorization phase.
Is where we've been successful in working on it on an exclusive basis. So we are happy and very if I look back on 'twenty, one I think of it as a year that the large deal got done in a year that we responded so well to to assisting with the needs for corporate is pointing to the COVID-19 pandemic and include.
Keeping our people safe so.
That's what I think would be the highlights, but Jim I think you gave an exhaustive answer so we will probably move on to the next question. Please.
Yeah.
Thank you. The next question will come from Charles <unk> from Cowen. Please go ahead.
Yeah, Thanks for the questions.
Jim I just wanted to follow up on the guidance, particularly in International Health Care segment. Here you said you were.
Planning to sell the the pro forma specialty business and so there was a 2% headwind that's 2% headwind to the full year operating income.
But it's not going to sell until so it's really double that for the back half of fiscal 'twenty two.
Did you give a revenue impact as well.
Yes, no we havent given a revenue impact, but you are right. It is it is at 2% headwind for the full year and we're assuming we're going to sell that business. During the first half of the year and and and of course our international.
Health care solutions segment is really driven by alliance healthcare being the largest part of the segment and we feel very good about the performance of alliance, it's operating at or above our deal model and then the next biggest piece of the International Health Care Solutions segment is of course, our world Courier business, which is <unk>.
So performing well.
Thank you and the next question will be from Steven Valiquette from Barclays. Please go ahead.
Thanks.
Sorry, two calls at once here I apologize.
Basically a lot of discussion points around freight costs, the ability for drug distributors to pass some of that through or have to absorb that.
There's a lot of components to that it can be higher labor costs. It could just be higher fuel costs et cetera, but just curious to hear about how you guys are handling that and whether there's any <unk>.
And your business, one way or the other or can you fully.
Either pass that through or just not have that would be material impact of the company.
Yes, I think really in summary, thats. It is fully reflected in our guidance and in fiscal year 'twenty two.
Do expect to continue to have higher expenses associated with picking packing shipping and there are some offsets from certain other FY 'twenty. One expenses that are not plan to repeat in FY 'twenty two but of course, we keep a close eye on economic trends that can impact our business and we have seen way.
Age and transportation inflation across our business during the summer we moved quickly to adjust wages to ensure that they remain competitive and market aligned and that's reflected in our <unk>.
Our fourth quarter results.
These things like higher labor and transportation costs Theyre fully contemplated in our fiscal year 'twenty two guidance and we'll manage these expenses as we do each year and work with our partners and customers to ensure that we're diligent in maintaining our fair compensation for the services.
Provide.
Next question. Please the next question is from Eric Percher from Nephron Research. Please go ahead.
Thank you I want to take the other side of the U S question asked earlier. So this also includes a <unk> animal extend is it fair to assume that that is growing more than the 3% to 6% for the total segment are there any headwinds coming out of fiscal year 'twenty, one we should be aware of.
And then relative to be re segmentation when we look at 3% to 6% is that apples and apples are there any changes in corporate expense now allocated to the EU segment or the global service entity in Switzerland that would impact the 3% to 6%.
Yeah, and so there arent any changes in the in.
In the corporate allocation and when we add businesses like <unk>.
Wi animal health and the consulting businesses to U S health care solutions.
<unk> has had a has had a stronger growth rate, particularly in fiscal year 'twenty one the animal health business really benefited from the pandemic and the increase in pet.
Ownership and so that has been a higher growth business in fiscal year 'twenty, one, whereas the consulting business has been a lower lower growth business and so I think that gives you a little bit of a.
Yeah.
A little bit of additional color there and then one thing that we are doing today is.
As I said in my prepared remarks, we are filing an 8-K, where we will show the segments. The two new segments will show that on an historical basis for fiscal year, 'twenty, one and how they look in.
In fiscal year, 'twenty, one and I think probably.
A key thing is that.
When we look at the U S segment for this upcoming year, we're expecting.
3% to 6% growth, which is which is largely <unk>.
<unk> because of the size of the legacy business that are going into the new segment.
That's very helpful.
Yeah.
Thank you and the next question will be from <unk> Singh from Credit Suisse. Please go ahead.
Thank you and good morning, everyone.
I was wondering if you could comment on the potential impacts from the recent changes coming out of Washington around Medicare negotiating drug prices among other components without needing presents and specialty products. How do you think about the implications as Medicare ramps up in a number of drugs. It just negotiating.
Yes. Thank you for the question so.
The U S is.
I think somewhat over fixated on the cost of medications relative to overall health care spending.
We'd be very interested in benefit design and we also prefer it when the market.
<unk> solutions for problems.
Such as high co pays for adherence products that all so detrimental the system in diabetic patient doesn't take the incident. So we.
We see some real strong benefits of.
If we can remove some barriers that have been artificially created on products like that.
You know on specialty.
A little bit too early to tell I think we've been through many changes in reimbursement, including the change to ASP.
This growth in EBITDA.
The hospital outpatient market for specialty drugs and the wholesalers.
<unk> resilience.
And we also do believe that they just said is understand that healthcare pharmaceuticals are the most efficient form of healthcare so.
Nothing tremendously concerns us as a business.
Our concern is always with preserving innovation and making sure that all providers have a stable reimbursement environment that they can get continue to run their businesses and take care of patients.
But definitely something we spend a lot of comment on no very interested and thanks for the question.
Thank you and the next question will come from Kevin Kelly Endo from UBS. Please go ahead.
Just in terms of the in the guidance I just want to understand the capital deployment expectations.
You gave us the share count we understand that should we just assume that the vast majority of the free cash flow then will be to pay down debt or.
How should we think about it.
Yeah. So as we've said before we do plan to.
G down about two thirds of the alliance healthcare acquisition debt.
By the end of fiscal year 'twenty three.
Started that process. So it's about $2 billion that we will be paying down during that timeframe, we expect to pay down about half of that in fiscal year 'twenty two and so that is.
One of them.
Key parts of our capital deployment will also of course continue to invest in the business and invest in current and future growth in fiscal year 'twenty two.
Thank you and the next question is from Elizabeth Anderson from Evercore. Please go ahead.
Hi, guys. This is Eduardo one for Elizabeth.
Maybe given the Walgreens as new expansion toward becoming a provider of healthcare services.
How do you envision your relationship with them evolving and what can you do to support their new strategy.
Yes. Thank you.
We are tremendously proud of.
The benefits, we're getting from the recently announced the launch transaction, including that we have a contract with boots Sousa become a very significant customer with.
All of our bonds division through 2031 and.
Most importantly, we extended out.
Walgreens contract in the U S through 2029, and this is such a fundamental customer for us that helps us.
Established such a strong base of scale and efficiency.
And I think we have the teams are at a very good stage, where we're looking to how can we help with one another's priorities. We have these discussions with all of our large customers and the needs for the very large customers like Walgreens are very different than say the independent veterinarians a community pharmacist, but <unk> for example, we support.
<unk> EBITDA with a central fill initiatives and we're looking to to understand better how we can help with the strategies on the institutional side. So.
I just would say that the relationship is a good place.
And we still go back to 2013 agreement is being very fundamental to the success of amerisourcebergen over the last decade.
Thank you and the next question will come from Michael Cherny from Bank of America. Please go ahead.
Okay.
Good morning, and thanks for the color so far so if I could just circle back a bit on the Americas grow.
Growth in the U S health care segment.
Think about the moving pieces and I appreciate the color Jim you gave so far relative to the market improvement.
In terms of the upside downside of the range what are the macro factors have to look like to get to those numbers and I'm more just curious because on an all in basis, you have obviously been tracking higher than that and outpacing the rest of the market.
So whether you're a antivirals are one component, but what else are the moving pieces that you think about in terms of what encapsulates the range on the U S segment.
Sure and so.
One of the one of the key things is something that I am.
Talked about.
In the prepared remarks, and then also in an earlier answer but I'll just quickly cover it again given this given the scale and thats the impact that COVID-19 therapies could have so that really impacts the range and again.
It was a.
<unk> 30 of benefit in fiscal year 'twenty one.
And 14 cents of that came in the first quarter of fiscal year 'twenty.
'twenty, one and we're expecting that the benefit will be significantly less in fiscal year 'twenty, two but Steve talked about some of the innovation that's occurring it could be higher and so thats something that.
Certainly could impact the range and that would be one of the larger things and then of course, there is always a number of moving pieces in our businesses. We have very strong performing businesses, but there's moving pieces within the businesses in terms of growth rates and then there is.
Sorts of things that are also mentioned like some higher labor and transportation costs and how those trend and so those are those are those are some of the things that impact us within the range, but I do want to say that we have a lot of confidence in the business and we are expecting continued strong performance across the business because of our differentiated.
Physician and or sprained, both within the pharmaceutical distribution and manufacturer solutions.
Thank you ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Steve Cohen for any closing remarks.
Thank you operator, it's truly been an honor to spin this hour with you highlighting a very successful 2021, which the management team is extremely proud of we're also really proud of and appreciated.
Remainder of efforts of our associates, we enter fiscal year 'twenty two with all of our business is performing well and we look forward to building on this success and remains in fiscal year 'twenty two.
Thank you.
And thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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