Q3 2023 AmerisourceBergen Corp Earnings Call
Hello, and welcome to today's Amerisourcebergen two free fiscal 20 free earnings Cool My name is Jordan and I'll be coordinate your cool today, if you'd like to register an audio question you may do so by pressing staff followed by one on your telephone keypad.
Now gonna handle Bennett Murphy, the senior V P. The head of Investor Relations in Treasury to begin then it. Please go ahead. Thank you. Good morning, good afternoon, and thank you all for joining US for this conference call to discuss marriage stores, Bergen physical 20, twenty-three third quarter results.
Murphy Senior Vice President.
And Treasury joining me today or do you call Us Chairman, President and CEO , Jim Carey Executive Vice President and C. F O.
Today's call, we will be discussing non-GAAP financial measures.
Conciliations on these measures the gap are provided in today's press release, which is available on our website that turned out amerisourcebergen dot com.
Also posted a slide presentation to accompany today's press release on our website. During this conference call. We will make forward looking statements about our business and financial expectations on and adjusted non-GAAP basis, including but not limited to E. P. S operating income and income taxes.
[noise] looking statements are based on management turn expectations that are subject to uncertainty and change.
We're discussing he risks and assumptions, we refer you to today's press release, and our SEC filings, including our most recent 10-K.
Amerisourcebergen assumes no obligation to update any forward looking statements in this call cannot be broadcasts are they express permission of the company.
You'll 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 to get to as many participants as possible in the hour with that I will turn the call over to Steve.
Thank you ban it good morning, and good afternoon to everyone on the call today.
Today, I am pleased to discuss Ah Marist Salzburg and pharmaceutical centric businesses.
Strength about balance sheet and execution by team members have continued driving a strong performance input school 2023.
In the quota we still continued our main Tim across our businesses.
Bring revenue growth of 11% and adjusted EPS growth of 11%.
We all once again, raising our physical 20 twenty-three guidance as we continue to benefit good underlying business fundamentals and I'll focus on operating more efficiently.
As I said last quarter, we are liberating all commercial and organizational strengths to find ways to better collaborate with a focus on enhancing the way we go to market without customers.
Operating efficiently is critical to our own the supply chain and to our ability to invest as we seek to drive for the differentiation in our business.
Guided biopharmaceutical Saint Big strategy, we advance our business by focusing on four key areas community providers, especially medicine and services global access and opportunity and customer partnerships.
We leverage our robust commercial strength to provide solutions and forged deep relationships with customers and partners globally.
Community providers from Spacey physicians and local health team cause two pharmacies and veterinarians are the cornerstone of access and care in their communities.
We work closely with our customers to provide solutions to support the operational needs and strategic initiatives as they enhance their patient impact.
Leveraging I'll scale and expertise we offer a broad range of solutions to our community provider customers from those designed to help them solve for everyday challenges like marketing and contracting to those designed to help evolve and broaden their reach.
One example of this is our our Fagan network of community pharmacies across Europe .
We recently introduced an oncology support program.
This program provided community pharmacist with improved training to support patients undergoing cancer treatment.
<unk> oncology support groups pharmacist to interact frequently with cancer patients with resources to help a grace topics such as mental health managing side effects related to treatment and adjusting to lifestyle habits and changes.
By providing these types of valuable services, we are able to help elevate the role community pharmacist play is pretty cool health care providers within their communities.
And the United States, the completion of a minority in basement and one oncology marked an important step and evolving amerisourcebergen support of community oncology providers.
Over the past several decades, we are both our leadership oncology and being a strong supporter of community oncologist <unk>.
Leveraging our expertise we partner with our customers to drive innovation and share best practices to support the health and vitality of those crucial community providers.
In the spirit on basement, and one oncology further expands output print within the oncology space.
Logging us to deepen already strong ties to community oncologist.
We look forward to enhancing the value we provide to all our partners has oncology landscape continues to grow and evolve.
As we continue to expand our downstream solutions and specialty I'll focus on safety medicine and services differentiates us to our pharmaceutical manufacturer partners across the commercialization process.
Clinical development to patient access as.
Pharmaceutical innovation continues to advance medical care and health in our communities, we have positioned ourselves as a differentiated leader Ah.
Amerisourcebergen ability to provide global access and opportunity by offering U S and Pan European logistics reach and commercialization support makes us a partner of choice for pharmaceutical manufacturers, particularly especially medicines with higher commercial and distribution complex.
<unk> I'll make it up a bigger portion of the pharmaceutical development pipeline.
All previous particularly unique in the 17 space.
Way, we can integrate logistics with essential patients support services and orchestration technology.
While still in early days was <unk>, we have had positive receptivity integrated solutions for these highly specialized products from their biopharmaceutical innovators.
Telling gene therapy is a key area for innovation as it represents an evolving and expanding market with considerable longterm growth opportunities.
Following the launch about Celgene in therapy integration had been April we announced our support for the commercialization of the recently approved gene therapy.
We will serve as the exclusive distributor of the product and provide commercialization support including three PL kidding and storage. Our goal is to simplify the commercialization process for our partners and help them achieve their desired outcomes.
Tomorrow's Salzburg and is well positioned to support the next evolution of innovative products and we will continue to invest in developing technologies and solutions to increase our value to our partners.
Our ability to drive innovation and establish new solutions to serve our customers and partners is key to advancing our strategy in long term growth.
Transparency into the supply chain has never been so broadly appreciated and we are focused on providing actionable and Tom the insights to ensure the supply chain can operate in an efficient manner.
Serving at the corner of the pharmaceutical supply chain, we take our role seriously handing nearly $1 billion worth of orders daily across tens of thousands of products.
Our ability to manage thoughtfully professionally and effectively through disruptions and shortages amplifies the importance of the expertise and diligence we provide in the pharmaceutical supply chain.
To further our ability to provide confidence and transparency, we recently announced a partnership with parcel shield, which will enhance our customers view all the the delivery of critical medications by providing them with real Tom packaging tracking and delivery updates. This.
This example builds on other initiatives, we have taken to enhance supply chain visibility, including the addition of real Tom tracking on shipments in our global logistics business and demonstrates how we are leveraging our infrastructure enhancing our distribution efficiency and creating innovative partnerships to deliberate valley.
<unk> services for our customers and partners.
And downstream.
We also drive value by leveraging our extensive customer partnerships to develop solutions that will expand access to high quality K.
In 2022, the innovative tastes to treat initiative began.
Hitting pharmacist to administer COVID-19 tastes and prescribed Sutent COVID-19 treatments. This into an increased accessibility to these treatments particular, particularly in underserved communities.
Taking learnings from the success of this program Amerisourcebergen has partnered with steady M. D. Two pilot a telehealth solution for community pharmacies to expand the number of tastes to treat services. They can offer <unk>.
By working jointly with physicians through the steady M D platform.
<unk> can accelerate patient access to essential pharmaceuticals before conditions become critical these.
These top of initiatives fortify, our customer partnerships and support our customers growth.
Got it Bob purpose upgrading healthier futures, we are focused on contemplating and bolting add other solutions to innovate, how we support and grow with our partners as I improve patient care and outcomes.
The last two decades Amerisourcebergen has recognized the importance of being a purpose driven company and unifying under a new name that better represents who we are today and where we are going in the future will allow us to deliver on our purpose in advance impact across the healthcare industry.
Today I am tremendously excited to announce that effective August 30th 2023.
Resource Brogan will officially become Syncora and.
And begin trading as CLR, which will you not our team members under a globally inclusive name and a ticket symbol that reflects Ah cole role in healthcare.
This new identity will allow us to go to market as a unified enterprise customers and partners showcasing the breadth and depth of al solutions across output Prince.
The name <unk> better represents all commitment to all people who are at the centre of everything we do.
Our team members are the key to our success and we are focused on creating an inclusive and engaging environment, where people feel comfortable sharing the unique backgrounds and experiences.
We pride ourselves on cultivating an inclusive culture and continually improving upon our efforts to ensure all our team members feel empowered and welcome.
We've taken steps to further I inclusion efforts by signing the C. E O disability inclusion data published by disability I N to ensure an accessible and equitable environment within the Amerisourcebergen team.
We were also honored to be recognized as the best place to work for disability inclusion after receiving a perfect score on the disability quality index.
[noise] proactively set goals and action items to advance disability inclusion and equity demonstrating a commitment to an acting change in the environment in which people with disabilities work.
At Amerisourcebergen, we are powered by our people and we are proud to promote a work environment that supports it empowers bold backgrounds abilities and changes.
As we continued to grow and evolve and our new corporate identity, we will remain driven by purpose our future success inches on our people environments and communities in which we live and work in our remaining spot <unk> team that looks out purpose every day.
And the remaining months of our physical 2023.
We look forward to executing on our strategy and investing in further innovation and growth.
Holding on Amerisourcebergen strong legacy Saint <unk> will continue to be a differentiated force within the global healthcare system and provide value for all our stakeholders.
The emphasis we place on innovation and efficiency sets us up for a longterm growth and success has a leader and pharmaceutical centric health K.
I will now hand, the call over to Jim for a more in depth look at our third quarter results and updated guidance going into the final quarter of fiscal 2000 twenty-three Jim.
Thanks, Steve Good morning, and good afternoon, everyone.
Amerisourcebergen delivered another quarter of strong results as our team members execution continues to create significant value for all our stakeholders.
Ah results speak to the strength of our business and our continued work to drive efficiencies.
In the quarter, we also strategically deployed capital closing our minority investment in one oncology. An example of investing to further our strengths and we continue to Opportunistically repurchase shares to also return capital to our shareholders.
Before I turned to our third quarter results as a reminder, my remarks today will focus on our adjusted non-GAAP . The natural results unless otherwise stated for a detailed discussion of our GAAP results. Please refer to our earnings press release.
Turning now to our third quarter results Amerisourcebergen had adjusted diluted EPS up $2.92, an increase of 11% over the prior year quarter driven by growth in both segments and a lower share count due to opportunistic share repurchases over the past year.
Our consolidated revenue with $66 $9 billion up 11.5% driven by growth in both segments, particularly in the U S Health care solutions segment, which had broad based growth across our customer base, including growth in sales of products labeled for Diaby.
<unk> and weight loss and the G. L P. One class.
Without this increase in G. L. P. One products are consolidated revenue growth would have been more in line with our consolidated gross profit growth.
Consolidated gross profit <unk> $2.2 billion up 8% due to growth in both segments consolidated gross profit margin was 3.33% a decline of 11 basis points due primarily to lower contribution from Covid treatments, which.
Have higher gross profit margins and continued volume growth and G. L. P. One whichever lower gross profit margins.
Both these margin impacts are to be expected given the unique characteristics of each of these product groups <unk>.
Consolidated operating expenses were $1.4 billion up 7.6%, primarily due to higher expenses and our international Health care solutions segment, we continue to focus on creating efficiencies and working collaboratively to drive value for our stakeholders, which contributed to the sequential.
Year over year moderation of growth and operating expenses in the quarter, particularly in our U S Health care solutions segment as a result of actions we have taken.
Consolidated operating income was $822 million, an increase of nearly 9% compared to the prior year quarter.
Operating income growth was driven by solid performance and both segments and that will provide more detailed business drivers when discussing segment level of results.
Moving now to our net interest expense for the third quarter net interest expense was $58 million, an increase of 9.5% versus the prior year quarter.
As we look to the fourth quarter, we expect net interest expense to be at its highest level. This fiscal year given cash use in the past few months now.
Now turning to income taxes are effective income tax rate was 21.5% compared to 22% in the prior year corner.
As we call that last quarter, we continued to expect our full year fiscal 2000 twenty-three effective tax rate to be towards the bottom end of our guidance range of 20% to 21%.
Turning to diluted share count are diluted share count was $204 4 million shares at 3.5% decrease compared to the third quarter of fiscal 2022, driven by share repurchases. We completed over the last 12 months.
This included $100 million or repurchases in the third quarter in conjunction with transactions Walgreens Boots Alliance executed.
Going forward, we expect transactions to continue to occur and we anticipate continuing to collaborate and coordinate with Walgreens boots Alliance as we have done over the past year.
Regarding our cash balance and free cash flow, we ended the quarter with approximately $1.4 billion of cash alright.
Alright, Justin free cash flow for the nine months ended June 30th was $1.5 billion and we are now slightly improving our adjusted free cash flow guidance to be at least $2 billion for the fiscal year up from approximately $2 billion.
This completes the review of our consolidated results now I'll turn to our segment results for the third quarter.
U S health care solutions segment revenue, which is $59.9 billion up 12% for the quarter with broad based growth across our customer base, including sales of products and a G. L. P. One class and also sales of specialty products to position practices and health.
Systems.
U S health care solutions segment operating income increased by 9.5% to $635 million as we saw good pharmaceutical utilization trends across our business and our animal health business had another good quarter with growth in both the companion and production animal markets.
Are operating income growth also benefited from an easier expense comparison as we lapped inflationary pressures that began in the March quarter of fiscal 2022 and from efficiency initiatives that we have taken both of which we called out last quarter.
This combination of operating expense items helped improve our operating expense margin in the quarter offsetting most of the gross profit margin pressure from lower COVID-19 treatment contributions and increased volumes of G. L. P ones in.
In the quarter U S Health care solutions segment operating income margin, it's still have a year over year decline of three basis points to 1.06% as a result of our mixed those two product groups.
As a reminder, COVID-19 product volume has continued to decline that's expected and we are earning a fee for distributing government owned products and G. L. P ones are a big driver of revenue growth, but not a meaningful driver operating income growth.
I will now turn to our international Health care solutions segment.
And the quarter International Health care solutions revenue was $7.0 billion up.
Five 6% on a reported basis or up 12.4% on a constant currency basis in.
In the segment, we saw growth and all our businesses.
International Health care solutions operating income was $187 billion up 6% on a reported basis or 7% on a constant currency basis frequent by solid performance in our global logistics business and the inclusion of farm <unk> in the quarter, which offset the impact of the <unk>.
<unk> of our Brazilian specialty business in June of 2022 as.
As a reminder, this domestic business contributed nearly 2% of segment level operating income in the third quarter of fiscal 2022.
That completes the review of our segment level results I will now discuss our updated fiscal 20 twenty-three guidance expectations. As a reminder, we do not provide forward looking guidance on a gap basis. So the following metrics are provided on and adjusted non-GAAP basis full.
Full details of our fiscal 2000 twenty-three guidance can be found on pages eight and nine of our earnings presentation on our Investor Relations website.
Starting with revenue we are racing art consolidated revenue guidance and now expect our revenue growth to be at least 8% to reflect stronger revenue growth in the U S health care solutions segment and favourable currency movements in the international Health care solutions segment relative to our prior guidance.
The U S health care solutions segment, we now expect revenue growth to be at least 9%, which reflects strong pharmaceutical utilization trends and also the increase in volume of G. L. P. One products.
And the International Health care solutions segment, we are raising our as it reported revenue growth guidance to be in a range of 1% to 4% up from our previous expectation about 3% declined to flat due to favourable currency movements relative to our may guidance move.
Moving to operating income we are narrowing our consolidated operating income guidance to a range of 3% to 4% growth from the previous range of 2% to 4% growth primarily to reflect the strong performance. We have seen in the U S health care solutions segment and to reflect favourable currency movements and the international health care.
Solutions segment.
And the U S Health care solutions segment, we now expect segment operating income growth to be in the range of 4% to 5% from our previous range of 3% to 5% X.
Excluding contributions related to COVID-19 treatment distribution.
We now expect operating income growth to be in the range of 7% to 8% from our previous range of 6% to 8%.
And we are more likely to be near the top and about 7% to 8% range.
And the third quarter COVID-19 treatments contributed six cents to our consolidated EPS with about five cents in the U S and one cent and the international segment.
This brings our total COVID-19 treatment contribution year to date to 29 cents.
Our full your expectations for Covid treatment contributions remain generally unchanged and we expect only a penny or two of Covid related contributions in the fourth quarter with the contribution occurring in the U S Health care solutions segment.
And the International Health Care Solutions segment, we now expect as reported segment operating income growth to be in the range of flat to 4% growth, which reflects favourable FX rates relative to our previous guidance.
As a result of these updates we are raising our full year diluted EPS guidance from our prior range of $11.70 to $11.90.
To a new range of $11.85 to $11.95.
Representing growth of 7% to 8% on an as reported basis or 12% to 13%, excluding COVID-19 treatment contributions.
As she turned to your models there are a few items. We wanted to remind you of if you think about the fourth quarter and the year ahead.
And the fourth quarter of fiscal 2022, we had 17 cents of contribution from distributing Covid treatments 16 cents of which was in the U S Health care solutions segment as.
As I mentioned this year, we expect to only have a penny or two of Covid treatment contributions and this year's fourth quarter, which will impact year over year growth rates.
It's also important to keep in mind that in the fourth quarter of fiscal 2022. The dollar was that historically strong levels versus most major currencies.
This should create a tailwind and the international healthcare solutions segment on and as you reported basis as we lap that easier comparison and.
<unk> reported growth is expected to be higher than constant currency growth in the fourth quarter of fiscal 2023.
This dynamic is reflected in our increased as reported operating income guidance at the international Health care solutions segment level and in our constant currency operating income guidance, which remains unchanged at the international healthcare solutions segment level.
We are in the middle of our planning process and feel confident that the strength and resilience of our core business and our value creating approach to capital deployment will allow us to deliver on our long term growth guidance.
The remains early in our planning process at this point, we would expect contributions related to COVID-19 treatment distribution to be minimal in fiscal 2024.
As usual, we will provide full fiscal 2024 guidance in November when it can be fully informed by our detailed planning process.
Before I turn to my closing remarks, I would like to provide a brief update on one of our key E. S. G initiatives.
Yes, we have discussed in fiscal 2023, we introduced in ESG metric within our executive compensation program that includes three quantifiable components focused on business resiliency female representation in leadership roles and employee inclusion and engagement during the quarter, we successfully completed the business.
Resiliency target by completing business impact assessments across our locations. This exercise in forums, our resilience planning and insurers. We are able to continue operating in the face of natural disasters and a changing climate.
For this and we were also proud to be recognized by Forbes on their first ever.
Net zero leaders list. This list recognises businesses that are leading the way not only in transitioning to a low carbon economy by 2050.
I'd also are embedding sustainability practices into their business and working to achieve sustainability targets companies were evaluated across industries for the robustness of accompanies climate governance strategy and risk management principles we.
We continue to focus on maintaining strong business Brazilians practices to allow us to deliver on a roll at the center of the pharmaceutical supply chain.
Reflecting on this being our last earnings call with the corporate name Amerisourcebergen.
I'm impressed by our company's track record of adapting and evolving over the years, we have executed on our pharmaceutical centric strategy building on our foundation and pharmaceutical distribution and expanding our suite of solutions for both our customers and manufacturer partners.
Looking ahead I'm excited that on August 30th we will begin trading under that ticker symbol core C O R and the New York Stock Exchange.
This ticker is more meaningful and reflective of our business and role in the supply chain.
As we begin our next chapter is Syncora I am confident that our team members will build upon the legacy we have created and continue to drive longterm growth for our stakeholders.
Now I will turn the call over to the operator to open the line for questions.
Operator.
Thank you as a reminder, if you'd like to register in order. Your question. Please press star.
One on your telephone keypad, if you change your mind. Please press star followed by two please ensure you are muted when speaking.
Our first question comes from Elizabeth Anderson of ethical ISI Elizabeth some on issues.
Hi, guys. Good morning, Thanks for that question and come back on the corner, what what particular passengers as we think about the performance in the corner was obviously that and prevent and the Opex can you sort of think about the sustainability of that improvement as we think about maybe the fourth quarter and then maybe conceptually beyond that thanks.
Yeah. Thanks, so much for asking that question Elizabeth one thing we were really pleased about there obviously so many things we were pleased about during this quarter, but one of the things. We are pleased with is that our <unk> growth was slower than our gross profit growth. So as I'm sure you saw art <unk>.
Most profit growth during the quarter was 8.0% in our Opex growth was 7.6% in really where we saw the improvement within the U S. Health care solutions segment, where are operating expense margin declined by 11 basis points, and we really were able to.
To achieve this by and focusing on a lining our internal capabilities to our customers needs and creating a more efficient organizational structure and we talked about that on the may call.
That's something that we're very focused on and then we also benefited from <unk>.
Laughing inflationary pressure that had started and the March quarter of.
Fiscal year 22, and so we left that pressure and so we had left uhm cost pressure during the quarter and so you know as we look towards the fourth quarter and we look towards fiscal year 24. This is something that.
Our company.
Company has some very focused on we're very focused on efficiency. So we can really you know a line our capabilities to our customers needs and have an efficient organization. So thanks, a lot for asking that.
Our next question comes from Lisa kill of J P. Morgan Lisa. Please go ahead.
Hi, Thanks, very much good morning, I'm, just trying to understand that a couple of things that are on the margins <unk> first and you're prepared comments you talked about exclusive distribution relationships on <unk> therapy, and then he talked a little bit about the credit within C. L. P. One, which I understand you know high dollar value what do we think about it branded but probably <unk>.
Martin So as we think about your book a business how do I think about it like the progression of March and especially in the U S distribution component of the business as we think about one exclusive distribution relationships to the continued growth in G. L. P. One three biosimilars how that plays a role and then just lastly like.
Anything else that I should keep in mind, whether it's generic price deflation, which seems to have moderated.
As we start to think about it not just the fourth quarter, but you know thinking about 24 as well.
Yeah, there's a lot there and so [laughter], let me start out by talking about G. L. <unk> because they were such a driver of revenue.
Revenue growth during the quarter and uhm.
Uhm I mentioned during my prepared remarks that you know we had about 11.5% revenue growth in the quarter and that if we backed out G. L. P one's our revenue growth would've been more in line with our G. P growth of eight.
8.0% and so G. L. P ones really are a driver of top line revenue growth, but from an operating.
Income standpoint, uhm they are minimally.
Profitable and so they really are.
Driver of top line, but minimally profitable at the operating income line and you know this is uhm caused by the fact that the gross profit margins on them are low and then the the operating expenses are a little higher because of the cold chain nature of the product and.
And then with regard to things like exclusive cell and gene relationships of course uhm. Those sorts of things are you know very positive for the company and very strategically important but in terms of dollars small at this point in time Biosimilars you asked about the.
<unk> continue to be really kind of uhm key in a.
Growth opportunity in March and opportunity for Amerisourcebergen, you asked about generic deep inflation and during the last few months, we have seen some moderation of generic deflation in certain pockets. This is too early to call a <unk>.
<unk>, but of course, if it worked abroad and beyond you know a few pockets into a broader range of generics. It certainly would become a tailwind for the company, but you know you you mentioned in particular, the U S and I think probably the the thing that I'll point out and Uhm I talked about this and the prepared remarks on a consolidated bay.
<unk>, but.
N D U S segment, the gross profit margin decline during the quarter was uhm 13 basis points and that was really driven by two things one is [noise].
Less sales of Covid therapies, which are high margin and then and a greater sales of G. L. P ones, which are lower margin products and minimally profitable, but and so I'd like to think that address is your questions. But you know I just want to finish by saying you know we were really pleased by the the.
Results, we had during the quarter.
In particular, the operating income growth that was <unk>.
Driven by Uhm several things, including.
Strong broad based results across many businesses good utilization trends, we saw it in the U S. And then you know the good performance we made on the Opex front that I had earlier talked about.
Oh no. Thank you shrink comes from Eric <unk> of <unk> Research. Please go ahead.
Thank you and thank you for the commentary on G. O P ones I Wanna stay on that subject and it's good to hear their minimally profitable for a mere source, but what we're hearing from pharmacies, particularly independents is that they're not profitable and it it sounds like maybe even the same per chains.
So given the importance of independence have you had to help them offset that or is that the role of the manufacturer and others in the supply chain.
Yeah, So hi, Eric Thanks that as you know we priced more on product category.
So this would fit into a branded and and and indeed, you know oral category fixed <unk>, mainly in the retail sector.
You know a fairly significant amount of is going through mail order. So it's you know we don't a discount on a particular product category, even as significant as this product category is but uhm, we do regard ourselves as a as a liaison so of course, we'll be talking on behalf of a good night.
Pharmacies in particular that you look at the elevate network. We discuss this is a key product category that is affecting.
Profitability reimbursement stability in the community pharmacy, but you know it's it's it's it's not anything that we all are discounting on a particular art on on a particular category basis. It just it just fits into that broader category of course. These products are extremely important.
A good example of innovation and there's a lot of product a lot of positives about the product as well I think we should know and you look at this in terms of the negatives I mean I think it.
There'll be a whole lot of benefits to the pharmacy industry as this category evolves, including the monitoring all of the side effects potentially anything else had pharmacist can do to help manage the health of the patients and <unk> will of course be able to assist.
Our next question comes from Daniel Gross line of City can you. Please go ahead.
Hi, Thanks for taking my question and congrats on another strong quarter here I just had a quick question on the adjusted operating income guidance for the rest of this year and how we should think about that going into 24. So she back out the the COVID-19 impact.
Assume that you're going to be out at the high end of.
The range for the fiscal year and plays around a 2% sequential stepped down from three Q.
Curious if there was any pull through from four Q into three Q that may be causing that sequential decline or is does that kind of a normal seasonality now I've been going forward is kind of a you know like.
Like.
Low teens I doubled high single digit growth rate in that segment reasonable.
Yeah. Thank you for asking the question and you know let me say of course, we were.
Really pleased with the results during the quarter and is and due to that we did you know really kind of across the board and.
Raised are narrowing of five guidance for fiscal year twenty-three and we have a lot of confidence and are updated fiscal year 2003 guidance and we have a lot of confidence in our long term guidance, which is of course, 5% to 8% organic.
Operating income growth and then including capital deployment, it's double digit compound annual growth rate for adjusted EPS at the midpoint of the range of course, both those exclude COVID-19 and exclude FX, but you know we there of course, you know a number of things that <unk>.
Can impact results uhm quarter to quarter, and timing and those sorts of things, but rather than.
Get into the details of the air I, just want to say that.
Uhm are starting and into physical excuse me the fiscal fourth quarter. We've got a lot of good momentum and our business. We're seeing strong utilization trends in the U S were seeing you know good performance and just the number areas of the business and that's what gives us.
You know a lot of confidence in both our our fiscal year twenty-three full year guide and R. N.
<unk> longterm guidance that I talked about and of course, we're you know just in the middle of our fiscal year planning process now and we'll look forward to providing our fiscal year twenty-four guidance on that November call.
Thank you next question comes from Charles <unk> of T. D. Cohen Charles Please go ahead.
Yeah. Thanks for taking the questions. Congrats on the on the corner you know I wanted to go back to Ya.
Talking about sort of the services that you're looking to do you said you want to provide performer manufacturers knew that you talked about more commercial support <unk> therapy hub et cetera.
Can you talk about a little bit maybe how maybe one oncology fits into this you know you look at some of your peers and somebody up for sit there, making in terms of sort of upward facing services to to manufacturers. I know you have a lot of that let me think about world Courier as well you know what is the the broader strategy.
And what are the services that menu manufacturers are are starting to ask from folks like you and then what's unique position that you have here and and and I guess ultimately how how mature a little business do you think this will be when we think of you know some coral going forward. Thanks.
Yeah, Hi, Charles Thanks for the question, that's I'll I'll I'll try to cover all the elements you off the of course, one of the ways that Amerisourcebergen has a differentiated value proposition is a strong portfolio of distribution capabilities and key strategic relationships.
Already we juxtapose and and relate those into our upstream relationships and <unk> provide more services to manufacturers. So key themes that you you know you should keep in mind is out presents and specialty distribution.
We've been the leading community oncology and this will only be enhanced spot by the one oncology acquisition, where we expect to have learnings.
Being a lot of activity for example, recently and <unk>, but so that could be a future area of interest for us as any of these physician dispensing because capabilities become up in areas that we already activin, including urology and rheumatology ophthalmology that will be of interest in <unk> could be one minute.
We are very interested in as well.
Along with that distribution capabilities to the dispensing physician and what we often call. The <unk>. The market is at G. P O capabilities.
And then you know I'd have to say Amerisourcebergen is really focused that invested in the development and the breadth and depth about commercialization services.
The customer is the biopharmaceutical manufacturer, who will actually be billing for a lot of these services and I think if you look at the various businesses that we've been embraced it and go back to 98, when we invested in Lash, we started <unk> business for pre wholesale food Party logistics, we have always been you know a leader.
In this area as well and our goal is to provide <unk> and suite of solutions and support our partners at every stage of the commercialization journey. So of course as you have new more complex therapies.
None more so than more intriguing than seven gene therapies and you know you have you have you know when you launch them you have cost issues. You have access issues you have of course, the distribution and storage issues transportation issues Amerisourcebergen Israeli creating a lot of our services around this and <unk>.
You've heard how we even if we're unique product now, we're doing some kitting and and and different sorts of handling for a cell and gene products. So we will continue to evolve our business days. There's a lot. We can do we can track we can track outcomes on you know in a therapy specific level in San.
Cases, we've done that in the past so we will be responsive to the needs of the market and continued to add value to patients on the excess front and two manufacturers on.
Taking those <unk> distribution and other points, we have two to get their products into the market and efficiently and effectively.
Thank you.
Our next question comes from Andrea Alfonzo of UBS Andrea. Please go ahead.
Oh, Hi, it's Kevin Italian, though for Andrea cause on the International segment, you discuss pricing visibility.
And World Courier, there's been a benefit from higher wages for shipment.
Does that dynamic when increases pricing organically on a go forward basis.
I guess, we're not really trying to <unk> trying to understand here's what how should we think about what drives margin improvement here and internationally. Besides operating costs headwinds using for the for the whole International segment is that one of the big drivers or is there anything else. We should think about in terms of the international margin or the.
Potential for margin improvement in that in that business.
Yeah. Thanks for asking that question and Uhm, we look at the International business. You know you asked about World Courier and there has been some benefit from.
From a price, but I think as we look forward there probably what good deal with the benefit will see from World Courier will be in.
Volume growth as we look at you know margins overall in the international business, probably uhm, what all impacted more than anything else is a mix and as we deployed capital like we did and <unk> those will be in higher margin higher growth businesses.
And that will over.
Over a period of time, it should positively impact margin percentage growth in the international business and I think that'll be the key driver.
Thank you.
Thank you.
[noise] next question comes from Eric Coldwell, All said Eric. Please go ahead.
Thanks, very much I'm gonna shift topics here, a little bit we're seen aging of receivables and weaker cash collections in certain of our health care services coverage biopharma clients simply trying to hold onto cash as long as possible.
To take advantage of interest rates I.
I know payments really never seen as a risk here, but at least on the former site, but I'm. Just curious what are you seeing in contract renewals client negotiations when it comes to payment terms and are you seeing any of your upstream or downstream accounts trying to hold onto cash longer than they have in the <unk>.
<unk>. Thank you.
Yeah, Hi, how can start out it's a it's an interesting question, giving the interest rate environment and the the the.
With the the different you know.
Sort of narrow assertion, we've had I'll I'll <unk> I'll Mark the economist on this cold, but you know the the.
Terms in our business all very stable.
There are longer term is often given to the physician segment, but we are not seeing anything discernable noticeable on changes in terms.
Certainly visit <unk> funding environment for.
Full biopharma manufacturers, and especially startup innovative products, but you know that that's a <unk>. We think we may be seeing some sort of signs of optimism.
You know and we of course follow very closely some of the World Korea peers logic.
Logic larger log Sanchez top services companies and <unk> pronouncements say comments on this but.
Nothing specific the odd cole Jim out on when we actually negotiate and negotiating fee for service and clauses I mean, the terms are pretty well established and the last thing I would say is that.
You know with with nearly said he was in the business. The resiliency of the balance sheet that we have the inventory you know the overall majority of the manufacturers. We have our you know an outside of the vast majority I'll be we've had some few few smaller manufacturers.
Heavy cut run into financial problems in the last couple of quarters, but it's it's if you look at the gross business of Amerisourcebergen is fairly negligible very stable <unk> you want to add something yeah. Yeah. So this is you know of course something that we Ah monitor in something that we manage you know very closely and constantly.
<unk> and there's no meaningful change to call out you know of course, and a working capital management and <unk> see in free cash flow or such key value drivers for us over the longterm. This is something that we really stay on top of it and I said, there's as I said, there's no <unk>.
Change to call out.
Thank you next question comes from a J Royce of credit Suisse. A J. Please go ahead.
Hey, Thanks, It's Jonathan Young <unk>, I'm, just calling back to the generic pricing commentary and I appreciate that the improvement as in the pockets of products, but just how do you think about this from a competitive landscape.
Is the increased pricing, perhaps providing an opportunity to gain share in the market, if you're purchasing might be better than others. Just curious to get your thoughts Sir thanks.
Yeah, so yeah.
Yeah like I said earlier. This is what we're seeing is the last few months is a moderation of deflation and again as you said, it's in pocket. So too early to call a trend and that but of course, if it were a trend it would be a benefit for us.
And then on the south side, which he talked about and what I'll stay on the sell side is you know what's at competitive market and it's a stable market wholesale so thank you.
Our next question comes from Michael Cherney of Bank of America. My Code. Please go ahead.
Yes, hi. Thank you. This is Dan Clark on for Mike are you seeing any impact too sterile injectable pricing margins or supply. After the find the appointment was disrupted uhm little earlier this month and last month and if so how does that impact accidentally got it. Thanks.
You know it's it's it's very quick very soon obviously that was a plant that manufactured a couple of the injectable products. We've actually we're closed the with <unk>.
<unk> you know in this particular instance to see if we could help we had a distribution center close by the impacted manufacturer planned, but you know nothing to report yeah. That's we keeping an eye on this you know a supply chain group does a fantastic job.
Manage through Covid has managed through all sorts of setback, we had the form of nationalism that that we have on one of the calls we had a lot of concerns about that I I don't think that one one manufacturer plant will impact us and I also you know you're talking about one of the most wireless.
Average Brazilian manufacturers are I would imagine that I have the contingency plans and business continuity plan. So you know I I think we did a gemini and Bob <unk>, we did have a cold without supply chain people to understand and nothing nothing alarming yet.
But we will keep a close on the situation and we feel confident we can manage through this this as we have a lot of the setbacks and you know.
That that are not not not overall material to what what medicine was broken does.
Next question please.
Next question comes from George Hill of Deutsche Bank George Please go ahead.
Yeah, Good morning, guys and James I'm Gonna come back to Eric's question talking about G. L. P. One engineer I guess has the has the growth of the G. O P one's kind of changed the generic mix and kind of compliant turtles and independent channels and I guess you know.
This led to the independence kind of like artificially hitting generic compliance numbers with you guys to kind of all set the brand. It's a generic next I'm just kind of want to hear you delve into that that dynamic a little bit more.
You know George that's a good question I mean, the the growth of these products have been producing headlines in it has altered but we we we you know we we are you know we <unk> far from original organization. We have you know we have discussions with our customers we stay very.
Close to the customers I think in fact, I think one of the things that I've been really proud about the teams in the last few years is without just deal with customers. When it comes to Rfps, the large and the small customers. We're trying to stay very close to them and we have a whole lot of new resources, including including the.
Telehealth.
Attribute <unk>, we were trying to help with that of ancient capital funds, but but also just the general communication tools that we have with customers and the coverage. We have in this you know the.
The market is Jim cities competitive stable. So we know our customers well, we know what's going on and if we have issues, we help with them and certainly the the growth of this product category is something that that will be discussed in the.
Potentially could be adjusted for but no clear trained yet, but it's it's definitely a good thoughts and you know we we have a big retail trade show this weekend and I'm sure that this is gonna come up because you know it you know we have been it uses this term headline grabbing products and they they are I mean since the hip at <unk>.
Drugs who've never seen any of the market, but this is definitely you know most sustainable and even much bigger than that so.
Cause much different <unk> et cetera, but we we want to make sure that partners community pharmacies in particular, all stable for the long term and and this would include the management of these products, which are important for their patients.
So last question that was the last question. Okay. I will thank you today. Thank you, we we kind of a little bit emotional Gaz, We report a lost quota as amerisourcebergen.
And I know, Dave Yost is is gonna be turning over he's he's he doesn't like cats that we haven't changes we are very very excited to.
To be talking in the future about Saint Cora.
<unk> is a name that I think really resonates with myself and the team as we look towards the future, where we even more of a you're not a global health solutions of beta.
This name has been studied very well Bob <unk> was broken and we really believe that is resonates with our team and who we are what's also extremely important and I cannot understate. This enough is who we are what we do and how we do it will not change we will continue to be a purpose.
Driven pharmaceutical centric Vita powered <unk> team members and driven to provide differentiated solutions draw a form of partners and provide our customers. We will continue to bold on our foundation and pharmaceutical distribution further a leadership, especially distribution services and carry forward a long <unk>.
<unk> record of execution and creating value for all of our stakeholders as syncora. Thank you for your time and attention today.
Think he'd this concludes today's event you may now disconnect your lines.
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