Q1 2024 Cencora Inc Earnings Call
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Hello, and welcome to <unk> first quarter 'twenty to 'twenty four.
Cool My Name's Luisa Nobody course at college, you feel cool today, if you'd like to register your questions. During today's event. Please press star followed by one on your telephone keypad.
Ill turn the call over to Bennett Murphy SVP head of Investor Relations and Treasury. The floor is yours. Please.
Bennett S. Murphy: Thank you good morning, good afternoon, and thank you all for joining US for this conference call to discuss <unk> fiscal 2024 first quarter results I embedded Murphy senior Vice President head of Investor Relations and Treasury. Joining me today are Steve Collis, Chairman, President and CEO, and Jim Cleary Executive Vice President and CFO.
On today's call, we 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 <unk> Dot com.
Bennett S. Murphy: We have also posted a slide presentation to accompany today's press release on our Investor website. During this conference call. We will make forward looking statements about our business and financial expectations on an adjusted non-GAAP basis, including but not limited to EPS operating income and income taxes.
Bennett S. Murphy: Forward looking statements are based on management's current expectations and are subject to uncertainty and change.
Bennett S. Murphy: For a discussion of key risks and assumptions, we refer you to today's press release, and our SEC filings, including our most recent 10-K.
Bennett S. Murphy: Saint <unk> assumes no obligation to update any forward looking statements and this call cannot be rebroadcast without the express permission of the company.
Bennett S. Murphy: You'll have the 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 as possible within the hour.
Bennett S. Murphy: With that I will turn the call over to Steve.
Steve Collis: Thank you Beth good morning, and good afternoon to everyone on the pole.
Steve Collis: St. Cora delivered an exceptional start to fiscal 2020 full with revenue up 15% your over year to over $72 billion in the quarter and adjusted earnings per share up 21% year over year.
Steve Collis: Given our continued performance and execution, including a strong first quarter results.
Steve Collis: I'm pleased that we are able to raise our fiscal 2020 for full year guidance.
Steve Collis: The strength of our business is bolstered by the execution of our teams and powered by our commercial partnerships and strategic positioning.
Teams across the core I continued to a broader customer centricity and enhance the services we provide.
Steve Collis: We are capitalizing on the positive trends across our business, creating value for our customers and stakeholders and building on the pivotal role we play in the global health care system.
Steve Collis: I'll call in pharmaceutical distribution and breath of higher margin high growth businesses linked without scale has provided us with a unique expertise which positions us to support both upstream and downstream partners to achieve the best outcomes for patients.
Steve Collis: <unk>.
Steve Collis: Our leadership in specialty has spanned 20 plus years and over that time, we have built an unparalleled suite of services that connect manufacturers and providers.
Strategically positioning ourselves in the center of the specialty market, we have created opportunities to partner with leading innovators early in the drug development process through scientific development and consulting.
Steve Collis: 50, and quality compliance and clinical trial support and logistics.
Steve Collis: Our downstream services enhanced provider efficiency, allowing physicians to spend more time with patients and includes patient experience insights as well as operational and financial solutions.
Steve Collis: Specialty medicines and services will continue to be a key area of focus for St. Cora as ongoing innovation and increasingly complex therapies drive opportunities for growth and allow us to demonstrate the differentiated value.
Steve Collis: We can provide to our partners.
Steve Collis: Yeah.
Steve Collis: We partner with Biopharma players, who are developing innovative life changing medications to help improve the lives of patients and advance the standard of care.
To support their clinical and commercial success. It is imperative that we invest in all of the capabilities, we offer and position ourselves to meet their evolving needs.
Steve Collis: One example is our global specialty logistics business, which offers solutions to transport complex products across our extensive footprint.
Steve Collis: And provides key logistics for clinical trials.
Steve Collis: We continue to invest to support the growing demand for specialty logistics by enhancing the solutions offered across our footprint and implementing new technologies to drive further efficiency.
Steve Collis: This quarter, we announced three new transport stations strategically located across the United States that will improve our ability to handle products in trial and complex products coming to market commercially.
Steve Collis: Since many of these products require specialized temperature control, we have expanded cryogenic storage and capabilities globally.
Steve Collis: This ensures we are providing partners with a complex logistics they need with a clinical trial and <unk> basically shipping needs, while investing to remain the best in class partner with these promising therapies across geographies and categories.
Steve Collis: Innovation in cell and gene therapies continues to excite and advance.
Steve Collis: Innovation in life Sciences, motivates us at St Cora and we invest in our operational technical and logistics capabilities to ensure we are also innovating to support their tremendous potential for improving patients lives.
Steve Collis: Growing our capabilities and solutions and high margin high gross services positions us to be the partner of choice with market, leading innovators and to capitalize on opportunities presented by scientific advancement and the corresponding growing needs for commercialization services and.
Steve Collis: Solutions.
Steve Collis: On the consulting side St Coors Global Pharma services group helps our partners to accelerate the speed at which the air products go to market by helping them navigate the complexity of clinical regulatory and access challenges.
Steve Collis: We continue to integrate formal ex biopharma innovators are increasingly seeing the value we offer as a partner providing global pharma consulting alongside our abilities to support the logistics needs from clinical trials to three P L, especially in wholesale distribution with expertise.
Steve Collis: And significant presence in key markets in the U S, Canada and Europe.
Steve Collis: Our expertise enables us to work with revolutionary medicines and products early in the development process and help support their commercial launches, giving St. Cora a key role in health care innovation.
Steve Collis: Our expanded and unified enterprise is advancing St chorus presence as we continue to make investments and better leverage our infrastructure.
Our legacy of investing in technology, and enhancing operations to increase our efficiency continues to be front of mind as we pursue ways to enhance our services and customer experience.
Steve Collis: First acacia scale and flexibility of our infrastructure was on full display as we handle the significant volume of newly commercial and temperature sensitive COVID-19 vaccines in the U S. In the December quarter.
Louise: Hello, and welcome to the Sonora First Quarter 2024 Airlines Conference Call. My name is Louise, and I'll be the coordinator for your call today. If you would like to submit a question during today's event, please press star followed by one on your telephone keypad. I'd now like to turn the call over to Bennett Murphy, SVP, Head of Investor Relations and Treasury. The floor is yours.
Steve Collis: Without negatively impacting our ability to distribute a normal pharmaceutical volume.
Steve Collis: This is yet another proof point of the value we provide the health care system and validates our continued focus on advancing our capabilities to further St. Corus strength at the center of health care globally.
Bennett S. Murphy: Please begin. Thank you. Good morning. Good afternoon.
Bennett S. Murphy: Thank you all for joining us for this conference call to discuss Sancora's fiscal 2024 first quarter results. I am Bennett Murphy, Senior Vice President, Head of Investor Relations and Treasury. Joining me today are Steve Collis, Chairman, President, and CEO, and Jim Cleary, Executive Vice President and CFO. On today's call, we 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.sancora.com.
Steve Collis: As we continue to grow and you're not as St. Cora, we look for ways to capitalize on our range of services across our global enterprise and invest in platforms to improve the speed precision and processes in which we serve customers St. Cora leads with market leaders and we must continue.
Steve Collis: <unk> progress and adapt to help our customers navigate the complexity of the health care landscape.
Bennett S. Murphy: We've also posted a slide presentation to accompany today's press release on our investor website. During this conference call, we will make forward-looking statements about our business and financial expectations on an adjusted, non-GAAP basis, including, but not limited to, EPS, operating income, and income tax. Forward-looking statements are based on management's current expectations and are subject to uncertainty and change. For a discussion of key risks and assumptions, we refer you to today's press release and our SEC filings, including our most recent 10K. Sync Core assumes no obligation to update any forward-looking statements, and this call cannot be rebroadcast without the express permission of the company. You have the 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 as possible within the hour. With that, I will turn the call over to Steve.
Steve Collis: As a global pharmaceutical distributor, we are focused on investing to support the growth and needs of our market leading customers.
Steve Collis: We're able to use our scale reach and expertise to bold and advocate for programs aimed at mitigating drug shortages supporting our customers' ultimate ability to better serve their patients.
Steve Collis: And we are proud to collaborate with the drug supply chain resilience and advanced manufacturing consortium.
Steve Collis: <unk> mission is to work towards a resilient supply chain.
Steve Collis: I'll work with the group involves partnering with stakeholders across the supply chain to identify effective policy solutions aimed at reducing the frequency and severity of drug shortages. These.
Steve Collis: Thank you, Bennett. Good morning and good afternoon to everyone on the call. Sincora delivered an exceptional start to Fiscal 2024, with revenue up 15% year-over-year to over $72 billion in the quarter, and adjusted earnings per share up 21% year-over-year. Given our continued performance and execution, including our strong first quarter results, I am pleased that we are able to raise our fiscal 2024 full-year guidance. The strength of our business is bolstered by the execution of our teams and powered by our commercial partnerships and strategic position. Teams across SYNCORA continue to prioritize customer centricity and enhance the services we provide.
Steve Collis: These types of initiatives reflect our intellectual confidence in our organization snakes minded approach to addressing challenges and allow us to advance our purpose to create healthier futures for patients around the world.
Steve Collis: Our position at the center of healthcare uniquely equips, our team with knowledge to overcome the obstacles the supply chain faces and plan for future challenges.
Steve Collis: Making us a trusted partner organizations focusing on pharmaceutical supply chain resiliency.
Steve Collis: Our ESG and D. I goals are meaningful to the success of our company and our ability to deliver on our purpose.
Steve Collis: We recognize the importance of operating in a responsible manner and sit ESG goals, along with all business that ensures we are maintaining resilient operations.
Steve Collis: We are capitalizing on the positive trends across our businesses, creating value for our customers and stakeholders, and building on the pivotal role we play in the global healthcare system. Our expertise in pharmaceutical distribution and breadth of higher margin, high growth business, linked with our scale, have provided us with a unique expertise, which positions us to support both upstream and downstream partners to achieve the best outcomes for patients. Our leadership in specialty has spanned 20 plus years, and over that time, we have built an unparalleled suite of services that connects manufacturers and providers. Strategically positioning ourselves at the center of the specialty market, we have created opportunities to partner with leading innovators early in the drug development process through scientific development and consulting. Safety and Quality Compliance. Clinical Trial Support and Registry.
Steve Collis: <unk> housing out people's growth and well being in the workplace and supporting Syncor as long term sustainable growth.
Steve Collis: We recently published our eighth annual ESG report, which highlights our progress on our ESG programs and how these initiatives contribute to our overall success.
Steve Collis: One of the key pillars of our ESG strategy is our team members who remain at the center of our company.
Steve Collis: At St. Cora, we prioritize creating a work environment that fosters growth and support for all our employees, we believe that having a diverse and inclusive team underpins our culture and strengthens our operations as we benefit from the insights that come from having a broad.
Steve Collis: Water set of views and experiences.
Steve Collis: As we seek to advance our culture, we have been focused on measuring inclusion and engagement in our workplace.
Steve Collis: Our downstream services enhance provider efficiency, allowing physicians to spend more time with patients, and include patient experience insights as well as operational and financial solutions. Specialty medicines and services will continue to be a key area of focus for SYNCORA as ongoing innovation and increasingly complex therapies drive opportunities for growth and allow us to demonstrate the differentiated values we can provide to our partners. We partner with biopharma players who are developing innovative, life-changing medications to help improve the lives of patients and advance the standard of care. To support their clinical and commercial success, it is imperative that we invest in all the capabilities we offer and position ourselves to meet their evolving needs. One example is our global specialty logistics, which offers solutions to transport complex products across our extensive footprint and provides key logistics for clinical trials.
Steve Collis: We were pleased in our second annual global inclusion survey a majority of our team members indicated we have a highly inclusive culture.
Steve Collis: As a part of the survey our team members provided leaders with valuable feedback and opportunities for improvement that will inform our efforts to strengthen our employee experience and working environment.
Steve Collis: Being purpose driven to create healthier futures, we offer comprehensive benefits and apply policies and practices and our corporate culture that ensure all employees are able to perform to the best of their ability.
Steve Collis: As an example of this I am proud that St. Cora was a recipient of a quality 100 award by the Human Rights campaign Foundation, where I work at providing equitable benefits policies and practices.
Steve Collis: This award recognizes companies that receive 100 on the foundation's corporate equality index that measure policies and practices related to LGBTQ workplace equality.
Steve Collis: These achievements reflect the dedication of our team members, who have taken an active role in creating an inclusive environment and delivering on our critical role in healthcare each day.
Steve Collis: We continue to invest to support the growing demand for special education by enhancing the solutions offered across our footprint and implementing new technologies to drive further efficiency. This quarter, we announced three new transport states strategically located across the United States that will improve our ability to handle products in trial and complex products coming to market commercially. Since many of these products require specialized temperature control, we have expanded cryogenic storage and capabilities globally.
Steve Collis: As we look ahead to the rest of our fiscal year.
Steve Collis: We are focused on continuing to capitalize on the strength of our business and the opportunities provided by our pharmaceutical centric strategy in order to deliver value for our customers and other stakeholders IRA.
Steve Collis: I remain inspired by our team members execution and drive to deliver on our purpose by demonstrating passion and adaptability as we went through an ever changing health care environment to improve lives every day.
Steve Collis: This ensures we are providing partners with the complex logistics they need for their clinical trial and specialty shipment needs, while investing to remain the best-in-class partner for these promising therapies across geographies and categories, as innovation in cell and gene therapies continues to excite and advance. Innovation in life sciences motivates us at SYNCORA, and we invest in our operational, technical, and logistics capabilities to ensure we are also innovating to support their tremendous potential for improving patients' lives. Growing our capabilities and solutions in higher-margin, high-growth services positions us to be the partner of choice with market-leading innovators and to capitalize on opportunities presented by scientific advancement and the corresponding growing needs for commercialization services and solutions. On the consulting side, Sincora's Global Pharma Services Group helps our partners to accelerate the speed at which their products go to market by helping them navigate the complexity of clinical, regulatory, and access challenges.
Steve Collis: I will now turn the call over to Jim for an in depth review of our first quarter results and updated guidance Jim.
Thanks, Steve Good morning, and good afternoon, everyone before I turn to my prepared remarks as a reminder, my remarks today will focus on our adjusted non-GAAP financial results unless otherwise stated for a detailed discussion of our GAAP results. Please refer to our earnings press release and presentation.
Jim Cleary: <unk> delivered remarkably strong results in our first quarter of fiscal 2024 as our team capitalized on the opportunities provided by our pharmaceutical centric strategy commercial partnerships robust infrastructure and team member execution in the quarter. This drove one.
Jim Cleary: 20% ROIC for Suncor as adjusted operating income and adjusted diluted EPS, our strong performance in the quarter and expectation for continued execution and growth in the balance of year leads us to meaningfully raise our full year fiscal 2020 for guidance.
Speaker Change: I'll now turn to a review of our consolidated first quarter results starting with revenue.
Steve Collis: As we continue to integrate Pharmalex, biopharma innovators are increasingly seeing the value we offer as a partner providing global pharma consulting, alongside our abilities to support their logistics needs from clinical trials to 3PL and specialty and wholesale distribution with expertise and a significant presence in key markets in the US, Canada, and Europe. Our expertise enables us to work with revolutionary medicines and products early in the development process and help support their commercial launches, giving Sencora a key role in healthcare innovation.
Speaker Change: Consolidated revenue was $72 $3 billion up 15% with strong revenue growth in both segments. We continue to see good utilization trends broadly across our business. In addition to continued growth in sales of <unk> products, particularly in the U S.
Speaker Change: Excluding the increase in sales of G. L. P ones are consolidated revenue growth would have been 12% consolidated gross profit was $2 $4 billion up nearly 13% with double digit gross profit growth in each segment.
Speaker Change: Consolidated gross profit margin was 331% a decrease of seven basis points similar to the past several quarters. Our gross profit margin comparison continues to be impacted by sales growth for low margin G. L. P ones and less volume of government owned Covid treatments the.
Steve Collis: Our expanded and unified enterprise is advancing Sencora's presence as we continue to make investments and better leverage our infrastructure. Our legacy of investing in technology and enhancing operations to increase our efficiency continues to be front and center as we pursue ways to enhance our services and customer experience. The sophistication, scale, and flexibility of our infrastructure were on full display as we handled the significant volume of newly commercial and temperature-sensitive COVID vaccines in the U.S. in the December quarter without negatively impacting our ability to distribute normal pharmaceutical volumes. This is yet another proof point of the value we provide the healthcare system and validates our continued focus on advancing our capabilities to further Senkora's strength at the center of healthcare globally.
These two items was partially offset by the full quarter contribution from the distribution of commercial COVID-19, vaccines, which have higher gross profit margins given the complexity associated with the products.
Consolidated operating expenses were $1 $5 billion up 8% due to higher distribution selling and administrative expenses to support revenue growth and incremental operating expenses in the international segment related to the acquisition of <unk>, which we closed in January of 2020.
Speaker Change: Three.
Speaker Change: Consolidated operating income was $886 million, an increase of 21% compared to the prior year quarter. The increase in operating income also included double digit growth in both segments, which I will discuss in more detail in the segment level results.
Steve Collis: As we continue to grow and unite as Syncora, we look for ways to capitalize on our range of services across our global enterprise and invest in platforms to improve the speed, precision, and processes in which we serve customers. Syncora leads with market leaders, and we must continually progress and adapt to help our customers navigate the complexity of the healthcare landscape. As a global pharmaceutical distributor, we are focused on investing to support the growth and needs of our market-leading customers. We are able to use our scale, reach, and expertise to build and advocate for programs aimed at mitigating drug shortages, supporting our customers' ultimate ability to better serve their patients. To that end, we are proud to collaborate with the Drug Supply Chain Resilience and Advanced Manufacturing Consortium, whose mission is to work towards a resilient supply chain Our work with the group involves partnering with stakeholders across the supply chain to identify effective policy solutions aimed at reducing the frequency and severity of drug shortages.
Speaker Change: Moving now to our net interest expense and effective tax rate for the first quarter net interest expense was $41 million down 12%, primarily due to higher interest income, resulting from higher interest rates on investments.
Speaker Change: And lower interest expense due to the September 2023 divestiture of our less than wholly owned subsidiary in Egypt.
Regarding income taxes, our effective income tax rate was 21% compared to 19, 1% in the prior year quarter. We continue to expect our full year effective tax rate to be in the range of 20% to 21%.
Speaker Change: Turning now to diluted share count or diluted share count was 201 8 million shares at 2% decrease compared to the prior year first quarter. This was primarily driven by opportunistic share repurchases over the course of fiscal 2023 and also repurchases and.
Steve Collis: These types of initiatives reflect our intellectual context and our organization's next-minded approach to addressing challenges and allow us to advance our purpose to create healthier futures for patients around the world. Our position at the Center of Healthcare uniquely equips our team with knowledge to overcome the obstacles the supply chain faces and plan for future change, making us a trusted partner for organizations focusing on pharmaceutical supply chain resilience. Our ESG and DEI goals are meaningful to the success of our company and our ability to deliver on our purpose. We recognize the importance of operating in a responsible manner and set ESG goals aligned with our business that ensures we are maintaining resilient operations. Prioritizing our people's growth and well-being in the workplace and supporting Sankora's long-term sustainable growth
Speaker Change: The quarter, including a $135 million in open market repurchases and $250 million in repurchases in November concurrent with the transaction completed by Walgreens Boots Alliance.
Speaker Change: Regarding our cash balance and adjusted free cash flow, we ended the quarter with approximately $2 $9 billion of cash and generated $763 million and adjusted free cash flow.
In December we made a commitment to exercise the prepayment option permitted under our opioid settlement agreements.
Speaker Change: This prepayment of approximately $238 million was made in January and represents the net present value of future obligation of approximately $345 million.
Speaker Change: Since this prepayment was unplanned and nonrecurring it will not be included in our adjusted free cash flow consistent with our practices for unplanned and nonrecurring payments or receipts relating to legal settlements.
Steve Collis: We recently published our eighth annual ESG report, which highlights our progress on our ESG programs and how these initiatives contribute to our overall success. One of the key pillars of our ESG strategy is our team members, who remain at the center of our company. At Syncora, we prioritize creating a working environment that fosters growth and support for all our employees. We believe that having a diverse and inclusive team underpins our culture and strengthens our operations, as we benefit from the insights that come from having a broader set of views and experiences. As we seek to advance our culture, we have been focused on measuring inclusion and engagement in our work. We were pleased that in our second annual Global Inclusion Survey, a majority of our team members indicated we have a highly inclusive culture. As a part of the survey, our team members provided leaders with valuable feedback and opportunities for improvement that will inform our efforts to strengthen our employee experience and working environment. Being purpose-driven to create healthier futures.
We'll continue to include the annual planned cash payments associated with our settlement agreements and our adjusted free cash flow and continue to expect adjusted free cash flow to be approximately $2 $5 billion for the fiscal year.
Speaker Change: This completes the review of our consolidated results now I'll turn to our segment results for the first quarter.
Speaker Change: U S health care solutions segment revenue was $65 $2 billion up approximately 16% as we continued to see broad based growth in our distribution businesses, which benefited from strong utilization trends, including continued volume growth in G. L. P ones.
Speaker Change: Growth in sales to specialty physician practices and health systems, and commercial COVID-19 vaccine sales.
Speaker Change: U S health care solutions segment operating income increased 22% to $698 million driven by strong performance across our distribution businesses, including commercial COVID-19 vaccine sales and operating leverage as a result of strong <unk>.
Jim Cleary: We offer comprehensive benefits and apply policies and practices in our corporate culture that ensure all employees are able to perform to the best of their ability. As an example of this, I am proud that Sincora was a recipient of the Equality 100 Award by the Human Rights Campaign Foundation for our work in providing equitable benefits, policies, and practices. This award recognizes companies that receive a hundred on the Foundation's Corporate Equality Index, which measures policies and practices related to LGBTQ plus workplace equality. These achievements reflect the dedication by our team members who have taken an active role in creating an inclusive environment and delivering on our critical role in healthcare each day, as we look ahead to the rest of our fiscal year.
<unk> and the expense management actions, we called out on our May earnings call last year.
Speaker Change: Similar to last quarter, we saw broad based strength across our human health distribution businesses with good volumes and trends in both specialty and full line distribution.
Speaker Change: <unk> continues to benefit from leading with market leaders and as a result, we continue to see good growth across customer segments and broad pharmaceutical utilization trends. We also had particularly strong growth in our animal health business, which delivered good performance in the quarter and Benny.
Speaker Change: They did from an easier comparison given industry wide pressures in the prior year December quarter that we called out last year.
Speaker Change: Before turning to a review of our International Health Care Solutions segment performance I would like to provide an update on COVID-19 related contributions in the U S segment for both exclusive therapies and the commercial COVID-19 vaccines.
Jim Cleary: We are focused on continuing to capitalize on the strength of our business and the opportunities provided by our pharmaceutical-centric strategy in order to deliver value for our customers and other stakeholders. I remain inspired by our team members' execution and drive to deliver on our purpose by demonstrating passion and adaptability as we work through an ever-changing healthcare environment to improve lives every day. I will now turn the call over to Jim for an in-depth review of our first quarter results and updated guidance. Thanks, Steve. Good morning and good afternoon, everyone.
Speaker Change: First regarding exclusive product distribution in the quarter, we had six cents a contribution related to exclusive COVID-19 product distribution in the U S.
Speaker Change: <unk> <unk> headwind from the ninth sense of segment level contribution in the prior year quarter.
Speaker Change: This contribution was in line with the two to 10 cents of contribution we guided on our November earnings call related to our first quarter of fiscal 2024.
Speaker Change: For the balance of the year, we expect a 21 cent headwind from exclusive COVID-19 treatments in the segment in line with our previous expectations and guidance, we do not expect a material contribution from these COVID-19 treatments and the balance of the year.
Jim Cleary: Before I turn to my prepared remarks, as a reminder, my remarks today will focus on our adjusted non-GAAP financial results unless otherwise stated. For a detailed discussion of our GAAP results, please refer to our earnings press release and presentation. Sencora delivered remarkably strong results in our first quarter of fiscal 2024 as our team capitalized on the opportunities provided by our pharmaceutical-centric strategy, commercial partnerships, robust infrastructure, and team member execution.
Speaker Change: Second regarding COVID-19 vaccines.
Speaker Change: This quarter, we saw an incremental and higher than expected benefit from distributing commercial COVID-19 vaccines and as we said on our November earnings call. This was comparing to a prior year period, where vaccines were distributed by other parties prior to their movement to a traditional.
Jim Cleary: In the quarter, this drove over 20% growth for Sankora's adjusted operating income and adjusted diluted EPS. Our strong performance in the quarter and expectation for continued execution and growth in the balance of the year led us to meaningfully raise our full year fiscal 2024 guidance. I'll now turn to a review of our consolidated first quarter results, starting with revenue. Our consolidated revenue was $72.3 billion, up 15%, with strong revenue growth in both segments. We continue to see good utilization trends broadly across our business, in addition to continued growth and sales of GLP-1 products, particularly in the U.S. Excluding the increase in sales of GLP-1s, our consolidated revenue growth would have been 12%.
Speaker Change: Commercial distribution model in September.
Speaker Change: The contribution to our operating income from COVID-19 vaccine distribution in the December quarter was highly concentrated in the October and November months and in total was more than double the contribution in the September quarter.
Excluding both the commercial COVID-19 vaccine and exclusive COVID-19 treatment distribution contributions.
Speaker Change: Segment level operating income growth would have been 12% as our teams strong execution and our pharmaceutical centric strategy have allowed us to capitalize on good underlying prescription utilization trends and deliver significant growth.
Speaker Change: I will now turn to our international Health care solutions segment.
Speaker Change: In the quarter International Health care solutions revenue was $7 $1 billion up 7% on a reported basis or up 9% on a constant currency basis.
Jim Cleary: Consolidated gross profit was $2.4 billion, up nearly 13%, with double-digit gross profit growth in each segment. Consolidated gross profit margin was 3.31%, a decrease of seven basis points. Similar to the past several quarters, our gross profit margin comparison continues to be impacted by sales growth for low-margin GLP-1s and less volume of government-owned COVID-19. The impact of these two items was partially offset by the full quarter contribution from the distribution of commercial COVID-19 vaccines, which have higher gross profit margins given the complexity associated with the product. Consolidated operating expenses were $1.5 billion, up 8% due to higher distribution, selling, and administrative expenses to support revenue growth and incremental operating expenses in the international segment related to the acquisition of Pharmalex, which we closed in January of 2023. Consolidated operating income was $886 million, an increase of 21% compared to the prior year quarter.
Speaker Change: International Health care solutions operating income was $188 million up 16% on a reported basis or up 20% on a constant currency basis.
Speaker Change: In the quarter, we benefited from higher shipment weights and improvements in airfreight costs, and our global specialty logistics business.
Speaker Change: Incremental operating income from the pharma LEC acquisition and excellent performance in our Canadian business offsetting.
Speaker Change: Offsetting foreign currency pressure and the September 2023 divestiture of the non wholly owned subsidiary in Egypt, which was profitable in the first quarter of fiscal 2023.
Speaker Change: That completes the review of our segment level results I will now discuss our updated fiscal 2024 guidance expectations.
Speaker Change: A reminder, we do not provide forward looking guidance on a GAAP basis. So the following metrics are provided on an adjusted non-GAAP basis I will.
Speaker Change: Also provide certain guidance metrics on a constant currency basis.
Speaker Change: I will begin with Etfs, and then provide detail on the income statement items contributing to the increase we.
Speaker Change: We are raising our full year diluted EPS guidance to a range of $13 25 to.
Jim Cleary: The increase in operating income also included double-digit growth in both segments, which I will discuss in more detail in the segment-level results. Moving now to our net interest expense and effective tax rate for the first quarter. Net interest expense was $41 million, down 12% primarily due to higher interest income resulting from higher interest rates on investments and lower interest expense due to the September 2023 divestiture of our less than wholly owned subsidiary in Egypt. Regarding income taxes, our effective income tax rate was 21%, compared to 19.1% in the prior year quarter.
Speaker Change: The $13.50.
Speaker Change: Up from our prior range of $12 70 to $13 representing growth of 11% to 13%.
Speaker Change: The increase reflects our expectation for continued strong performance throughout our fiscal year and the incremental benefit from COVID-19 vaccine distribution in the first quarter.
Speaker Change: Now moving to revenue.
Speaker Change: We expect consolidated revenue growth to be in the range of 10% to 12% on both an as reported and constant currency basis.
Jim Cleary: We continue to expect our full year effective tax rate to be in the range of 20 to 21%. Turning now to diluted share count, our diluted share count was 201.8 million shares, a 2% decrease compared to the prior year first quarter.
Speaker Change: From previous expectations of 7% to 10%.
Speaker Change: The updated guidance reflects an increase in our U S health care solutions segment revenue growth, where we now expect growth of 11% to 13% up from our previous expectations of 7% to 10% growth.
Jim Cleary: This was primarily driven by opportunistic share repurchases over the course of fiscal 2023 and also repurchases in the quarter, including $135 million in open market repurchases and $250 million in repurchases in November, concurrent with a transaction completed by Walgreens Boots Alliance. Regarding our cash balance and adjusted free cash flow, we ended the quarter with approximately $2.9 billion of cash and generated $763 million in adjusted free In December, we made a commitment to exercise the prepayment option permitted under our opioid settlement agreement. This prepayment of approximately $238 million was made in January and represents the net present value of a future obligation of approximately $345 million.
Speaker Change: The new guidance range reflects the strong revenue growth, we saw in the first quarter, including the year over year growth of G. L. P ones and continued good growth for the remainder of the year driven by expected broad base prescription utilization trends.
Speaker Change: Moving to operating income, we expect consolidated operating income growth to be in the range of 8% to 10% up from our previous guidance of 4% to 6%.
Speaker Change: On an ex Covid basis, which as a reminder, excludes the benefit from exclusive COVID-19 contributions in fiscal 2023 in fiscal 2024.
Speaker Change: We now expect consolidated operating income growth to be in the range of 11% to 13%.
From our prior guidance of 7% to 9%.
In the U S Health care solutions segment, we now expect operating income growth to be in the range of 9% to 11% up from our prior range of 4% to 7%.
Jim Cleary: Since this prepayment was unplanned and non-recurring, it will not be included in our adjusted free cash flow consistent with our practices for unplanned and non-recurring payments or receipts relating to legal settlement. We will continue to include the annual planned cash payments associated with our settlement agreements in our adjusted free cash flow and continue to expect adjusted free cash flow to be approximately $2.5 billion for the fiscal year. This concludes our review of our consolidated results. Now I'll turn to our segment results for the first quarter. U.S. healthcare solution segment revenue was $65.2 billion, up approximately 16%, as we continue to see broad-based growth in our distribution businesses, which benefited from strong utilization trends, including continued volume growth in GLP-1s, growth in sales to specialty physician practices and health systems, and Commercial COVID-19 Vaccine Sales.
Speaker Change: Or ex Covid guidance in the U S. I will remind you that we only exclude the contributions from exclusive COVID-19 therapies in fiscal 2023 in fiscal 2024, and do not exclude COVID-19 vaccine contributions since they are traditional commercially distributed products on.
Speaker Change: This ex Covid basis, we expect U S segment operating income growth to be in the range of 12% to 14%.
Up from our prior range of 7% to 10%.
Speaker Change: The increase in our U S segment guidance reflects our strong first quarter and continued momentum across our business as we continue to benefit from our leadership in specialty and alignment with market, leading customers, allowing us to capitalize on broad pharmaceutical utilization trends.
Speaker Change: Turning now to the International Health care solutions segment on an as reported basis. We now expect operating income growth to be in the range of 5% to 8% up from our previous range of 1% to 4%.
Speaker Change: On an ex Covid basis, we now expect operating income growth to be in the range of 7% to 10% up from our previous range of 3% to 6%.
Jim Cleary: U.S. healthcare solution segment operating income increased 22% to $698 million, driven by strong performance across our distribution businesses, including commercial COVID-19 vaccine sales and operating leverage as a result of strong volumes and the expense management actions we called out on our May earnings call last year. Similar to last quarter, we saw broad-based strength across our human health distribution businesses, with good volumes and trends in both specialty and full-line distribution. Sincora continues to benefit from being led by market leaders.
Speaker Change: The updated as reported guidance reflects solid underlying performance trends and a slight benefit from current foreign exchange rates versus rates at the time of our initial guidance.
Speaker Change: Year over year currency translation continues to be a moderate full year headwind to our business and on a constant currency basis. We expect segment operating income growth to be in the range of 9% to 12% or 10% to 13% when excluding COVID-19 contributions.
Speaker Change: Finally, turning to interest expense, we now expect interest expense to be in the range of $185 million to $215 million from our previous range of $210 million to $230 million as our cash flow generation in the first quarter was stronger than expected.
Jim Cleary: And as a result, we continue to see good growth across customer segments and broad pharmaceutical utilization. We also had particularly strong growth in our animal health business, which delivered good performance in the quarter and benefited from an easier comparison given industry-wide pressures in the prior year December quarter that we called out last year. Before turning to a review of our international health care solutions segment performance, I would like to provide an update on COVID-19-related contributions and the US segment for both exclusive therapies and the commercial COVID-19 vaccine. First, regarding exclusive product distribution, in the quarter, we had $0.06 of contribution related to exclusive COVID-19 product distribution in the U.S., a $0.03 headwind from the $0.09 of segment level contribution in the prior year quarter.
Speaker Change: A quarterly cadence perspective, we would expect interest expense to step up meaningfully in the second quarter similar to the prior year quarter, given typical seasonality and cashews.
Speaker Change: That concludes our updated guidance assumptions before I turn to my closing remarks, I would like to briefly comment on our recently published ESG report.
Speaker Change: This week as Steve mentioned, we published our eighth annual ESG report that details initiatives. We are taking to ensure our business is equipped to operate resilient Lee support our team members and create healthier communities, where we live and work.
Speaker Change: We are proud of the business aligned approach, we take to our ESG strategy and I would encourage those interested to visit our micro site at <unk> Dot <unk> Dot com.
Jim Cleary: This contribution was in line with the $0.02 to $0.10 of contribution we guided on our November earnings call related to our first quarter of fiscal 2024. For the balance of the year, we expect a 21 cent headwind from exclusive COVID treatments in the segment, in line with our previous expectations and guidance. We do not expect a material contribution from these COVID treatments for the balance of the year.
Speaker Change: The report aligns with a number of reporting standards and describe some exciting new initiatives launched over the past year, including our Sentara healthier futures ramp program that aims to support nonprofits and charities around the world doing work to advance access to care, we remain committed to fostering transparency and report.
Speaker Change: On progress on our ESG strategy and recognition of these efforts we were pleased to be named to sustain <unk> 'twenty 'twenty four ESG top rated companies list on both their region top rated an industry top rated less <unk>.
Jim Cleary: Second, regarding COVID-19 vaccines. This quarter, we saw an incremental and higher-than-expected benefit from distributing commercial COVID-19 vaccines. And as we said on our November earnings call, this was compared to a prior year period where vaccines were distributed by other parties prior to their movement to a traditional commercial distribution model in September. The contribution to our operating income from COVID-19 vaccine distribution in the December quarter was highly concentrated in the October and November months, and in total, it was more than double the contribution in the September quarter.
Speaker Change: In closing.
Speaker Change: <unk> clearly delivered outstanding results in the first quarter of our fiscal year I'm incredibly proud of our team's dedication and ability to consistently drive strong performance quarter after quarter.
Leveraging the breadth and depth of our pharmaceutical centric solutions, we continue to find opportunities to capitalize on commercial strengths and build upon the momentum in our business to drive value for our stakeholders.
Jim Cleary: Excluding both the commercial COVID-19 vaccine and exclusive COVID-19 treatment distribution contributions, segment-level operating income growth would have been 12%, as our team's strong execution and our pharmaceutical-centric strategy allowed us to capitalize on good underlying prescription utilization trends and deliver significant growth. I will now turn to our international healthcare solution segment. In the quarter, international healthcare solutions revenue was $7.1 billion, up 7% on a reported basis, or up 9% on a constant currency basis. International Healthcare Solutions operating income was $188 million, up 16% on a reported basis, or up 20% on a constant currency basis.
Speaker Change: Now I will turn the call over to the operator to open the line for questions.
Speaker Change: Operator.
Speaker Change: Thank you.
Speaker Change: To ask a question. Please press star followed by one on your telephone keypad. If you would like to withdraw your question. Please press star followed by two.
Speaker Change: When preparing to ask a question. Please ensure your devices on mute locally.
Speaker Change: First question comes from Stephanie Davis with Barclays. Your line is open countries go ahead.
Stephanie Davis: Hey, guys. Thank you for taking my questions and congrats on a very strong start to the year.
Stephanie Davis: I was hoping you could tell us more about the strength of our business as you saw outsized operating income growth. So it looks like there was a lot more than <unk>, one driving the beef so anything else to call out there in the sustainability and a quick follow up on the other side of the business just given some of the geopolitical turmoil is there anything you would call out on potential <unk>.
Jim Cleary: In the quarter, we benefited from higher shipment weights and improvements in air freight costs and our global specialty logistics business, incremental operating income from the Pharmalex acquisition and excellent performance in our Canadian business, offsetting foreign currency pressure and the September 2023 divestiture of the non-wholly owned subsidiary in Egypt, which was profitable in the first quarter of fiscal 2023. That completes the review of our segment-level results. I will now discuss our updated fiscal 2024 guidance expectations. As a reminder, we do not provide forward-looking guidance on a gap-based... So the following metrics are provided on an adjusted non-GAAP basis.
National shipping headwinds thank you.
Speaker Change: Sure Stephanie Thanks, a lot for those questions and with regard to the beat in the core business and the sustainability of kind of.
Speaker Change: Let me start out with some of the kind of the drivers of the Q1 beat.
Speaker Change: All out five things first commercial COVID-19 vaccines, we had very strong performance there during the first fiscal quarter.
And is that just the continued strong pharmaceutical utilization trends, resulting in favorable volume trends broadly across our businesses, including in specialty.
Speaker Change: Third thing I'll call out, it's just particularly strong execution by our <unk> team members broadly across our businesses with our key businesses performing well and then a fourth thing and this is key we had very good performance on operating expenses and good operating leverage as a result of both that's opex focus.
Jim Cleary: I will also provide certain guidance metrics on a constant currency basis. I will begin with EPS and then provide detail on the income statement items contributing to the increase. We are raising our full-year diluted EPS guidance to a range of $13.25 to $13.50, up from our prior range of $12.70 to $13, representing growth of 11 to 13%.
Speaker Change: And the volumes that we saw during the quarter and then finally on pricing, including some continued signs of moderating generic deflation during the quarter and so you know how did these benefits impact guidance and how sustainable are these benefits that I just called out well I would say that the first one commercial.
Jim Cleary: The increase reflects our expectation for continued strong performance throughout our fiscal year and the incremental benefit from COVID-19 vaccine distribution in the first quarter. Now, moving to revenue. We expect consolidated revenue growth to be in the range of 10-12% on both an as-reported and constant currency basis, up from previous expectations of 7 to 10 percent. The updated guidance reflects an increase in our U.S. healthcare solution revenue growth, where we now expect growth of 11 to 13 percent, up from our previous expectations of 7 to 10 percent. The new guidance range reflects the strong revenue growth we saw in the first quarter, including the year-over-year growth of GLP-1s, and continued good growth for the remainder of the year, driven by expected broad-based prescription utilization trends.
COVID-19 vaccines, we expect.
Speaker Change: These sales of commercial COVID-19 vaccines to come down very significantly in Q2 to Q4 of fiscal year 'twenty four compared to Q1, perhaps with an increase at the end of the fiscal year in the month of September as seasonal vaccine activity begins picking up and as I said in my prepared remarks, if we.
Speaker Change: Exclude the contributions from both commercial COVID-19, vaccines and the exclusive COVID-19 treatments or operating income growth would have been 12% in the U S Health care solutions segment in Q1 versus that 22% that we reported in the U S and.
Speaker Change: With regard to the other positive trends that I talked about we expect these positive trends to continue across our business throughout the fiscal year, but perhaps not at the same level of outperformance as in Q1 and this is reflected in our guidance and you know an example, I'll give there is operating expense.
Jim Cleary: Moving to operating income, we expect consolidated operating income growth to be in the range of 8 to 10 percent, up from our previous guidance of 4 to 6 percent. On an ex-COVID basis, which as a reminder excludes the benefit from exclusive COVID-19 contributions in fiscal 2023 and fiscal 2024, we now expect consolidated operating income growth to be in the range of 11% to 13% from our prior guidance of 7% to 9%. In the U.S. healthcare solutions segment, we now expect operating income growth to be in the range of 9 to 11 percent, up from our prior range of 4 to 7 percent. For our ex-COVID guidance in the U.S., I will remind you that we only exclude the contributions from exclusive COVID-19 therapies in fiscal 2023 and fiscal 2024 and do not exclude COVID-19 vaccine contributions since they are traditional commercially distributed products.
Speaker Change: On the May call last year, we talked about some operating efficiency initiatives that we took in April of last year and they were very effective and as we can see in our results this quarter with 8% operating expense growth compared to 13% gross profit growth than kind of the comps get a little bit harder on opex in the back half of the year.
Speaker Change: And so that's one of the things where we could we.
Speaker Change: We would continue to expect that outperformance, but perhaps not the same level of outperformance, but having said that I just wanted to finish by saying we feel really good about the ongoing strong performance of our businesses and our guidance. So thanks for asking that question and then there was a second part of the question was that on.
Speaker Change: I could answer that I think it was more to do with geopolitical risk in Europe, if I understood.
Speaker Change: You know I would just say of course, we don't have a crystal and but I would just say that our business has proved many geopolitical events many economic crises to be very resilient in fact, among the most resilient businesses.
Jim Cleary: On this ex-COVID basis, we expect U.S. segment operating income growth to be in the range of 12 to 14 percent, up from our prior range of 7 to 10 percent. The increase in our U.S. segment guidance reflects our strong first quarter and continued momentum across our business as we continue to benefit from our leadership in specialty and alignment with market-leading customers, allowing us to capitalize on broad pharmaceutical utilization trends. Turning now to the International Healthcare Solutions segment, on an as-reported basis, we now expect operating income growth to be in the range of 5 to 8 percent, up from our previous range of 1 to 4 percent. On an ex-COVID basis, we now expect operating income growth to be in the range of 7 to 10 percent, up from our previous range of 3 to 6 percent.
As long as patients keep medium prescriptions as long as pharma companies keep on innovating as long as the payers, both government and commercial payers keep paying.
Speaker Change: Proven to be very resilient, very inelastic and demand for our core services.
Speaker Change: Can get a little bit different and commercialization services.
Speaker Change: Depending on what's going on with investments in pharma life cycles, but overall I'd say, we tend to be the most durable businesses. Jim you want to add something yes, I'll, just say with regard to shipping specifically, we don't have anything specific to call out I mean, our teams are experts in this and are very focused on it and you know like some of the things that we.
Jim Cleary: We actively focus on our monitoring any shipping disruptions and working closely with our manufacturer partners and our provider customers to analyze and ensure sustainability of supply and like I said, we don't have anything specific to call out other than to say our teams are experts in it and very focused on it's Stephanie.
Jim Cleary: The updated as reported guidance reflects solid underlying performance trends and a slight benefit from current foreign exchange rates versus rates at the time of our initial guidance. However, year over year currency translation continues to be a moderate full year headwind to our business, and on a constant currency basis, we expect segment operating income growth to be in the range of 9-12% or 10-13% when excluding COVID-19 contributions. Finally, turning to interest expense, we now expect interest expense to be in the range of $185 million to $215 million from our previous range of $210 million to $230 million, as our cash flow generation in the first quarter was stronger than expected.
Speaker Change: Next question comes from.
Speaker Change: Our next question comes from Lisa Gill with Jpmorgan. Your line is open. Please go ahead.
Lisa C. Gill: Yeah, Thanks, very much and good morning.
Lisa C. Gill: First I wanted to start with the international business and you called out global specialty logistics.
As being part of that strong performance on the international side can you maybe help us to understand what are some of the keys to that outperformance was there anything that was kind of one time in the quarter and then just as a follow up Jim I was surprised to hear you say generic price.
Jim Cleary: From a quarterly cadence perspective, we would expect interest expense to step up meaningfully in the second quarter, similar to the prior year quarter, given typical seasonality and cash. That concludes our updated guidance assumptions. Before I turn to my closing remarks, I would like to briefly comment on our recently published ESG report. This week, as Steve mentioned, we published our eighth annual ESG report that details initiatives we are taking to ensure our business is equipped to operate resiliently, support our team members, and create healthier communities where we live and work. We are proud of the business-aligned approach we take to our ESG strategy, and I would encourage those interested to visit our microsite at esg.sencora.com. The report aligns with a number of reporting standards and describes some exciting new initiatives launched over the past year, including our Centora Healthier Futures grant program that aims to support nonprofits and charities around the world doing work to advance access to care.
Lisa C. Gill: Lack of deflation or stabilization in generic price list number five can you maybe just talk about what you are seeing any environment. There because I would have expected that that would have been maybe a little bit more of a key driver when we think about the operating profit.
Speaker Change: Yeah. So on.
Speaker Change: All our logo business and of course, our world Courier business, which does more specialized statistics off are both performing very well.
You know and we expect to see continued growth in those businesses, we have a lager closely linked with our tradition.
Speaker Change: <unk> business in the U S and we're getting away from those names as we move to.
Speaker Change: Saint <unk>.
Speaker Change: Global programs.
Speaker Change: Those businesses continue to be a significant interest to manufacturers.
Speaker Change: They help with the commercialization process they provide efficiency both for large and small manufacturers and you know are a key element of our growth.
Speaker Change: Europe.
Speaker Change: We have some we have some stronger competitors. They then it's a more established industry I'd say.
Jim Cleary: We remain committed to fostering transparency and reporting on progress on our ESG strategy. In recognition of these efforts, we are pleased to be named to Sustainalytics. 2024 ESG Top Rated Companies List on both their Region Top Rated and Industry Top Rated Lists. In closing, Sencora clearly delivered outstanding results in the first quarter of our fiscal year. I'm incredibly proud of our team's dedication and ability to consistently drive strong performance quarter after quarter.
Speaker Change: And of course every country is a little bit different but as a generalization I would say we have stronger competitors in certainly St Korean tends to raise the ball. Our leadership is very focused on becoming the leader in that industry and in all the major markets. We're in and you'll continue to see us making progress because we have a great <unk>.
Standing all the whole healthcare ecosystem that is hard for others to have you know we have it from the provider the manufacturer perspective, the health system perspective, and we have it across so many different countries and healthcare ecosystems that I think it just gives us some business intelligence that is hard to replicate and you would expect us to continue to do very well.
Jim Cleary: Leveraging the breadth and depth of our pharmaceutical-centric solutions, we continue to find opportunities to capitalize on commercial strengths and build upon the momentum in our business to drive value for our stakeholders. Now, I will turn the call over to the operator to open the line for questions. Operator.
Speaker Change: And in those areas during the second part was for you sure with regard to the moderation of generic deflation is.
Speaker Change: We've indicated over the last several months.
Operator: Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask a question, please ensure your device is unmuted locally.
Speaker Change: Been a moderation in generic deflation, particularly in certain pockets of the market and we certainly benefited from that to the extent that it's been a smaller headwind.
Speaker Change: And if the moderation in generic deflation sustains and is more broad.
Stephanie Davis: The first question comes from Stephanie Davis with Barclays. Your line is open, please go ahead. Hey guys, thank you for taking my questions and congrats on a very strong start to the year. I was hoping you could tell us more about the strengths in the Forbes. As you saw, outsized operating income growth. So it looks like there was a lot more than GOP1 driving the beat.
It would really be a.
Speaker Change: The benefit to us.
Speaker Change: New benefit to us as the.
Speaker Change: Annual headwind would be smaller in terms of ranking them.
Speaker Change: Just one point I wanted to make is just the volumes were so strong this this quarter with 15% revenue growth and.
Bennett S. Murphy: So anything else to call out there in terms of sustainability? And a quick follow-up on the other side of the business, just given some of the geopolitical turmoil, is there anything you would call out on potential international shipping headwinds? Thank you.
Speaker Change: As you well know when you can have a 13% gross profit growth and 8% Opex growth that really it's kind of a big driver of that operating leverage is a big driver of operating.
Speaker Change: Income growth and so.
Bennett S. Murphy: Sure, Stephanie, thanks a lot for those questions. And with regard to the beat in the core business and the sustainability kind of, let me start out with some of the kind of drivers of the Q1 beat. Now, I'll call out five things.
Speaker Change: That.
Speaker Change: That volume is driven by a number of things, including commercial COVID-19 vaccines, where a.
We're a really good benefit for us during the quarter and so I really wouldn't make too much of the ranking them, though and.
Bennett S. Murphy: First, commercial COVID-19 vaccines, we had, you know, very strong performance there during the first fiscal quarter. Second, just the continued strong pharmaceutical utilization trends, resulting in favorable volume trends broadly across our businesses, including in specialty. You know, a third thing I'll call out is just particularly strong execution by our SYNCOR team members broadly across our businesses, with our key businesses performing well. And then, and this is key, we had, you know, very good performance on operating expenses and good operating leverage as a result of both this OpEx focus and the volumes that we saw during the quarter. And then finally, pricing, including some continued signs of moderating generic deflation during the quarter.
Speaker Change: The generic moderation trends, we're certainly a positive for us during the quarter.
Speaker Change: Thank you Lisa.
Our next question comes from Eric Percher with Nephron Research. Your line is open. Please go ahead.
Eric Percher: Thank you.
Eric Percher: Jim the gross profit was strong despite the downward pressure you mentioned from <unk> and government Covid treatments can you remind us when the.
Eric Percher: The <unk> volumes and also the gross profit have trended over the last year and specifically when the shift in sell side discount occurred how that plays through for the remainder of the year and whether there's any impact on generic discounts built in there.
Jim Cleary: Yeah, and so let me.
Jim Cleary: Kind of addressed that with regard to your questions on China.
Bennett S. Murphy: And so, you know, how did these benefits impact guidance, and how sustainable are these benefits that I just called out? Well, I'd say that the first one, commercial COVID-19 vaccines; we expect sales of commercial COVID-19 vaccines to come down very significantly in Q2 to Q4 of fiscal year 24 compared to Q1, perhaps with an increase at the end of the fiscal year in the month of September as seasonal vaccine activity begins picking up. And as I said in my prepared remarks, if we, you know, exclude the contributions from both commercial COVID-19 vaccines and the exclusive COVID treatments, our operating income growth would have been 12% in the U.S. healthcare solution segment in Q1 versus the 22% that we reported in the U.S. And with regard to the other positive trends that I talked about, we expect these positive trends to continue across our business throughout the fiscal year, but And, you know, an example I'll give there is operating expenses. Last year on the May call last year, we talked about some operating efficiency initiatives that we took in April of last year, and they were very effective.
G L P. One our growth and the G. L P. One.
Jim Cleary: <unk>.
Jim Cleary: Profitability in the impacts it has on our business and.
As we talked about we've continued to see strong growth and drugs in the <unk> one class.
Jim Cleary: Revenue this quarter grew.
Jim Cleary: <unk> grew by $2 $2 billion versus the first quarter of fiscal year 'twenty three unless I talked about in the prepared remarks, our consolidated revenue was up 15% and if we exclude the increase in G. L. P ones are consolidated revenue growth would've been 12.
Jim Cleary: 12% during the quarter and then.
Jim Cleary: With regard to.
Jim Cleary: Profitability My comment there is consistent with what we've said in the past <unk> has continued to be more impactful from a revenue growth perspective, and our minimally profitable.
Jim Cleary: For us given that there are brand with.
Jim Cleary: With cold chain requirements also Eric.
Speaker Change: Next question please.
Speaker Change: Our next question comes from Daniel <unk> with Citi. Your line is open. Please go ahead.
Bennett S. Murphy: And as we can see in our results this quarter with, you know, 8% operating expense growth compared to 13% gross profit growth, and comps get a little bit harder on OPEX in the back half of the year. And so, you know, that's one of the things where we would continue to expect to have outperformance, but perhaps not at the same level of outperformance. But having said that, you know, I just want to finish by saying we feel really good about the ongoing strong performance of our businesses and our guidance. So thanks for asking the question. And then there was a second part of the question. Was that on shipping?
Daniel: Hi, guys. Thanks for taking the question and congrats on the strong start here on.
Daniel: On the international side, you called out strength in your Canadian business I know you have a strong vaccine distribution business up there, but I'm curious if.
Daniel: It's vaccines vaccines, there that's driving that strength or if there's some other.
Daniel: A piece of the business.
Daniel: Gideon side that is performing well.
Gideon: Yeah no. Thank you.
Gideon: Obviously, you had a question about Canada, which is which has been a strong business for us a long time, we had did several acquisitions there many years ago, and we have an integrated business model.
Bennett S. Murphy: I could answer. I think it had more to do with geopolitical risk in Europe, if I understood correctly. And, you know, I would just say, of course, we don't have a crystal lens, but I would just say that our business has proved over many geopolitical events, many economic crises to be very resilient, in fact, among the most resilient of businesses. As long as patients keep needing prescriptions, as long as pharma companies keep on innovating, as long as the payers, you know, both government and commercial payers, keep It can get a little bit different in commercialization services, depending on what's going on with investments in pharma life cycles. But overall, I'd say, you know, we tend to be the most durable of businesses. Jim, you want to add something? Yeah, I'll just say with regard to shipping specifically, we don't have anything specific to call out. I mean, our teams are experts at this and are very focused on it.
Gideon: The business goes by the name of animal and it's both a distribution on the specialty side, we run some infusion centers, which are really part of a manufacturer commercialization. We have a lot of patient programs. We do a three PL and it's not it's a health system that is a very relevant to our.
Gideon: Our expansion into other countries.
Gideon: And.
Gideon: Certainly if you look at the value and the way the Canadian government thinks about new products in that it's very illustrative of the types of.
Gideon: Pharmacy and health care models, we see in Europe. So it's been a good formative business for us and one that we continue to do well and I would also say that we have a entrepreneurial team that understands the market there.
Gideon: It's pretty stable that have been with us for a long time.
Gideon: Many of them are actually helping US now an international development. So good business for us and really punches outside of their weight in the specialty market in Canada and.
Jim Cleary: And, you know, some of the things that we actively focus on are, you know, monitoring any shipping disruptions and working closely with, you know, our manufacturer partners and our provider customers to analyze and ensure sustainability of supply. And like I said, we don't have anything specific to call out other than to say our teams are experts in it and very focused on it, Stephanie. Next question, please. Our next question comes from Lisa Gill with J.P. Morgan. Your line is open, please go ahead. Thanks very much and good morning.
Speaker Change: And having a global impact was in Cora now so thanks for the call out Jim you want to add something yeah, I'll add one.
Jim Cleary: Minor point in response to your question there was growth in vaccines in Canada during the quarter, but it was a small part of the growth really the growth was driven by the core part of the business, which performed very well during the quarter.
Jim Cleary: Our next question comes from Elizabeth Anderson with Evercore ISI.
Elizabeth Anderson: Please go ahead.
Elizabeth Anderson: Hi, guys. Thanks, so much for that question one thing that I wanted to explore a little bit more you, obviously said that youre seeing nice performance from the former Nellix business as it continues to.
Lisa C. Gill: Steve, first I wanted to start with the international business, and you called out global specialty logistics as being part of the strong performance on the international side. Can you maybe help us to understand what are some of the keys to that performance? Was there anything that was kind of unusual in the quarter?
Elizabeth Anderson: Integrated into the core business one thing we've been hearing from the more the manufacturer side of equation is just sort of maybe a little bit of reduced spending on the commercialization side can you talk about how youre seeing the impact of that in the business is it something that you sort of maybe a headwind later in the year as at present additional opportunities as they seek to outsource additional services.
Steve Collis: And then, just as a follow-up, Jim, I was surprised to hear you say generic price, lack of deflation or stabilization in generic price, was number five. Can you maybe just talk about what you're seeing in the environment there? Because I would have expected that that would have been maybe a little bit more of a key driver when we think about operating profit. Yeah, so on, you know, our logo business and, of course, our world career business, which does more specialized logistics, are both performing very well. You know, and we expect to see continued growth in those businesses. We have a logo closely linked to our traditional RCS business in the US, and we're getting away from those names as we move to, you know, Syncora and global programs.
Elizabeth Anderson: Can you help us sort of think through that as we think about the rest of the year. Thank you.
Speaker Change: Yeah, no. It's a very good it's a very good question and I certainly understand that I mean, the investment socket and life cycles in the fruit in life Sciences, and the approval cycles, we've had experience with this through businesses like lash and.
Speaker Change: Even in my early days, our Ics as we look at products.
Getting approved or not getting approved and as you look at the VC funding cycle and as you look at M&A from Big pharma to smaller format.
Speaker Change: I'd say that the market has been a little bit softer than in the last a year or two here in the hall.
Speaker Change: With some of the geopolitical deflation and market pressures, but you're seeing you know.
Steve Collis: But, you know, those businesses continue to be of significant interest to manufacturers because they help with the commercialization process. They provide efficiency, both for large and small manufacturers, and, you know, are a key element of our growth. In Europe, we have some, you know, we have some stronger competitors there, and it's a more established industry, I'd say. You know, and, of course, every country is a little bit different, but as a generalization, I'd say we have stronger competitors there, and certainly, Syncora intends to raise the bar.
Speaker Change: I think theres, a real thesis of a tremendous investment in innovation, a precision medicine cell and gene therapies, which Saint <unk> is uniquely positioned to capitalize on and you'll see us continue to benefit.
Speaker Change: <unk> spending.
Speaker Change: Just getting ready now for a March our strategic plan presentation to the board are we spending a lot of time looking at our commercialization services capabilities, how do we become the best in class in all the various areas. If we're in including the four main segments had formulations in development consulting regulatory affairs.
Speaker Change: Pharmacovigilance quality management and compliance and we think that there's a real role for St. Cora globally in those in those launches in those commercialization services and you'll see US continue to invest we're happy with the team we have in place we happy with the U S. Presences, we have then you'll see us.
Steve Collis: Our leadership is very focused on becoming a leader in that industry and in all the major markets we're in, and you'll continue to see us making progress because we have a great understanding of the whole healthcare ecosystem that is hard for others to have. You know, we have it from the provider, the manufacturer, the health system perspective, and we have it across so many different countries and healthcare ecosystems that I think it just gives us some business intelligence that is hard to replicate, and you'd expect us to continue to do very well in those areas. Jim, the second part is for you.
Speaker Change: To benefits and.
It'll be a little bit affected by the economic cycles, but.
Speaker Change: There's a global trend, which.
Which is a long term trend, which we intend to capitalize on.
Speaker Change: We now turn to Allen Lutz with Bank of America. Your line is open. Please go ahead.
Allen Lutz: Good morning, and thanks for taking the questions one for Jim we're about a month into the year, just wondering how our brand price increases coming in versus expectations is there anything to call out there and then what's embedded in the model for mid year price increases. Thanks.
Jim Cleary: Sure. With regard to the moderation of generic deflation, and, you know, as we've indicated over the last several months, there's been a moderation in generic deflation, particularly in certain pockets of the market, and we've certainly benefited from that to the extent that it's been a smaller headwind. And if the moderation in generic deflation sustains and is more broad, it would really be, you know, a benefit to us, a continued benefit to us as the annual headwind would be smaller.
Allen Lutz: Yeah, and so let me talk about.
Jim Cleary: Brand price increases and what we've been saying that January price increase activity was broadly in line with our expectations.
Speaker Change: And I'll also say that you know as we've said in the past that brand inflation is.
Speaker Change: Less important first syncor than it once was since well over 95% of our brand buy side dollars are fee for service and then.
Jim Cleary: You know, in terms of ranking them, just one point I want to make is that volumes were so strong this quarter with 15% revenue growth, and, you know, as you well know, when you can have 13% gross profit growth and 8% operating leverage, that really is kind of a big driver. Operating leverage is a big driver of operating income growth. And so, you know, that volume is driven by a number of things, including commercial COVID-19 vaccines, which were a really good benefit for us during the quarter. And so I really wouldn't make too much of the ranking, though, and, you know, the generic moderation trends were certainly positive for us during the quarter. Thank you, Lisa. Our next question comes from Eric Percher with Nephron Research. Your line is open. Please go ahead.
Speaker Change: What I'll, just say with regard to our kind of expectations and whats in the model for the balance of the year with regard to brand pricing. We don't have specific guidance metrics on drug pricing, but our expectations that we have in the model or it'll be generally in line with the changes we've seen.
Speaker Change: Over the past couple of years.
Speaker Change: Thank you for the question.
Erin Wilson Wright: We now turn to Erin rights with Morgan Stanley. Your line is open. Please go ahead.
Erin Wilson Wright: Great. Thanks, two questions here.
Erin: Okay, but.
Erin: <unk> is there any way you can achieve better economics associated with G. L. P. One or is it just simply a function of the more complex logistics and there's nothing more you can do there and then on animal how if you've called that out as strong what are you seeing in terms of volume and pricing trends across both companion and production animal how are how's the landscape.
Erin: Evolving for instance in terms of an alternative channel. Thanks.
Eric Percher: Jim, the gross profit was strong despite the downward pressure you mentioned from GLP ones and government COVID treatments. Can you remind us how the GLP one volumes and also the gross profit have trended over the last year and specifically when the shift in sell-side discounts occurred, how that plays through for the remainder of the year, and whether there's any impact on generic discounts built in there? Yeah, and so let me kind of address that with regard to your questions on kind of GLP-1 growth and GLP-1 profitability and the impacts it has on our business. And, you know, as we talked about, we continue to see strong growth in drugs in the GLP-1 class. You know, revenue this quarter grew by $2.2 billion versus the first quarter of fiscal year 23. And as I talked about in the prepared remarks, our consolidated revenue was up 15 percent. And if we exclude the increase in GLP-1s, our consolidated revenue growth would have been 12 percent during the quarter.
Erin: Yeah.
Speaker Change: Yes. Thank you for the question Eric you know on <unk> I would just say that in the long term you know some of the formulations are going to switch.
Speaker Change: It's such a big category that as we look at renewals of contracts and you know we have on the sell side we have.
Speaker Change: Some way you usually around three to five years on those contracts.
Speaker Change: This is a different category that we would work with the customers to understand what our mutual requirements are.
Speaker Change: Certainly, it's a category that debt.
Speaker Change: That is having a white almost contracts such as a serious topline significance and has impacts on.
Speaker Change: The different contractual requirements that we have including mix of products et cetera. So.
It obviously will come up in any discussion.
Speaker Change: We also intend to do more work with manufacturers, we do think that from a clinical perspective. These are products that are interesting at the pharmacy counter and we encouraging our independent pharmacists for example to stay involved in the dispensing of these products.
Speaker Change: So.
Speaker Change: It's certainly something that.
Speaker Change: That we are very mindful of and we would expect that overtime.
Jim Cleary: And then, you know, with regard to profitability, my comment there is consistent with what we've said in the past. GLP-1s continue to be more impactful from a revenue growth perspective and are minimally profitable for us, given that they are, you know, a brand with cold chain requirements also, Eric. Next question, please. Our next question comes from Daniel Groslight with City. Your line is open, please go ahead.
As he sell side contracts come up that Youll see them become more typical brand economics and then.
Speaker Change: Headwinds we've experienced in the early days hopefully that's the aspiration.
Speaker Change: What we would hope to get to I'm sure Aaron with regards to your question on animal health, our animal health business had a particularly strong.
Speaker Change: Growth in the quarter.
And it had very good performance and it also benefited from an easier comparison, given the industry wide pressures in the prior year December that we called out last year, and so particularly strong.
Daniel Groslight: Hi guys, thanks for taking the question and congrats on the strong start here. On the international side, you called out strength in your Canadian business. I know you have a strong vaccine distribution business up there, but I'm curious if it's the vaccines, the COVID vaccines there that's driving that strength, or if there's some other piece of the business on the Canadian side that is performing well. Thanks. Yeah, no,
Speaker Change: Operating income growth and also very good performance from a revenue growth standpoint, it had low double digit revenue growth in the quarter.
Speaker Change: With the growth in both the companion animal business in the production animal business with growth being stronger in the companion animal business and then one just final thing I'll say is that we've seen here just very strong execution by our animal health team just as we have by all of our teams across Syncor. So thank you for that and animal health.
Steve Collis: It's nice to get a question about Canada, which has been a strong business for us for a long time. We did several acquisitions there many years ago, and we have an integrated business model there. The business goes by the name of Enamor, and it's both distribution on the specialty side.
Speaker Change: <unk>.
Speaker Change: Yeah.
Speaker Change: We now turn to Charles Murray with TD Cowen. Your line is open. Please go ahead.
Steve Collis: We run some infusion centers, which are really part of a manufactured commercialization. We have a lot of patient programs. We do 3PL, and it's a health system that is very relevant to our expansion to other countries. And certainly, if you look at the value and the way the Canadian government thinks about new products, it's very illustrative of the types of pharmacy and healthcare models we see in Europe. So it's been a good formative business for us and one that we continue to do well in. I would also say that we have an entrepreneurial team that understands the market there. That's pretty stable. They've been with us for a long time. Many of them are actually helping us now in international development.
Charles Murray: Yeah. Thanks, Thanks for taking the question.
Charles Murray: Steve.
Charles Murray: There's a lot of discussion recently around potential changes on how pharmacies are reimbursed by payers and moving to a cost plus model and I think the argument here is that that industry is at a tipping point, where maybe there's less potential for generic substitution to offset sort of the reimbursement pressures pharmacy space by payers.
Charles Murray: From where you sit as a key partner to both no change and particularly independent pharmacies.
Charles Murray: Could you comment maybe on what Youre seeing in the market in terms of the health of your retail customers.
Do you think we are reaching sort of a limit to what you know.
Steve Collis: So good business for us, and really punches outside of their weight in the specialty market in Canada, and has a global impact within Cora now. Jimmy, do you want to add something?
Charles Murray: Pharmacies, particularly independents can confer and if the industry does move to a cost plus model how much that impacts the way you interact.
Charles Murray: How might that impact your business and how you interact with our retail customers. Thanks.
Speaker Change: Yeah. So.
Speaker Change: I think we always said one of the things that I learned early on in my career is that we always have to be very mindful of reimbursement for our provider customers.
Jim Cleary: Yeah, I'll add one minor point in response to your question. There was growth in vaccines in Canada during the quarter, but it was a small part of the growth. Really, the growth was driven by the core part of the business, which performed very well during the quarter. Our next question comes from Elizabeth Anderson with Evercore ISA. Your line is open, please go ahead.
Speaker Change: Of course, we do a lot of work with independents in particular with elevated Psa O.
Speaker Change: And we've been saying for a while that some of the Reits are not manageable so to see and.
Speaker Change: And the industry to step up and really talk about changing the model I think is very important.
Elizabeth Anderson: Hi guys, thanks so much for the question. One thing that I wanted to explore a little bit more is you obviously said that you're seeing nice performance from the Pharmalex business as it continues to integrate into the core business. One thing we've been hearing from the more, the manufacturer side of the equation is just sort of maybe a little bit of reduced spending on the commercialization side. Can you talk about how you're seeing the impact of that in the business? Is it something that you sort of may be a headwind for later in the year?
Speaker Change: We would like to see a fair and transparent reimbursement system for all categories in pharmacy.
Speaker Change: Especially community pharmacy, and clear, especially including independent pharmacists to we feel a special need to advocate on behalf of so it's early days, it's encouraging that there is some talk about adoption of a cost plus model across the industry and we will see we will see how.
Speaker Change: The industry responds in PA.
Speaker Change: <unk> responded cetera, but we believe that this is a sign that it does need to be an improvement in the base profitability of community pharmacists, which is encouraging.
Steve Collis: Does it present additional opportunities as they seek to outsource additional services? Can you help us sort through that as we think about the rest of the year? Yeah, no, it's a very good question.
Speaker Change: Our next question comes from Eric Coldwell with Baird. Your line is open. Please go ahead.
Steve Collis: I certainly understand that. I mean, investment cycle in life cycles and the proof in life sciences and the approval cycles, you know, we've had experience with this through businesses like Lash and, you know, even in my early days, ICS, as we look at, you know, products, you know, getting approved or not getting approved. And as you look at the VC funding cycle, and as you look at M&A from big pharma and just smaller pharma, and, you know, I'd say that the market has been a little bit softer than, you know, in the last year to year and a half, you know, with some of the geopolitical and deflation and market pressures, but you're seeing, you know, I think there's a real thesis of a tremendous investment in innovation, precision medicine, cell and gene therapies, which Syncora is uniquely positioned to capitalize on, and you'll see us continue to benefit.
Eric W. Coldwell: Thanks, very much a number of mine have been hit but I might have a too small separate ones first on internet.
Eric W. Coldwell: International very strong underlying performance.
Eric W. Coldwell: Up over 20% FX ex foreign currency I'm curious if you could parse out the impact of Egypt from both a revenue and AOI standpoint, because I believe your AOI would have been up even more.
The year over year headwind in Egypt, and then secondarily just a quick one on GOP ones. I know you don't guide to specific revenue or revenue contribution growth rate, but when we look at your raised revenue target for the year could you give us a sense on how much of that was or was not related to <unk>.
Eric W. Coldwell: Outlook.
Eric W. Coldwell: He is your <unk> growth.
Speaker Change: Our expectation changed since the last update thanks, so much.
Speaker Change: Okay. So let me start out with the Egypt, Eric and we.
Steve Collis: You know, we're spending time, just getting ready now for our March strategic plan presentation to the board. We're spending a lot of time looking at our commercialization services capabilities, how do we become the best in class in all the various areas that we're in, including the four main segments that Pharmalex is in, development consulting, regulatory affairs, pharmacovigilance, quality management, and compliance, and we think that there's a real role for Syncora globally in those launches, in those commercialization services, and you'll see us We're happy with the team we have in place, we're happy with the U.S. presence we have there, and you'll see us continue to benefit. And, you know, we'll be a little bit affected by the economic cycles, but there's a global trend here, which is a long-term trend which we intend to capitalize on. We now turn to Allen Lutz with Bank of America. Your line is open; please go ahead. Good morning, and thanks for taking the questions. One for Jim.
Speaker Change: We haven't specifically disclosed the size of that business, but let me say, yes, you're absolutely right. Our operating income growth would have been higher in the quarter.
Speaker Change: If we.
Speaker Change: If we had backed out Egypt for instance from the first quarter of last year, but let me kind of give you some some.
Speaker Change: Some data that I think would be helpful. As you do your models over the course of the year They Egyptian business.
Speaker Change: Was profitable in the first fiscal quarter of last year.
Speaker Change: We just referenced and then was essentially flat in Q2 and Q3 and then it had a loss in Q4 and so for the full year. It was a slight.
A slightly profitable business in fiscal year, 'twenty, three and so it really doesn't have if you look at it on a full year basis. It doesn't have much of an impact on kind of full.
Speaker Change: Full year growth rates in the international segment, but as I said during the first quarter the growth would have been a little bit higher if we.
Speaker Change: If we included or if we backed out Egypt from.
Jim Cleary: We're about a month into the year. Just wondering how brand price increases are coming in versus expectations. Is there anything to call out there?
Speaker Change:
Speaker Change: Last year, and then with regard to.
Speaker Change: U S health care segment.
Jim Cleary: And then what's embedded in the model for mid-year price increases? Thanks. Yeah, and so let me talk about brand price increases and what we've been seeing. The January price increase activity was broadly in line with our expectations. And I'll also say that, as we've said in the past, that, you know, brand inflation is less important for Syncora than it once was since, you know, well over 95% of our brand buy side dollars are fee for service. And then, you know, what I'll just say with regard to our kind of expectations and what's in the model for the balance of the year with regard to brand pricing. We don't have specific guidance metrics on drug pricing, but our expectations that we have in the model are that it will be generally in line with the changes we've seen over the past couple of years. Thank you for the question. We now turn to Erin Wright with Morgan Stanley. Your line is open, please go ahead. Great, thanks. I have two questions here, if that's okay.
Speaker Change: And.
Speaker Change: <unk> so the U S health care solutions segment.
Speaker Change: Revenue growth, we now expect 11% to 13% growth up from our previous expectations of 7% to 10% growth in the new guidance range.
Reflects the strong revenue growth, we saw in the first quarter, including year over year growth of G. L. P ones and continued good growth for the remainder of the year driven by expected broad based prescription.
Speaker Change: Utilization trends and so <unk> ones essentially contributed three percentage points of growth.
Speaker Change: The first quarter and we expect.
Just kind of continued.
Good growth.
Speaker Change: Throughout our business during the balance of the year and feel really good about the business overall and really good about our guidance. Thanks.
Speaker Change: Our next question comes from George Hill with Deutsche Bank. Your line is open. Please go ahead.
George Hill: Hey, guys. Thanks for squeezing me in I'm going to kind of get into a niche topic here with centre ex Jim.
Erin Wilson Wright: But on GLP-1s, is there any way you can achieve better economics associated with GLP-1s? Or is it just simply a function of the more complex logistics, and there's nothing more you can do there? And then on animal health, you called that out as strong.
George Hill: You guys have that EPA business and there's been a we've seen kind of a surge in demand for epa's, both as it relates to <unk> and the increasing use of Biosimilars. So would just love to hear you talk a little bit about how that business is performing well that's kind of the GOP wants to know about some space.
Speaker Change: Yeah and so.
Steve Collis: What are you seeing in terms of volume and pricing trends across both companion and production animals? How's the landscape evolving, for instance, in terms of alternative channels? Thanks. Yeah, thank you for the question, Aaron. You know, on GLP-1s, I would just say that in the long term, some of the formulations are going to switch. It's such a big category, that as we look at renewals of contracts, and you know, on the sales side, we have, you know, somewhere usually around three to five years on those contracts. This is a different category that we would work with the customers to understand what our mutual requirements are. Certainly, it's a category that has weight on those contracts. It's of such serious top-line significance and has impacts on, you know, the different contractual requirements that we have, including the mix of products, etc. So, it obviously will come up in any discussion.
Speaker Change: I'll say.
Speaker Change: Overall, we feel really good about our prospects in our global pharma services and patient services and the sorts of things that <unk> does and we feel.
Speaker Change: Very good overall about the the growth.
Speaker Change: Growth.
Speaker Change: Prospects, there and really don't have any.
Speaker Change: Comments beyond that other than to say kind of global pharma services in those businesses like <unk>.
Just.
Speaker Change: A key part of our growth this year and over our long term guidance also.
Speaker Change: Okay. This concludes our thanks to everyone Steve Collins.
Speaker Change: Okay.
Steve Collis: Thanks, everyone.
Speaker Change: I appreciate your patience as we ran a little bit long today. So this wraps up our call for today.
Speaker Change: I just have to make a little note that at the end of our fiscal year 'twenty three coal I received a little pouch and it was 50 quarters from my predecessor to commemorate 50 earnings calls. So once we counting 51 is clearly one of the most memorable and exciting quarters that we have presented in.
Steve Collis: We also intend to do more work with manufacturers. We do think that, from a clinical perspective, these are products that are interesting at the pharmacy counter, and we're encouraging our independent pharmacists, for example, to stay involved in the dispensing of these products. So, you know, it's certainly something that we are very mindful of, and we would expect that over time, as these sales side contracts come up, you'll see them become more typical brand economics than the headwind that we experienced in the early days. Hopefully, that's the aspiration.
Speaker Change: Even more so to do it under the new core ticker symbol.
Speaker Change: While we have a lot of work ahead to continue to deliver on our purpose and the potential of saying Cora. We are really proud of the work. Our team members are doing to position us successfully and strategically at the center of pharmaceutical based healthcare. Thank you for your time today.
Jim Cleary: That's what we would hope to get. Sure, Aaron, with regard to your question on animal health, our animal health business had particularly strong growth in the quarter, and it had, you know, very good performance, and it also benefited from an easier comparison given the industry-wide pressures in the prior year, December, that we called out last year. And so, you know, particularly strong operating income growth and also very good performance from a revenue growth standpoint. It had low double-digit revenue growth in the quarter, with growth in both the companion animal business and the production animal business, with growth being stronger in the companion animal business.
Speaker Change: Ladies and gentlemen, today's call is now concluded. Thank you for your participation you may now disconnect your lines.
Ladies and gentlemen, today's call is now concluded. Thank you for you.
Jim Cleary: And then one final thing I'll say is that, you know, we've seen just very strong execution by our animal health team, just as we have by all of our teams across SYNCOR. So, thank you for that animal health question. We now turn to Charles Rhye with T.D. Cohen.
Charles Rhye: The line is open, please go ahead. Yeah, thanks for taking the question. Steve, you know, there's been a lot of discussion recently around potential changes to how pharmacies are reimbursed by payers and moving to a cost plus model. And I think the argument here is that, you know, that industry is at a tipping point where maybe there's less potential for generic substitutions to offset the reimbursement pressures pharmacies face from payers. From where you sit as a key partner to both Chained End and independent pharmacy, could you comment maybe on what you're seeing in the market in terms of the health of your retail customers? Do you think we are reaching some sort of a limit to what pharmacies, particularly independents, can bear? And if the industry does move to a cost-plus model, how might that impact the way you interact? Or how might that impact your business and how you interact?
Steve Collis: Yeah, so, one of the things that I learned early on in my career is that we always have to be very mindful of reimbursement for our provider customers. Of course, we do a lot of work with independents, in particular with Elevate, PSAO, and we've been saying for a while that some of the rates are not manageable. So, to see an industry leader step up and really talk about changing the model is very important. We would like to see a fair and transparent reimbursement system for all categories in pharmacy, you know, especially community pharmacy, and especially including independent pharmacists who we feel a special need to advocate on behalf of. So, it's early days.
Steve Collis: It's encouraging that there is some talk about adoption of the cost-plus model across the industry, and we'll see how the industry responds and payers respond, etc., but we believe that this is a sign that there does need to be an improvement in the base profitability of community pharmacists, which is encouraging. Our next question comes from Eric Coldwell with Baird. Your line is open, please go ahead. Thanks very much. A number of mine have been hit, but I might have two small separate ones.
Eric W. Coldwell: First on international, very strong underlying performance, AOI up over 20% in FXX foreign currency. I'm curious if you could parse out the impact of Egypt from both a revenue and AOI standpoint. I believe your AOI would have been up even more x the year over year headwind in each. And then, secondarily, just a quick one on GLP-1s.
Jim Cleary: I know you don't guide to specific revenue or revenue contribution growth rates, but when we look at your raised revenue target for the year, could you give us a sense of how much of that was or was not related to your GLP-1 outlook, i.e., your GLP-1 growth? Expectation changes since the last update. Thanks. Okay, so let me start out with Egypt, Eric. And we haven't specifically disclosed the size of that business. But let me say, yeah, you're absolutely right.
Jim Cleary: Our operating income growth would have been higher in the quarter if we, you know, had backed out Egypt, for instance, from the first quarter of last year. But let me kind of give you some data that I think would be helpful as you do your models over the course of the year. The Egyptian business was profitable in the first fiscal quarter of last year, as we just referenced, and then it was essentially flat in Q2 and Q3. And then it had a loss in Q4.
Jim Cleary: And so for the full year, it was a slight, a slightly profitable business in fiscal year 23 and so it really doesn't have if you look at on a full year basis it doesn't have much of an impact on kind of full year growth rates in the international segment but as I said during the first quarter the growth would have been a little bit higher if we if we included or if we backed out Egypt from last year and then with regard to kind of U.S. healthcare segment and GLP-1 so the U.S. healthcare solution segment you know in revenue growth we now expect 11 to 13 percent growth up from our previous expectations of seven to ten percent growth and the new guidance range it reflects the strong revenue growth we saw in the first quarter including the year over year growth of GLP-1s and continued good growth for the remainder of the year driven by expected broad-based prescription utilization trends. And so GLP ones essentially contributed, you know, three percentage points of growth in the first quarter, and we expect, you know, just kind of continued good growth throughout our business during the balance of the year and feel, you know, really good about the business overall, and really good about our guidance. Thanks. Our next question comes from George Hill with Deutsche Bank. Your line is open, please go ahead. Hey guys, thanks for squeezing me in. I'm going to kind of get into a niche topic here with CenterX, Jim.
George Hill: I know that you guys have that EPA business, and there's been a kind of surge in demand for EPAs, both as it relates to GLP-1s and the increasing use of biosimilars. So we'd just love to hear you talk a little bit about how that business is performing relative to the GLP-1s and the biosimilars. Yeah, and so, you know, I'll say, Overall, we feel really good about our prospects in global pharma services and patient services and the sorts of things that CenterX does. And, you know, we feel just very good overall about the growth prospects there and really don't have any comments beyond that, other than to say, you know, kind of global pharma services and those businesses like CenterX are just, you know, a key part of our growth this year and in our long-term guidance.
Jim Cleary: This concludes our Q&A. Thanks, everyone. Steve Collis.
Steve Collis: Thanks, everyone. I appreciate your patience. We ran a little bit long today, so this wraps up our call for today. I just have to make a little note that at the end of our fiscal year 23 call, I received a little pouch, and it contained 50 quarters from my predecessor to commemorate 50 earnings calls. So once we're counting, 51 is clearly one of the most memorable and exciting quarters that we have presented, and even more so to do it under the new call ticker symbol. While we have a lot of work ahead to continue to deliver on our purpose and the potential of Sankora, we are really proud of the work our team members are doing to position us successfully and strategically at the center of pharmaceutical-based healthcare.
Operator: Thank you for your time today. Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation, and we will now disconnect your line. Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your...