Q3 2025 Cencora Inc Earnings Call

Lucy: Hello, everyone, and thank you for joining the Cencora Fiscal 2025 third quarter results call. My name is Lucy, and I'll be coordinating your call today. During the presentation, you can register a question by pressing star, followed by one on your telephone keypad. If you change your mind, please press star, followed by two. It is now my pleasure to hand over to your host, Bennett Murphy, Senior Vice President of Investor Relations and Treasury, to begin. Please go ahead.

Hello everyone, and thank you for joining the Senor. Fiscal 2025 third quarter results. Call my name is Lucy and I'll be coordinating your call today during the presentation. You can register a question by pressing star, followed by 1, on your telephone keypad,

If you change your mind, please press star followed by 2. It is now my pleasure to hand over to your host, Bennett Murphy, Senior vice president of investor relations and treasury to begin. Please go ahead.

Bennett Murphy: Thank you. Good morning, good afternoon, and thank you all for joining us for this conference call to discuss Cencora's Fiscal 2025 third quarter results. I am Bennett Murphy, Senior Vice President, Head of Investor Relations and Treasury. Joining me today are Bob Mauch, President and CEO, and Jim Cleary, Executive Vice President and CFO. On today's call, we'll 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.cencora.com. We have also posted a slide presentation to accompany today's press release on our investor website. During this conference call, we'll discuss 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. Forward-looking statements are based on our management's current expectations and are subject to uncertainty and change.

Thank you. Good morning, good afternoon. And thank you all for joining us for this conference call to discuss. Sorus physical 2025, third quarter results. I am Ben and Murphy Senior vice president head of investor relations and treasury joining me today are Bob M, president CEO, and Jim Clary, Executive, Vice President, and CFO on today's call. We've been 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.com.

Operate income and income taxes.

Bennett Murphy: For our discussion of key risks and assumptions, we refer to today's press release and our SEC filings, including our most recent 10-Q. Cencora assumes no obligation to update any forward-looking statements, and this call cannot be rebroadcast without the express permission of the company. You will have 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 participants as possible within the hour. With that, I'll turn the call over to Bob.

What we're looking statements are based on our management, current expectations and our subject to uncertainty and change for a discussion of key risk and assumptions. We appreciate today's press release and our SEC filings, including our most recent 10q, 10 cor assumes, no obligation to update any forward. Looking statements in this. Call cannot be rebroadcast with the express permission of the company.

Robert Mauch: Thank you, Bennett. Hi, everyone, and thank you for joining Cencora's Fiscal 2025 third quarter earnings call. To start, I'd like to thank the over 51,000 Cencora team members for the industry-leading expertise and purpose-driven approach they bring to work each day. Their talent and commitment fuel our growth as we continue to strengthen our position as an end-to-end healthcare solutions provider. Through the strength of our strategy, services, and unwavering standards, Cencora's business model is driven by pharmaceutical distribution and complemented by higher margin, high-growth value-added services and solutions for our biopharma and provider customers. In our third quarter, Cencora delivered strong performance with adjusted operating income growth of 21% and adjusted diluted EPS growth of 20%.

You have the opportunity to ask questions after today's remarks by management. We ask that you limit your questions to 1 per participant in order for us to get to, as many participants as possible in the hour with that. I'll turn the call over to Bob.

Thank you Bennett. Hi, everyone. And thank you for joining sorus. Fiscal 2025 third quarter earnings. Call to start, I'd like to thank the over 51,000, core team members for the industry-leading, expertise and purpose-driven approach. They bring to work each day.

Their talent and commitment fuel. Our growth as we continue to strengthen our position as an end to end Healthcare Solutions, provider.

Do the strength of our strategy services and unwavering standards sora's. Business model is driven by pharmaceutical distribution and complimented by higher margin. High growth value, added services and solutions for our biofarma and provider customers.

Robert Mauch: In recognition of our outperformance during the quarter and year to date, both in the US segment and on a consolidated basis, we are pleased to once again raise our Fiscal 2025 guidance. Today, I will highlight three growth priorities. First, enhancing patient care and adherence. Through decades of investment in physical and digital infrastructure, our core pharmaceutical distribution services ensure access to life-saving medications. Second, strengthening our specialty leadership. As we focus on future growth, we are differentiating the services and solutions we offer to pharmaceutical manufacturers to support specialty product innovation. And third, leading with market leaders, prioritizing active learning and active leading. We identify opportunities to create value in collaboration with our leading customer portfolio. I'll begin with how Cencora enhances patient access to pharmaceuticals through our critical role as a leader in pharmaceutical distribution.

In our third quarter percent core delivered, strong performance with adjusted operating income, growth of 21% and adjusted diluted EPS growth of 20%.

In recognition of our outperformance during the quarter and year to date, both in the US segment, and on a Consolidated basis, we are pleased to once again, raise our fiscal 2025 guidance.

Today, I will highlight 3 growth priorities.

First enhancing patient care and adherence.

Through Decades of investment in physical and digital infrastructure. Our core pharmaceutical distribution services ensure access to life-saving medications

Second strengthening our specialty leadership. As we focus on future growth, we are differentiating the services and solutions we offer to pharmaceutical manufacturers to support specialty product, innovation.

And third leading with Market leaders.

I prioritize active learning and active leading. We identify opportunities to create value in collaboration with our leading customer portfolio.

Robert Mauch: Our global reach, coupled with our local expertise, ensures patients have access to the medications they need when and where they need them in an efficient, reliable, and secure manner. We've invested in our distribution capabilities for decades, enhancing our efficiency, security, and ability to handle increasingly complex medications, allowing us to meet the needs of innovation and the increased use of pharmaceuticals. We are responsible for delivering millions of pharmaceutical orders overnight or the same day to hundreds of thousands of healthcare providers we serve, ensuring pharmacists, physicians, veterinarians, and other healthcare providers have access to the medications they require to treat patients.

I'll begin with house Andorra enhances patient access to Pharmaceuticals through our critical role as a leader in pharmaceutical distribution.

Our Global reach coupled with our local expertise, ensures patients have access to the medications. They need

When and where they need them, in an efficient, reliable and secure manner.

We've been invested in our distribution capabilities for decades.

Enhancing our efficiency security and ability to handle increasingly complex medications, allowing us to meet the needs of innovation and the increased use of pharmaceuticals.

We are responsible for delivering millions of pharmaceutical orders overnight, or the same day to hundreds of thousands of healthcare providers. We serve,

Robert Mauch: Specifically, we believe our investments over the past decade have made Cencora a market leader in ensuring the supply chain is supported and equipped to comply with the enhanced tracking and visibility requirements of the Drug Supply Chain Security Act, DSCSA, which goes into effect later this year in the United States. The significant investments made over the past several years in support of the DSCSA is yet another clear proof point of the vital role Cencora and our industry play to ensure patients' efficient, safe, and reliable access to medication. Next, Cencora is strengthening our leadership in specialty by enhancing capabilities through RCA. RCA's physician-centric approach in retina is enhancing clinical trial access, supporting specialty product innovation, and improved outcomes for patients. Recently, physician and business leaders across the RCA organization came together at our offices outside Philadelphia for their Business and Medical Leadership Board.

Ensuring pharmacists, Physicians veterinarians and other Healthcare Providers have access to the medications. They require to treat patients.

Specifically, we believe our investments over the past, decade have made Surah a market leader in ensuring of the supply chain is supported and equipped to comply with the enhanced tracking and visibility requirements of the drug supply, chain Security Act.

Dscsa, which goes into effect later this year in the United States.

The significant Investments made over the past several years, in support of the dscsa. Is, yet another Clear Proof point of the vital roles Andorra and our industry play to ensure, patients, efficient safe, and reliable access to medication.

Next Senor is strengthening our leadership and Specialty by enhancing capabilities through RCA.

RCA's Physicians Centric approach. In retina is enhancing clinical trial access supporting specialty product Innovation and improved outcomes for patients.

Robert Mauch: The time our teams spent together demonstrated collective value as we focused on practice management, value creation, and the future of patient care. In addition, retina specialists across RCA had a significant presence at the annual American Society of Retina Specialists meeting, which was oriented around highlighting the rapid innovation in retina treatments. RCA physicians drove discussions in clinical research where they demonstrated clinical excellence, strong clinical trial patient enrollments, and novel therapeutic approaches, including the delivery of an investigational gene therapy. We are proud to support these groundbreaking clinicians. Additionally, Cencora's longstanding leadership in specialty distribution, including deep relationships in the retina market, equips us with specific expertise to support manufacturers' product launches. As a result, we look forward to serving as the specialty distributor for several recently approved retina therapies that are beginning to enter both the US and international markets.

Recently, physician and Business Leaders across the RCA organization. Came together at our offices outside Philadelphia for their business and medical leadership board.

The time our team spent together demonstrated Collective value, as we focused on practice management value creation and the future of patient care.

In addition, Retina Specialists across, RCA had a significant Presence at the annual American Society of retina specialist meeting, which was oriented around highlighting the rapid innovation in retina treatments.

Clinical Excellence, strong clinical trial, patient enrollments and novel therapeutic approaches including the delivery of an investigational gene therapy.

We are proud to support these groundbreaking clinicians.

Additionally, Senora's long-standing leadership and Specialty distribution.

Including deep relationships in the retina Market, equips us with specific expertise to support manufacturers product launches.

Robert Mauch: Through these partnerships, we are facilitating streamlined market entry, secure storage, and distribution. Innovation is driving specialty pharmaceutical market growth, and Cencora is deepening our leadership in specialty by remaining at the forefront through our portfolio of services and solutions, end-to-end, from manufacturers to specialty providers. And finally, our focus on active learning and active leading is bolstering relationships with our industry-leading portfolio of customers, furthering our leadership with market leaders. Our teams are prioritizing focused engagement with our partners to deeply understand their business challenges and growth opportunity. The intentional time we spend with our customers is helping inform how we invest and expand our business to best create value. Throughout the quarter, we drove meaningful interactions with our customers and partners across the supply chain.

As a result we look forward to serving at the specialty distributor for several recently approved retina therapies that are beginning to enter both the US and international markets.

Through these Partnerships, we are facilitating. Streamlined Market, entry Secure Storage and distribution.

Innovation is driving specialty pharmaceutical market growth and Senora is deepening. Our leadership and Specialty by remaining at the Forefront, through our portfolio of services and solutions. And to end from manufacturers to Specialty providers,

And finally, our focus on Active Learning and active leading is bolstering relationships with our industry-leading portfolio of customers.

Furthering, our leadership with Market leaders.

Our teams are prioritizing focused engagement with our partners to deeply. Understand their business challenges and growth opportunity.

The intentional time we spend with our customers is helping inform how we invest and expand our business to best create value.

Robert Mauch: As an example, we hosted our annual Good Neighbor Pharmacy Thought Spot conference, giving our independent pharmacy customers the opportunity to learn about the latest trends shaping the industry and connect with peers. Our enterprise leadership team recently had the opportunity to visit a Good Neighbor Pharmacy member that is a great representation of a pharmacy that has positioned itself as a differentiated care provider. Community pharmacies are vital, accessible healthcare destinations, providing care tailored to the community they serve. I'm continually inspired by the creativity and tenacity these community pharmacists exhibit, and I'm proud of Cencora's partnership with these market leaders. In closing, and before I hand it over to Jim, as I near the end of my first year as CEO, I'll remind you we are focused on four drivers that will strengthen our execution: digital transformation, talent and culture, productivity, and prioritizing growth-oriented investments.

Throughout the quarter, we drove meaningful interactions with our customers and partners across the supply chain.

As an example, we hosted our annual Good Neighbor, Pharmacy, thoughtspot conference,

Giving our independent pharmacy customers the opportunity to learn about the latest trends shaping the industry and connect with peers.

Our Enterprise leadership team recently had the opportunity to visit a Good Neighbor Pharmacy member, that is a great representation of a pharmacy that has positioned itself as a differentiated care provider.

Community. Pharmacies are vital, accessible Healthcare destinations providing care. Tailored to the community, they serve.

I'm continually inspired by the creativity and tenacity of these community pharmacists, and I'm proud of Sorus' partnership with these market leaders.

In closing. And before I hand it over to Jim, as I near the end of my first year as CEO, I'll remind you, we are focused on 4 drivers, that will strengthen our execution.

Digital transformation.

Talent and culture.

Productivity.

Robert Mauch: We're focused on Cencora's digital transformation, using data and advanced analytics to accelerate operational excellence and enhance both the customer and team member experience. We're committed to developing our team members, ensuring Cencora is a place where best-in-class talent come to grow their careers, and furthering our purpose-driven culture. We've elevated our concentration on productivity, equipping us to identify ongoing capability and process improvements. And finally, our commitment to leading now and in the future means we prioritize investments in strategic growth-oriented areas, as evidenced by our continued investment in technology and capabilities for our customers, our acquisition of RCA, and our investment with a pathway to full ownership in one oncology. This also means that we continually evaluate the areas which are less strategically aligned where we should de-emphasize investment. To close, I want to again thank the Cencora team members.

And prioritizing growth oriented Investments.

We're focused on senor's digital transformation.

Using data and advanced analytics to accelerate operational excellence and enhance both the customer and team member experience.

We're committed to developing our team members ensuring sentoria is a place where best-in-class Talent come to grow their careers.

And furthering our Purpose Driven culture.

We've elevated, our concentration, our productivity

Equipping us to identify ongoing capability and process improvements.

And finally our commitment to Leading now, and in the future means, we prioritize investments in strategic growth oriented areas.

As evidenced by our continued investment in technology and capabilities for our customers.

Our acquisition of our CCA and our investment with a pathway to full ownership and 1 oncology.

This means that we continually evaluate the areas which are less strategically aligned where we should deemphasized investment.

To close.

Robert Mauch: It's due to their expertise, efficient execution of our strategy, and dedication to our purpose that Jim and I are able to once again report such strong results. With that, I will turn the call over to Jim for an in-depth review of our third quarter results and our updated Fiscal 2025 guidance. Jim?

I want to again, thank the Senora team members. It's due to their expertise.

Efficient execution of our strategy and dedication to our purpose. That Jim and I are able to once again report such strong results.

With that.

James Cleary: Thanks, Bob. Good morning and good afternoon, everyone. As a reminder, before I turn to my prepared remarks, my remarks today will focus on our adjusted non-GAAP financial results. For a detailed discussion of our GAAP results, please refer to our earnings press release and presentation. Cencora delivered strong financial performance in our fiscal third quarter, and we are pleased to be raising our full-year Fiscal 2025 guidance as we move into the fourth quarter. Our pharmaceutical-centric strategy and positioning in key markets has allowed us to capitalize on favorable industry trends, and our growth-oriented investments to advance our leadership and specialty are driving significant value, as evidenced by our adjusted diluted EPS growth of 20%. Before reviewing our updated guidance, I'll first turn to a review of our consolidated and segment-level third-quarter results, beginning with revenue.

I will turn the call over to Jim for an in-depth review of our third quarter results and our updated fiscal 2025 guidance. Jim.

Thanks Bob. Good morning and good afternoon everyone as a reminder before I turn to my prepared remarks. My remarks today will focus on our adjusted non-gaap Financial results for a detailed discussion of our Gap results. Please refer to our earnings press release and presentation.

Senora delivered strong financial performance in our fiscal third quarter. And we are pleased to be raising our full year fiscal 2025 guidance. As we move into the fourth quarter,

To advance our leadership and Specialty are driving significant value as evidenced by our adjusted diluted EPS, growth of 20%.

James Cleary: Our consolidated revenue was $80.7 billion, up 9%, driven by revenue growth in both reporting segments. In the US healthcare solutions segment, which makes up the significant majority of our revenue and operating income, we continued to benefit from strong utilization trends and volume growth, including continued growth in GLP-1 products. Excluding sales of GLP-1s, our consolidated revenue growth would have been 8%. Turning now to gross profit, consolidated gross profit was $2.9 billion, up 21%, primarily due to the US healthcare solutions segment. Consolidated gross profit margin was 3.55%, an increase of 36 basis points, primarily driven by the gross profit contribution from our acquisition of Retina Consultants of America. Moving now to operating expenses, in the quarter, consolidated operating expenses were $1.8 billion, up 21%, driven primarily by the RCA acquisition and to support our revenue growth.

Before reviewing our updated guidance. I'll first turn to a review of our Consolidated and segment level third quarter results, beginning with Revenue,

Our Consolidated Revenue was 80.7 billion dollars up, 9% driven by Revenue growth in both reporting segments and the US, Healthcare Solutions segment, which makes up the significant majority of our revenue and operating income, we continue to benefit from strong utilization Trends and volume growth. Including continued growth in glp1 products, excluding sales of glp-1s are Consolidated, Revenue growth would have been 8%

Turning now to gross profit, consolidated gross profit was $2.9 billion, up 21%, primarily due to the U.S. Healthcare solution. Segment consolidated gross profit margin was 3.55%, an increase of 36 basis points, primarily driven by the gross profit contribution from our acquisition of Retina Consultants of America.

James Cleary: Consolidated operating income was $1.1 billion, an increase of 21% compared to the prior year quarter due to continued strong performance in our US healthcare solutions segment, 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 third quarter, net interest expense was $82 million, an increase of $50 million versus the prior year quarter, primarily due to the $3.3 billion in debt raised to finance a portion of the RCA acquisition. Turning now to income taxes, our effective income tax rate was 20.7% compared to 21.0% in the prior year quarter. Finally, our diluted share count was 195.2 million shares, a 2% decrease compared to the prior year quarter, driven by approximately $1 billion in opportunistic share repurchases over the past year.

Moving now to operating expenses in the quarter. Consolidated operating expenses were $1.8 billion, up 21%, driven primarily by the RCA acquisition and to support our revenue growth.

Consolidated operating income was 1.1 billion dollars and increase of 21%. Compared to the prior year quarter due to continued strong performance. In our us, Healthcare Solutions segment 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 third quarter.

net, interest expense was 82 million and increase of fifty million dollars versus the prior year quarter, primarily due to the 3.3 billion dollars in debt, raised to finance a portion of the RCA acquisition

Turning now to income taxes, are effective income tax rate was, 20.7% compared to 21.0% in the prior year quarter.

James Cleary: Regarding our cash balance and adjusted free cash flow, we ended June with $2.2 billion of cash and year-to-date adjusted free cash flow of approximately $100 million. Our full-year adjusted free cash flow guidance of $2 billion to $3 billion remains unchanged. This completes the review of our consolidated results. Now I'll turn to our segment results for the third quarter. US healthcare solutions segment revenue was $72.9 billion, up 9%, as the strong pharmaceutical utilization trends continued, including growth in GLP-1s. Across the segment, we saw broad-based revenue growth in all customer classes. As it relates to GLP-1 products, in the quarter, GLP-1 sales increased $1.4 billion, or 19% year over year. Turning now to operating income, US healthcare solutions segment operating income increased an outstanding 29% to $902 million, driven by growth across our distribution businesses and the contribution from RCA.

Finally, our diluted share count was 195.2 Million, shares, a 2%, decrease compared to the prior year quarter driven by approximately 1 billion dollars in opportunistic. Share purchases over the past year.

Regarding our cash balance and adjusted free cash flow. We ended June with 2.2 billion dollars of cash and year to date, adjusted free cash flow of approximately a hundred million dollars. Our full year adjusted free cash flow. Guidance of 2 billion dollars to 3 billion dollars remains unchanged

This completes the review of our Consolidated results. Now I'll turn to our segment results for the third quarter.

Us Healthcare Solutions, segment Revenue was 72.9 billion up 9%. As the strong pharmaceutical, utilization Trends continued including growth in glp owns

Across the segments. We saw broad-based Revenue growth in all customer classes.

As it relates to glp-1 products in the quarter glp-1 sales increased 1.4 billion dollars or 19% year-over-year.

James Cleary: In the quarter, specialty remained a key growth driver in both health systems and specialty physician practices, where we benefited from strong volumes and saw good biosimilar conversion trends. I'll now turn to our international healthcare solutions segment. In the quarter, international healthcare solutions revenue was $7.8 billion, up approximately 11% on an as-reported basis and up 9% on a constant currency basis, primarily driven by revenue growth in our European distribution business. International healthcare solutions operating income was $156 million, down 13% on an as-reported basis and down 16% on a constant currency basis. The decline was driven by continued softness for our higher margin global specialty logistics, as well as a decline at our consulting business.

Now to operating income us Healthcare Solutions, segment operating income increased and outstanding 29% to 902 million driven by growth our distribution businesses and the contribution from RCA

In the quarter specialty remained a key growth driver in both Health Systems and Specialty physician practices where we benefited from strong volumes and saw good bio similar conversion trends.

I'll now turn to our International Healthcare Solutions segment.

In the quarter International Healthcare Solutions, Revenue was 7.8 billion dollars up approximately 11% on an as reported basis and up 9% on a constant currency basis. Primarily driven by Revenue growth in our European distribution business.

James Cleary: While our global specialty logistics business did have a decline year over year, it grew sequentially from the March quarter as our teams have taken steps to optimize the business and drive value for our customers. We expect to see the same type of sequential improvement in operating income from the June quarter to the September quarter for this business. In the third quarter, we also saw solid performance in our 3PL business as our differentiated footprint is resonating with manufacturers. That completes the review of our third quarter results. I'll now discuss our updated Fiscal 2025 guidance expectations. As a reminder, we do not provide forward-looking guidance for certain metrics on a GAAP basis, so the following information is provided on an adjusted non-GAAP basis, except with respect to revenue and share count. I will also provide certain guidance metrics on a constant currency basis.

Driven by continued softness for our higher margin. Global specialty Logistics as well as a decline at our Consulting business. While our Global specialty Logistics business did have a decline year-over-year, it grew sequentially from the March quarter as our teams have taken steps, to optimize the business and drive value for our customers. We expect to see the same type of sequential Improvement in operating income from the June quarter, to the September quarter, for this business,

In the third quarter, we also saw solid performance in our 3pl business, as our differentiated footprint is resonating with manufacturers.

James Cleary: I will start with adjusted diluted EPS guidance and then provide detail on the income statement items contributing to the increase. We are raising and narrowing our Fiscal 2025 EPS guidance and now expect EPS to be in the range of $15.85 to $16, up from the previous range of $15.70 to $15.95, and representing growth of 15% to 16%. The updated guidance reflects the continued strong performance of our US healthcare solutions segment and reflects a lower expected contribution from our international healthcare solutions segment. Moving to revenue, we are narrowing our consolidated revenue guidance to the growth of approximately 9%. At the segment level, we are updating both our US and international healthcare solutions segment revenue growth outlooks. In the US, we now expect segment revenue growth to be in the range of 9% to 10%, narrowed from our previous range of 9% to 11%.

We are raising and narrowing. Our fiscal 2025 EPS guidance. And now expect EPS to be in the range of $15.85 to $16 up from the previous range of $15.70, to $15.95 and representing growth of 15 to 16%

The updated guidance reflects the continued strong performance of our U.S. Healthcare Solutions segment and reflects a lower expected contribution from our International Healthcare Solutions segment.

James Cleary: And given the trends we have seen and foreshadowed last quarter, we will likely finish in the lower part of that revenue range for the US. For the international segment, we now expect our segment revenue growth to be in the range of 6% to 7% on an as-reported basis, up from our previous range of 3% to 4%, to reflect the weakening of the US dollar relative to several key currencies and sales mix for our European distribution business. On a constant currency basis, we now expect international healthcare solutions segment revenue growth to be in the range of 7% to 8%, up from the previous range of 6% to 8%. Moving to operating income, we are raising and narrowing our expected consolidated operating income growth guidance to be in the range of 15% to 16%, up from our previous range of 13.5% to 15.5% growth.

Moving to revenue, we are narrowing. Our Consolidated Revenue guidance to be growth of approximately 9% at the segment level. We are updating both our us and international Healthcare Solutions. Segment, Revenue growth outlooks in the US we now expect segment, Revenue growth to be in the range of 9 to 10% narrowed from our previous range of 9 to 11% and given the trends we have seen and foreshadowed last quarter. We will likely finish in the lower part of that Revenue range for the US.

For the international segment. We now expect our segment, Revenue growth to be in the range of 6 to 7% on an as reported basis up from our previous range of 3 to 4%, to reflect the weakening of the US dollar relative to several key currencies and sales mix for our European distribution business.

On a constant currency basis, we now expect International Health Care Solutions segment revenue growth to be in the range of 7% to 8%, up from the previous range of 6% to 8%.

James Cleary: In the US healthcare solutions segment, we now expect operating income growth to be in the range of 20% to 21%, up from our prior range of 17.5% to 19.5%. The updated guidance reflects our strong performance and execution and expectation for continued strong pharmaceutical utilization trends in our fourth quarter, despite the previously disclosed loss of an oncology customer due to its acquisition. Turning now to the international healthcare solutions segment, on an as-reported basis, we now expect operating income to be down approximately 6% compared to our prior expectations for operating income to be down 4% to down 1%. The updated guidance range reflects the pressure we have seen in our higher margin global specialty logistics and consulting businesses. On a constant currency basis, we now expect segment operating income to be down approximately 5%.

Moving to operating income, we are raising and narrowing. Our expected Consolidated operating income growth guidance to be in the range of 15 to 16% up from our previous range of 13.5 to 15.5% growth.

In the US Healthcare Solutions segment. We now expect operating income growth to be in the range of 20 to 21% up from our prior range of 17 and 1.5 to 19 and 1.5%. The updated guidance, reflects our strong performance and execution, and expectation. For continued strong pharmaceutical, utilization Trends, and our fourth quarter, despite the previously, disclosed loss of an oncology customer due to its acquisition.

Turning now to the international Healthcare Solutions segment on an as reported basis, we now expect operating income to be down, approximately 6% compared to our prior expectations, for operating income to be down 4% to down 1%.

James Cleary: As we move into the fourth quarter, we have an easier comparison, and with continued sequential improvement from our global specialty logistics business, we expect to see the international healthcare solutions segment operating income return to growth exiting the fiscal year. That concludes our full-year guidance update. As we near the end of our fiscal year, I remain inspired by our team members' dedication to being a differentiated and solution-oriented partner for our customers, which continues to result in strong financial results. Cencora continues to drive impressive performance powered by our US healthcare solutions segment as we are positioned to capitalize on positive industry trends, and our investments in high-growth specialty are generating value. Grounded in our pharmaceutical-centric strategy, Cencora is delivering sustainable growth, investing in our strengths, and is well-positioned to continue driving long-term value for all our stakeholders.

The updated guidance range, reflects the pressure, we have seen and our higher margin Global specialty, Logistics and Consulting businesses on a constant currency basis. We now expect segment, operating income to be down approximately 5%.

As we move into the fourth quarter we have an easier comparison and with continued sequential improvement from our Global specialty Logistics business we expect to see the international Healthcare Solutions segment. Operating income returned to growth exiting the fiscal year

That concludes our full year guidance update.

Team members dedication to being a differentiated and solution oriented partner for our customers, which continues to result in strong financial results.

Senora continues to drive impressive performance, powered by our us Healthcare Solutions segment. As we are positioned to capitalize on positive industry Trends and our investments in high growth specialty are generating value.

James Cleary: Now I will turn the call over to the operator to open the line for questions. Operator?

Grounded. In our pharmaceutical Centric strategy, Senora is delivering sustainable growth investing in our strengths and is, well, positioned to continue driving long-term value for all our stakeholders

Now, I will turn the call over to the operator to open the line for questions, operator.

Lucy: Thank you. To ask a question, please press star, followed by one on your telephone keypad now. If you change your mind, please press star, followed by two. When preparing to ask your question, please ensure your device is unmuted locally. In the interest of time, we ask participants to limit their questions to one per person. The first question comes from Lisa Gill of JP Morgan. Your line is now open. Please go ahead.

Thank you to ask a question. Please press star. Followed by 1 on your telephone keypad. Now, if you change your mind, please press star, followed by 2. When preparing to ask a question, please, ensure your device is unmuted locally.

In the interest of time, we asked participants to limit their questions to 1 per person.

Lisa Gill: Good morning, and thanks very much, Bob and Jim. Congrats on a very strong quarter. First, can we just start with the US healthcare segment, where we saw a strong gross profit, strong operating profit, but a slight trim in the revenue trim that you talked about from a guidance perspective? Can you talk about what some of the key drivers are there on each side? And then secondly, I just want a clarification on the international business. I'm assuming that some of the things that you talked about from an environmental perspective are around the mid or mid-size biotech pharma environment, and you talked about that getting better as we exit the year. Can you maybe just talk a little bit about what you're seeing there as well?

The first question comes from Lisa. Gill of JP Morgan. Your line is now open. Please go ahead.

Good morning and thanks very much Bob and Jim congrats on on a very strong quarter. Um, first, can we just start with the US Healthcare segment? Uh, where we saw strong growth profit, strong operating profit. But a slight Trim in the revenue stream that you talked about from from a guidance perspective, can you talk about what? Some of the key drivers are there on on each side and then, secondly, I just want to clarification on the international business. I'm assuming that, you know, some of the things that you talked about from an environmental perspective are around the smid or midsize biotech Pharma environment and you talked about that getting better. Um, as we exit the year, can you maybe just talk a little bit about what you're seeing there as well?

James Cleary: Sure. Lisa, thanks so much for the questions. Very much appreciate it. First question had to do with our particularly strong performance in the US business, but revenue growth moderating a bit there. But I'll say, first of all, we were really pleased to be able to increase our adjusted operating income guidance in the US business to a range of 20% to 21% because of the excellent performance there. Now, if we look at revenue versus operating income, we did see revenue growth moderating a bit in the US segment, and I'll really call out a few things. One is biosimilars, both Part D and Part B, which, of course, impact top-line growth, particularly Part D. Another thing is moderated GLP-1 growth. GLP-1s are still growing, but the growth we saw is 19% in the most recent quarter.

Sure. Lisa, thanks so much for the questions very much appreciated. First question had to do with, um, our particularly strong performance in the US business, um, but Revenue growth moderating a bit there. But you know, I'll say, first of all, we were really pleased to be able to, um, increase our adjusted operating income guidance, in the US business to a range of about 20 to 21% because the excellent performance there. Now, if we look at Revenue versus operating income, we did see Revenue growth. Um, moderating a bit in the US segment and I'll really call out a few things. 1 is bio similars. Um both um, part D and part.

James Cleary: So while the growth is still strong, it's decelerating versus prior year. And then a third thing on the top line is a grocery customer that we no longer have that was a very kind of high-revenue customer but a very low-margin customer. So those are some of the things that were impacting revenue growth guidance in the US segment. If we look at operating income results in the most recent quarter and our guidance, it really shows just excellent performance and excellent growth. And I'll just kind of call out things that we've been talking about for quite some time. Broad-based strong performance in the US segment, specialty sales to physician practices and health systems. So some of our higher margin businesses are performing quite well. And then also Part B biosimilar growth that's moderating sales growth a bit. It's kind of very positive from an operating income standpoint.

Part B, which of course, um, impact, Topline growth particularly Part D. Another thing is, um, moderated glp1 growth. Um, you know, G glp1 are still growing. But the growth we saw is, um, 19% in the most recent quarter. So while the growth is still strong, it's decelerating versus prior year. And then a third thing, on the top line is a grocery customer that we no longer have. That was a very kind of high Revenue customer, but a very low margin customer. So those are some of the things that, you know, are impacting, um, Revenue growth, guidance, in the US segment. If we look at operating income results in the most recent quarter, and our guidance, you know, it really shows just excellent performance and excellent growth and I'll just kind of call out things that we've been talking about for quite some time, broad-based strong performance.

James Cleary: And so those are some of the things that are just causing our operating income growth in the US, which is excellent, to be faster than our top-line growth. And then you were asking about international and just some of the things that we've been seeing there. And as other players in the market have been calling out that clinical trial activity this year has been subdued, which has been pressuring some of our businesses in the international segment, particularly our global specialty logistics business and the earlier stage pharma consulting projects that impact our consulting business. And so the rebound's been slower than expected in the segment and been impacting our global specialty logistics business and our consulting business.

In, um, the US segments specialty sales to physician practices and Health Systems. So some of our higher margin, businesses are performing quite well. And then also Part B bio similar growth, um, that's um, you know, moderating sales growth a bit, it's, you know, kind of very positive from an operating income standpoint. And so those are some of the things that are just causing our operating income growth. Um, in the US, which is excellent to be, you know, faster than our Topline growth. And then you were asking about International and just some of the things that we've been seeing there and um,

James Cleary: And one thing I did say in my prepared remarks is that the global specialty logistics business, while it's declining year over year, it did grow sequentially in the June quarter versus the March quarter. And we also expect sequential growth in the September quarter versus the June quarter. And so as we look ahead in the segment, we are encouraged by better clinical trial start statistics that we've been seeing the last couple of months that other people have been calling out also. And we see that as a positive leading indicator for potential future demand. And so we do expect, of course, to see business performance improve. And as we move into the fourth quarter, we do have an easier comparison.

James Cleary: And with the continued sequential improvement from our global specialty logistics business, we expect to see the international healthcare solutions segment operating income to return to growth in the fourth quarter. So thank you very much for those questions, Lisa.

Actually, um, in the June quarter versus the March quarter and we also expect sequential growth um in the September quarter versus the June quarter. And so as we um look ahead in the segment, we are encouraged by um better clinical trial start statistics that we've been seeing the um last couple months um that other people have been calling out. Also and we see that as a positive leading indicator um for potential future demand. And so we do expect of course to see business performance improve. And as we move into the fourth quarter, we do have an easier comparison and with the continued sequential improvement from our Global specialty Logistics business. We expect to see the international Healthcare Solutions segment operating income to return to growth and the for in the fourth quarter. So um thank you very much for those questions Lisa

Lucy: The next question comes from Elizabeth Anderson of Evicor ISI. Your line is now open. Please go ahead.

Lisa Gill: Hi, guys. Good morning. Congrats on a nice quarter and thanks for the question. You obviously referenced RCA and sort of how it's been going since you closed on the purchase there. Can you talk about some of how that's tracking versus your expectations and what some of the early customer feedback is? And then on a related note, obviously, there's been lots of political commentary around MFN, and that seems to be a changing landscape. Can you talk about sort of the exposure of businesses like RCA and sort of the general medical specialty to that and how we should think about the potential impact there? Thank you.

From Elizabeth Anderson have ever called isi. Your line is now open. Please go ahead.

Hi guys. Good morning. Congrats on a nice quarter and thanks for the question. Um, you know, you obviously, uh, referenced RCA and, and sort of, um, you know, how it's been going since you're, uh, you you closed on the purchase, their, can you talk about some of how that's tracking versus your expectations and what some of the early customer feedback is and then On a related note, you know, obviously there have been lots of there's been lots of political commentary around, you know.

You know, mfn and that seems to be a changing landscape. Can you talk about sort of the exposure of businesses? Um, like RCA and sort of the general, the medical specialty to that and how we should think about, um, you know, the potential impact there. Thank you.

Robert Mauch: Hi, Elizabeth. Thanks very much for the question. I'll start with the question around RCA. And we couldn't be more pleased with where we are so far with the acquisition. I mentioned in the prepared remarks we had both the clinical and the management leaders from RCA at our offices in the last few weeks. And aside from the work that we got done, which was meaningful in terms of how we'll work together, how integration will progress, how we'll identify new opportunities for growth and value creation. But I think, importantly, it's just the cultural fit is really, really strong. And there's an appreciation from the physicians and the practice leaders about the value that Cencora can bring to them in terms of their continued growth. And what that means is more care for patients, which is absolutely terrific.

Hi Elizabeth. Thanks very much for the question. I'll start with, uh, the question around RCA and, you know, we couldn't be more pleased with, you know, where we are. Uh, you know, so far with the acquisition, I mentioned, in the prepared remarks, we had the, um, both the clinical and the, uh, management leaders from uh, RCA at our offices, uh, in the last last few weeks and, um, you know, aside from the um, work that we got done, which was, which was meaningful in terms of, you know, how how the work together, how integration will progress, how will identify new opportunities for growth and, uh, and value creation. But, you know, I think, uh, importantly. It's just, the, the cultural fit is really really strong and, and there's an appreciation from

Robert Mauch: When you think about customer reaction, it's nothing remarkable there, right? So I mean, the market is adapting to an era where us and our peers are investing in MSOs. As I've said previously, it's important to note that the MSO investments or ownership are analogous to the work that we've done over decades to support community providers, whether they be a community pharmacist or veterinarians or physicians with the wraparound services that we have. And the MSOs are just the next evolution of that. So the market understands that, and the customer market understands that. So I'd say all is well there. I'll take MFN quickly and just overall policy. Elizabeth, obviously, there's a lot of news, a lot of things happening right now from IRA implementation to the letter sent to the CEOs.

From the Physicians and the practice, uh, leaders about the, uh, the value that Sora can bring, uh, to them in terms of their continued growth. And, uh, what that means is, is more care for, uh, for patients, which is, uh, which is absolutely terrific. Um, you know, when, when you think about customer reaction, uh, it's, you know, it's, uh,

Nothing remarkable there, right? So I mean, the market is, uh, adapting to uh, at at an era where, uh, us and our peers are, uh, investing in msos. As I've said previously, it's it's important to note that the, uh, MSO Investments or ownership. Uh, are analogous to the work that we've done over over decades to support Community providers. Whether they be a community pharmacist or or veterinarians or, uh, or Physicians with the wraparound services that we have in the in the msos are just at the next evolution of that. So, the market understands that and

Robert Mauch: And I would say we continue to believe it's just too early to call where all this goes. I think it's clear at this point what we all know, which is these things take a long time. And we're doing what you would expect that we are. We're staying very engaged. And as things are happening, we're spending time in Washington, DC. We're able to really communicate the need to make sure that access to community providers is maintained. So when you get beyond the headlines of drug prices, in many cases, that flows to reimbursement to physicians, in particular in the Part B space. So we're spending time making sure that legislators and regulators understand that that most cost-effective side of care is maintained. And somehow, that is not an unintended consequence of a focus on drug prices. So too early to call. We're very focused there.

Uh, the customer Market understands that. So um, you know, I'd say all is well there. Uh, I'll take, uh, mfn quickly and and just, you know, overall policy Elizabeth obviously there's a lot of news, you know, a lot of things happening, uh, you know, right now, uh, from you know, Ira implementation to the, you know, the letter sent to the, to the CEOs. Uh, and I would say we continue to believe it's just too early to to call, you know, where all this goes. I think it's, it's clear at this point. Uh, what we all know which is these things take these things, take a long time and and we're doing what you would expect that we are. We're we're staying very engaged in, um, as things are happening, we're spending time, uh, in Washington DC where, um,

Robert Mauch: And thank you very much for the questions.

Is maintained and and somehow that is not an unintended consequence of focus on drug prices. So uh, too early to call, uh, we're very focused there. Uh, and thank you very much for the questions.

Lucy: The next question comes from Michael Charney of Lerink Partners. Your line is now open. Please go ahead.

Stephen Baxter: Good morning, and thanks for taking the question. I know typically as we get to the end of the year, you're working on your four-year planning. As you sit here today, given the moving pieces we've had into the end of the year between RCA annualizing between the international sequential upticks, how should we think about the moving pieces into next year framed against your long-term 5% to 8% segment growth, 8% to 12% earnings growth? It seems like the street is sitting around 10% EPS growth for next year. I know you still have some contributions from RCA, but how should we think about what could provide a source of upstock versus downside, especially given areas of strength like the recent specialty trends? Thank you.

The next question comes from Michael Chaney of layering Partners, your line is now open. Please go ahead.

James Cleary: Michael, thank you very much for that question. And of course, as you know, we'll provide comprehensive fiscal 2026 guidance at the end of our fiscal year after we've completed our year-end planning process. And of course, we're really actively involved with our teams in that planning process now. And I will say that Cencora, we've consistently delivered strong financial performance driven by our leading market positions and the continued execution by our team members. And I'd also say that our pharmaceutical-centric foundation and competitive positioning enables us to capitalize on these market trends and to continue to deliver strong results. I'll say that we have confidence and we feel confident about our long-term guidance that contemplates organic operating income growth of 5% to 8% and EPS growth of 8% to 12%, including capital deployment.

Uh, good morning and thanks for taking the question. Yeah, I I know, uh, typically we get to stay in the year. You're working on your 4 year. Planning, as you sit here today, um, giving the moving pieces. We've had, um, it's the end of the year between RCA annualizing between the international sequential, upticks. How should we think about the moving pieces into next year? Framed against, uh, your long-term, uh, 5 to 8% segment growth? A 12% earnings growth. Seems like the street is sitting around 10%, EPS growth for next year. I know you still have some contribution with Marcia, but how should we think about um, what could provide a source of upside versus downside? Especially given uh, areas of strength, like the recent specialty Trends, thank you.

Michael, thank you very much for that question. And of course, as you know, we'll provide comprehensive fiscal 2026 guidance. At the end of our fiscal year, after we've completed our year-end planning process. And of course, we're really actively involved with our teams and that planning process now. And I will say that Senora, you know, we consistently delivered, strong financial performance driven by

James Cleary: We will benefit from RCA as we lap the close of the acquisition that occurred in our fiscal second quarter. So we had three quarters of RCA in fiscal year '25. We'll have four quarters of RCA in fiscal year '26. As we also look at moving pieces, we'll have three quarters of impact due to the loss of the previously disclosed oncology customer due to M&A activity that was acquired by a peer. And so we have one quarter impact from that in fiscal year '25, the September quarter. And we'll have four quarters impact from that in fiscal year '26. Now, other key items that'll move us within the range include changes in utilization trends. And of course, we've seen very strong utilization trends. And those include things like growth in specialty products, sales to physician practices and health systems.

By our leading Market positions and the continued execution by our team members. Um, and I'd also say that our pharmaceutical Centric foundation and competitive positioning, enables us to capitalize on these market trends and to continue to deliver strong results. I'll say that we, um, have confidence and we feel confident about our long-term guidance. That contemplates organic operating income growth of 5 to 8% and EPS, growth of 8 to 12% including Capital deployment. Um, we will benefit from RCA as we lap. The close of the acquisition that occurred in our fiscal second quarter. So we had 3 quarters of RCA and fiscal year. 25 will have 4 quarters of RCA and um, fiscal year 26. As we um, also look at, um, moving pieces. We'll have 3 quarters of impact due to the loss of the previously, disclosed oncology customer due to um m&a activity.

That was acquired by a, um, Pierre. And so, um, we have uh, 1 quarter impact from that in fiscal year, 25, the September quarter. And we'll have 4 quarters impact from that in fiscal year 26. Now, other key items that'll move us within the range. Um, include, you know, changes in utilization Trends. And of course, we've seen very strong utilization Trends. Um, you know, in those include things like growth and Specialty Products, uh, sales,

James Cleary: Other things that will impact our guidance, of course, include timing of capital deployment, for instance, timing of share repurchases. And as you said, another thing that will impact guidance is we'll assume better international growth given the soft fiscal year '25. So those are some of the moving pieces. But as I said before, we have confidence in our long-term guidance of 5% to 8% organic operating income growth and EPS growth of 8% to 12%. Thank you for the question.

A physician practices and Health Systems other things that will impact our guidance, of course, include um, timing of capital deployment. For instance, timing of share repurchases. And as you said, um, you know, another thing that will impact, um, guidance is, um, we'll assume better International growth, um, given the soft fiscal year 25. So, those are some of the moving pieces. But as I said before, we have confidence in our, you know, long-term guidance of 5 to 8% organic operating income growth and EPS growth of 8 to 12%. Thank you for the question.

Lucy: The next question comes from Stephen Baxter of Wells Fargo. Your line is now open. Please go ahead.

Stephen Baxter: Hi. Thank you. Just a numbers question here. I was hoping that you could better help us understand the acceleration in US healthcare earnings growth. I believe it was 23% last quarter to more like 29% this quarter. I'm guessing part of it is that the year-over-year contribution from RCA is greater in the third quarter, but it does feel like the acceleration goes beyond just that. I was hoping to see if there's any other adjustments or kind of drivers in the acceleration you can maybe speak to. Thank you.

The next question comes from Stephen Baxter of Wells. Fargo, your line is now open. Please go ahead.

Hi, thank you.

Number is question.

James Cleary: Yeah. Yeah, thanks. Appreciate the question. And you know I will say just it was a really strong quarter. And of course, you know RCA had an impact on the growth rate in that we didn't have it at this time last year. But I will say that if we look at kind of beating expectations and those sorts of things, it was really more driven by just the strength of the core business and strength of what we saw in the specialty market. And as we've talked about many times, utilization trends and sales of specialty products to physician practices and health systems. So our core business just performed very strong in the US segment. Really good expectation, excuse me, really good execution by our team members and just very strong, very strong broad-based performance.

Let's understand the acceleration in US Health Care earnings growth. I believe it was 23% last quarter and more like 29% this quarter. I'm guessing part of it is that the year-over-year contribution from RCA is greater in the third quarter but it does feel like the acceleration goes beyond just that I was hoping to to see if there's any other adjustments or or kind of drivers in the acceleration. You can maybe speak to thank you.

James Cleary: You know one probably other thing if we look at kind of relative comps is less of a COVID headwind compared to other points in time. But overall, the 29% adjusted operating income growth in the US segment during the quarter just reflects outstanding execution by our team. Thank you.

Segment, um, really good expectation. Excuse me, really good execution by our team members and just very strong. Um, very strong Bo broad base performance, you know, 1 probably other thing. If we look at, you know, kind of relative comps is, um, you know, less of a coid headwind compared to other points points in time. But um, oh, overall the um, you know, the uh 29%, um, adjusted operating income growth and the US segment during the quarter, just, you know, just reflects um, outstanding execution by our team, thank you.

Lucy: The next question comes from Eric Percher of Nephron Research. Your line is now open. Please go ahead.

The next question comes from Eric Patcher of nephron research. Your line is now open. Please go ahead.

Eric Percher: Thank you. Bob, I appreciate your commentary. That was a little early for you to go deep on MFN, but I'm wondering if the tariff topic is a little bit different. And you've had three months to process the full spectrum of potential policies. Any thoughts on potential impact across brand versus generic? Any change to your approach to inventory or sourcing? And do you think we may be heading into a naturally more inflationary environment? You know.

Thank you Bob. I appreciate your commentary. That was a little early for you to go deep on mfn but I'm wondering if the Tariff topic is a little bit different and you've had 3 months to process the full spectrum of potential policies. Any thoughts on potential impact across brand versus generic, any change to your approach to inventory or sourcing and do you think we may be heading into a naturally more inflationary environment?

James Cleary: I'll start, Eric. Thanks a lot for the question. And of course, we continue to monitor the evolutions around tariffs in the pharmaceutical market. And as you can imagine, we have teams in place analyzing the impacts of the tariffs on our business and on the supply chain. Importantly, as it relates to our business, we've not called out any material impacts as a result of tariffs. And as you know, we're pharmaceutical-centric and manufacturers are the importer of record for pharmaceuticals. And so the main focus is ensuring patients have access to life-saving medications, and we're supporting our upstream and downstream partners as they navigate any uncertainty. And we'll continue to advocate on behalf of our customers to ensure they receive adequate reimbursement for the services that they provide.

James Cleary: And of course, we're evaluating things and kind of many announcements that come out as to whether or not they impact branded pharmaceuticals versus generic pharmaceuticals. But from a financial standpoint, we haven't called out any material impacts on our business as a result of tariffs. And with that, I'll turn it over to Bob.

You know, I'll I'll start Eric, thanks a lot for the question and of course we continue to monitor um, the evolutions around tariffs in the far pharmaceutical Market, you know, we as you can imagine, we have teams in place analyzing the impacts of the tariffs, um, on our business and on the supply chain. Um importantly as it relates to our business, we've not called out any material impacts as a result of tariffs. And as you know we're pharmaceutical Centric and manufacturers are the import of records for pharmaceuticals. And so, you know, the main focus is ensuring patients have access to life-saving medications, and we're supporting our upstream and downstream Partners as they navigate any uncertainty, and we'll continue, um, to Advocate on behalf of our customers to ensure they receive, um, adequate reimbursement for the services that they provide, um, and of course, you know, we're um, evaluate, you know, you know, evaluating things and kind of many announcements.

Robert Mauch: Yeah. Thanks, Jim. Eric, thanks for the question. I think the headline is we're not changing our sourcing practices based on this. We have confidence in the supply chain, and we'll continue to work through that. I do think the watch-out is there is a difference between the supply chains for brands and generics. And I think what we are being careful what we're carefully monitoring is the risk of shortages and then therefore a disruption to patient access. So that's, again, an unintended consequence that would not be positive. So we're thinking about that. We're analyzing it. As Jim said, we're also educating in Washington about that. Again, it's one of the roles that we play in Washington is to make sure that ideas that are put forward are thought all the way through.

That come out as to whether or not they, you know, impact. Um, uh, you know, um, branded Pharmaceuticals versus generic Pharmaceuticals but from a financial standpoint, we haven't called out. You know, any material impacts on our business as a result of tariffs and with that, I'll turn it over to Bob. Yeah, thanks Jim. Eric. Thanks for thanks for the question. Uh, you know, I think, you know, headline, you know, is you know, we're we're not changing our, our sourcing practices, uh, based on this. We have

We have confidence in um in in the supply chain and uh we'll continue to work, work through that. I I do think you know, the watch out.

is, you know, there is a difference between the supply chains for Brands and and generics and um, I think what we

Robert Mauch: We are one of the very few healthcare players that really have end-to-end visibility of the supply chain. So we can play an education role. And as you think about that, it's the patient access impact of shortages that we're doing everything that we can to mitigate.

Are being care what we're carefully monitoring is, is the risk of of shortages and that and then therefore, uh, A disruption to to patient access. So that's uh, again an unintended consequence that would uh, would not be positive. So uh, you know, we're thinking about that. We're analyzing it as Jim said. We're also uh, you know, educating in Washington about that. Again, it's, it's 1 of the roles that we play in Washington is, uh, to make sure that, that ideas that are put forward are thought all the way through where we are, you know, 1 of the very few, uh, player Healthcare players that really have end-to-end visibility, uh, of the supply chain. So we can, we can play an education role. Uh, and as you think about that, you know, it's the it's the patient access impact of shortages that we're doing everything that we can to uh to mitigate

Lucy: The next question comes from Charles Rea of TD Cohen. Your line is now open. Please go ahead.

The next question comes from Charles Ray of TD Cohen. Your line is now open. Please go ahead.

George Hill: Yeah. Thanks for taking the question. I wanted to just go back to international and just trying to get a sense when you're looking, obviously, understanding that the comps get a little easier and it sounds like sequentially some of the business like special logistics was improving. What is the lead time generally for projects that come in for you? Is that like a year ahead of time? Like, you know how far ahead are projects booked for the various businesses there, particularly maybe in consulting as well? Or is it kind of a short-cycle type of business, or does it tend to be longer? And just trying to get a sense on what kind of visibility forward you have in terms of demand.

Uh, yeah, thank thanks for taking the question. Um, wanted to just go back to the international and just trying to get a sense. When, when you're looking, obviously understanding that the, the comps get a little easier and it sounds like sequentially. Uh, some of the business Life, Special Logistics was improving. What is the, um, lead time generally for projects, uh, that come in, uh, for you. Is that like a, you know, a year ahead of time, like, you know, how far ahead are projects booked, uh, for for the various business there, particularly maybe in Consulting as well, or is it kind of a short cycle type of business? Or is it tends to be longer and just trying to get a sense on what kind of visibility forward you have in terms of uh of demand?

Robert Mauch: Yeah. Thanks, Charles. You know we have, you know as you'd expect, you know visibility in terms of bookings and then you know our ability to pull through. And then the sales cycle is in your question as well. And I would just say it's variable. I mean, the size of the project, the market, the type of work that it is. So there's not a simple answer to that, certainly. But you know, you can be assured that we do have good visibility in terms of where we're tracking in terms of future growth. Our teams are very focused on execution on the sales side, and we're also making sure that we're optimizing the services that we have. So as the market begins to turn more positively, that we're going to be even better positioned to take advantage of that. Thanks for the question.

We have, uh, you know, as as you'd expect, you know, visibility in terms of of bookings, uh, and then, you know, our ability, uh, to pull through and then the the sales cycle is in in your question as well. And I, I would just say it's variable. I mean, the size of the project, the market uh the type of work that it is. So there there's not a simple, uh, answer to that. Uh, certainly. But, uh, you know, you can be assured that we have, uh, we do have good visibility in terms of uh, you know where we're tracking in terms of a future growth, our teams are very focused uh on execution, on the sales side and we're also, uh, making sure that we're um, optimizing the services that we have. So as the market begins to turn uh, more positively that we're going to be uh even better positioned to take advantage of that.

Lucy: The next question comes from Kevin Caliendo of UBS. Your line is now open. Please go ahead.

Thanks for that question. The next

The next question comes from. Kevin Caliendo, if you'd be BS, your line is now open. Please go ahead.

Stephen Baxter: Thanks for taking my question. Good morning. I wanted to expand a little bit on the headwinds and tailwinds for '26. Jim, I appreciate the details that you gave us, but the reality is your growth in the US segment, especially, has been so much above your LRP. And you're talking about incremental things around RCA one quarter and the three-quarters loss of FCS. And I understand that. But I guess, is there anything fundamental that you can see that would bring your growth rate down closer to your LRP, where it's been exceeding it now for almost two years? Fantastic performance. I'm just wondering, is there anything in biosimilars? Is GLP-1 slowdown something that could bring you back to within that range, as you sort of described within the range earlier?

Thanks for taking my question. Good morning. Oh, I wanted to expand a little bit on the headwinds and Tailwinds for 26. Um Jim, I appreciate the details that you gave us but the

James Cleary: Yeah. Thank you very much for the question, and thank you for your commentary on our results that we've been having also. That's very much appreciated. Let me just kind of answer one very specific thing that you said, and then I'll get into a broader answer. Kind of slowdown in growth in GLP-1s really wouldn't have a major impact on our guidance because, as we've said for a long time, GLP-1s add a lot to top-line growth. And they are profitable for us, but they're minimally profitable for us. And as we said during the second quarter earnings call, we'll say the same thing here, that as we look at things like the remainder of the year and at next year, we certainly expect to see good growth, but we aren't assuming the same level of outperformance that we've had in the recent past.

The reality is your, your growth in the US segment especially has been so much above your lrp and you're talking about incremental things around RCA, 1 quarter and the 3 quarters loss of FCS. And and I understand that, but I guess, is there anything fundamental that you can see that would bring your growth rate down closer to your lrp where it's been, you know, exceeding it now, for almost 2 years. Fantastic performance. I'm just wondering, is there anything in biosimilars? Is there is glp1 slowdown something that could bring you back to within that range as you sort of described within within the range earlier?

Yeah, thank you very much. Um, for the question and thank you for your, um, commentary on our results that we've been having also. That's very much appreciated. Um, let me just kind of answer 1, very specific thing that you said, and then I'll get into a broader answer kind of, um, you know, slow down and growth. And glp 1's really wouldn't have a, you know, major impact on our, um, guidance because as we've said for a long time, G lp1s, add a lot to Topline growth and they are profitable for us, but they're minimally profitable for us. Um, and you know, as we um, you know, said, um, during the second quarter earnings call, we'll say the same thing here that is, we look at things like, you know,

James Cleary: And so we do have a lot of confidence in our long-term guidance. We have confidence in the momentum that we have and what that is kind of translating in in terms of achieving the long-term guidance. But we probably wouldn't assume the same level of rapid growth that we've had in the recent past, especially as we begin to comp against periods of exceptional growth that we've had. But having said that, I'll say we're very confident in our long-term guidance ranges, and we'll continue to evaluate them annually. Thank you for the question.

You know, the um, the remainder of the Year and that next year, we, you know, certainly expect to see um, good growth but we aren't assuming, you know, the same level of outperformance that we've had in um the um the uh recent um, paths past. And so, you know, we we do have a lot of confidence in our long-term guidance, we have confidence in the

Momentum that we have and what that is um, you know, kind of translating in in terms of uh achieving the long-term guidance. But you know, we probably wouldn't assume the same level of rapid growth that we've had in the recent past especially as we begin to comp against periods of exceptional growth that we've had. But having said that, I'll say, you know, we're you know, very confident in our long-term guidance for ranges and, um, we'll, you know, continue and we'll continue to evaluate them uh, annually.

Thank you for the question.

Lucy: The next question comes from George Hill of Deutsche Bank. Your line is now open. Please go ahead.

George Hill: Yeah. Good morning, guys, and thanks for taking the question. Bob and Jim, I'm wondering if you could comment a little bit on the competitive environment in specialty distribution, especially in the Part B space. One of your large customers last week talked about trying to rapidly expand their business in this space. So maybe talk about how you think about market segmentation and where you guys kind of want to be strong and where you might have less of a competitive advantage. Thank you.

The next question comes from George Hill of Deutsche Bank. Your line is now open. Please go ahead.

Yeah, good morning guys. And thanks for taking the question Bob and Jim. I'm wondering if you could comment a little bit on the competitive environment and Specialty distribution in the part B Space 1 of your large customers last week talked about trying to rapidly expand their business in the space. Uh, so maybe talk about how you think about Market segmentation and where you guys kind of want to be strong and where you might have less of a competitive Advantage. Thank you.

Robert Mauch: Yeah. Thanks, George. You know we are focused in our areas of strength, which align very well with our strategy. So I wouldn't call out anything necessarily changing about the market. We are a leader in the market, in particular in retina and oncology. And we're very focused on making sure that we execute well there for the near term and the long term. And also, we're continuing to evaluate what future opportunities that there are. But as we sit here now, I wouldn't call out anything changing. We're happy with our positioning. We're very happy with the investments that we've made, both in RCA and in one oncology, as well as in our internal capabilities, by the way. I don't want to leave that out, right?

Robert Mauch: When you talk about kind of the future of specialty distribution and how things are evolving, I do want to probably remake the point that I made in a slightly different context in my prepared remarks. But we're continually investing in our capabilities across our network, both digital capabilities as well as physical infrastructure. So we feel good about being able to continue to grow, meet the needs of our customers, both manufacturer customers as well as provider customers. Thanks for the question, George.

Lucy: The next question comes from Aaron Wright of Morgan Stanley. Your line is now open. Please go ahead.

With our positioning. We're we're very happy with, um, the Investments, um, that we've made both in RCA. Uh, and in 1 oncology, uh, as well, as, in our internal capabilities, by the way, I don't want to, I don't want to leave that out, right? When you talk about, you know, kind of the future of specialty distribution and, uh, you know how things are evolving. You know, I, I do want to probably remake the point that I made in a slightly different context in in my prepared remarks. But we're, we're continually investing, uh, in our, in our capabilities, uh, across our Network, both digital capabilities, as well as, uh, as physical infrastructure. So, uh, we feel good, uh, about being able to continue to, uh, to grow meet the needs of our customers, both manufacturer customers as well, uh, as provider customers. Thanks for the question, George.

The next question comes from Aaron Wright of Morgan Stanley, your line is now open. Please go ahead.

Lisa Gill: Thanks for taking my question, Bob. Another thing from your prepared remarks, you mentioned that you're continually evaluating, I guess, areas that are less strategically aligned and where you should de-emphasize investments. I guess maybe I'm reading too much into the comment, but how are you thinking about commitments to the international business, the different components of that business? I'll throw in animal health as well and your commitment to that business. But how are these all fitting now with the cores? There's this clear synergy that you originally thought and where there may be kind of, I guess, less so as these businesses have evolved.

Um thanks for taking my question Bob, another thing from your prepared remarks. Um you mentioned that you're continually evaluating I guess the areas that are less strategically aligned and and where you should be emphasized, Investments. I guess. Maybe I'm reading too much into the comment, but how are you thinking about? You know, commitments to, you know, the international business, the different components of that business. I'll throw in Animal Health as well, and your commitment to that business. But how are these all fitting. Now with the core, is there, the clear Synergy that, you know, you originally thought and and

Robert Mauch: Yeah. Thanks very much for the question, Aaron. Yeah. What I'm really saying here, and there's not reading between the lines, what I'm trying to clearly say is that we're applying rigorous discipline to our entire portfolio of services and making sure that they are the right strategic fit. And then as we go through that, that will help us identify how to best deploy our resources, whether that's CapEx or OpEx or talent, that we make sure that we are investing in a differentiated way in the areas that are going to grow for us and are aligned with our strategy and that we're deprioritizing investment in areas that we see as less aligned. Thanks for the question, Aaron.

And where there may be kind of, I guess less. So as these businesses have evolved,

Yeah, thanks. Thanks. Very much for the questioner. Yeah, what? I'm, I'm really saying here. Um, and there's not, you know, reading reading between the lines, what I'm I'm trying to Clearly say is that we're, we're applying, you know, rigorous discipline to our entire portfolio, uh, of of services, uh, and making sure that they are, uh, the right strategic fit. And then as we go through that, that will help us, uh, identify how to best, uh, deploy our resources. Whether that's capex or Opex, uh, or Talent. Uh, that we make sure that we are, uh, investing in a differentiated way, in the areas that are, uh, going to grow for us, in our line with our strategy and that we're deep prioritizing, uh, investment in areas that we see, uh, as less aligned

Lucy: The next question comes from Stephen Valichette of Mizuho Securities. Your line is now open. Please go ahead.

Thanks for the question, Aaron.

Stephen Baxter: Yeah. Thanks. Good morning. So just based on our channel checks, it seems that brand drug manufacturers put in a bigger wave of AWP list price increases at mid-25, really relative to any other mid-year period in almost a decade, it seems. So I'm just wondering if you were seeing this as well, even though I know you've commented that brand inflation has a less beneficial impact to your P&L today versus history. But just curious if you're really seeing the activity. Thanks.

The next question comes from Stephen vallette of missu house, Securities. Your line is now open. Please go ahead.

Yeah, thanks. Uh, good morning. So, um, you know, just based on our Channel checks, it seems that, uh, you know, brand drug manufacturers, put in a bigger wave of, uh awp list, price increases in mid, 255, really relative to any other mid-year period in almost a decade. It seems. So I'm just wondering if you were seeing this as well, even though I know you've commented that, uh, you know, brand inflation has less beneficial impact to European now, uh, today versus history, but just curious if you're really seeing the, the

Activity. Thanks.

James Cleary: Yeah. Thank you very much for the question. What I'll say is that what we saw in terms of branded price appreciation was about in line with our expectations, may have been a little bit ahead of our expectations. Certainly not something big enough for us to call out. But so I'd just say it was generally in line with our expectations or a little bit ahead. And as we've talked about in the past, it has less of an impact on our overall P&L than it did at one point in time. And as we've rebalanced contracts and making sure that we make a fair profit across the board on brand specialty and generic products. Thanks. Appreciate the question.

Yeah, thank you very much for the question. Um uh, what I'll say is that um, what we saw in terms of branded price appreciation was, you know, about in line with our expectations, may have been a little bit ahead of our expectations. Certainly, not something big enough for us to call out, um, but, uh, you know, so I just say it was, um, generally in line with our expectations or a little bit ahead. And as we, you know, um, talked about in the past. It, you know, it, um, has, you know, less of an impact on our overall p&l that it did at 1 point in time and as we've, um, you know, rebalanced, um, contracts and making sure that we make, you know, a a, you know, a, a fair profit across the board on, um, Brands specialty and generic products. Thanks,

Lucy: The next question comes from Daniel Grosslight of CITI. Your line is now open. Please go ahead. Daniel, your line is now open. Please go ahead.

Appreciate the question.

The next question comes from Daniel gross light of City. Your line is now open. Please go ahead.

Daniel, your line is now open. Please go ahead.

Stephen Baxter: Hi. Sorry about that. I was on mute. Congrats on the strong quarter. Thanks for taking the question. Really just a couple of policy questions for you guys. The proposed hospital outpatient prospective rule seeks to end the pricing advantage that hospital-owned off-campus outpatient facilities have in drug administration. I'm curious how that may impact the competitive environment and growth for your MSO assets. And separately, I'm also curious if there are any tax benefits you're realizing from the OBDBA and if that's having any meaningful benefit to your free cash flow in the near term. Thanks.

James Cleary: Yeah. I'll start with the second part of that question. The new tax bill moving forward will have some incremental benefits for us. So as we look at our effective tax rate moving forward as a global company, there's always a lot of things that impact our consolidated effective tax rate. But the new tax bill is incrementally beneficial for us as it is for many companies. Thank you for that question.

Hi. Sorry about that. I was on mute. Congrats on the strong quarter. Thanks for taking the question. Um really just a couple of policy questions for you guys. The um the proposed Hospital outpatient, prospective rule seeks to end, the pricing advantage that hospital-owned off-campus outpatient facilities have in Drug Administration. I'm curious how that may impact the competitive environment and growth for your MSO assets and separately. I'm also curious if there are any tax benefits, you realizing from the, um, obb ba. Um, and if that's happening any meaningful benefit to your free cash flow in the near term, thanks.

Yeah, I'll I'll start with the, um, second part of that question that, um, the, um, new, um, tax bill moving forward will have, you know, some, some incremental benefits for us. So, as we look at our, you know, effective tax rate, moving forward, as a global company, there's, you know, always a lot of things that, um, impact our Consolidated effective tax rate. Um, but uh, the um the new tax bill is um incrementally beneficial for us as it is for many companies.

Thank you for that question.

Lucy: The final question is from Brian Tranquillette of Jeffries. Your line is now open. Please go ahead.

Stephen Baxter: Hey. Good morning. It's Jack Slevinon for Brian. Thanks for taking the question. Just wanted to double-click on the comment around GLP-1s and appreciate the commentary that a slowdown there shouldn't be particularly impactful when you think about consolidated earnings or US healthcare earnings. But maybe more broadly, as you cast forward, just thinking about what are the moving pieces that need to happen as we see more competition in that category for earnings to expand there or for margins to expand there? Is it something that's just not really possible, or do you think over time, as we get more and more competition and in that, that that's something that you can achieve? Thanks.

The final question is from Brian tranquil of Jeffrey's. Your line is now open. Please go ahead.

Hey, good morning, it's Jack 7 on for Brian. Thanks for taking the question. Um, just just want to double click on the comment around.

GOP 1's and appreciate the commentary that has slowed down there. You know, shouldn't be particularly impactful when you think about Consolidated earnings or us Healthcare earnings, um, but maybe more broadly as you cast forward.

just thinking about,

What are the moving pieces that need to happen, as we see more competition in that category, for earnings to expand or for margins to expand? Is it something that's just not really possible, or do you think over time as...

James Cleary: Yeah. Thank you very much for the question. And as we've consistently said for quite some time, GLP-1s have really been a driver of top-line growth, and they are profitable for us, but they are minimally profitable for us. At some point in time, as there are more competitors on the market, maybe it will move to a more normalized fee-for-service, and they will become more profitable for us at some point in time. But it's certainly not, we're doing, for instance, our fiscal year '26 planning. It's not something that we're anticipating in our fiscal year '26 plan. We're expecting them to remain profitable but be minimally profitable for us in kind of that type of time horizon. Thank you very much for the question.

As we get more and more competition, and, and in that, um, that that's something that you can achieve. Thanks.

Yeah. Thank you very much for the question and as we've you know, consistently said for quite some time. Um glp1 have really been a driver of Topline growth and they are profitable for us but they are um minimally profitable for us, you know, at some point in time. Um,

As there are more competitors on the market, maybe it will move to a more normalized fee for service and they will become more profitable for us at some point in time. But it's certainly not, it's we're doing for instance, our fiscal year, 26 planning. It's not something that we're anticipating in our fiscal year 26 plan. We're expecting them to remain profitable, but the minimally profitable for us and, um, kind of that type of time Horizon. Thank you very much for the question.

Lucy: We currently have no further questions, so I'll hand back to Bob for closing remarks.

We currently have no further questions so I'll hand back to Bob for closing remarks.

Robert Mauch: Thanks, everyone, for your time and interest in Cencora. We're continuing to deliver strong results powered by our strength in specialty, our leading customer portfolio, and our ability to enhance patient care. I want to, again, thank our incredible team members at Cencora who every day are executing at a very high level, bringing their passion and expertise to our customers, both upstream to manufacturers and downstream to providers, and delivering our purpose every day. Thank you, everyone.

Thanks everyone for your for your time and interest in Surah. Uh, we're continuing to deliver strong results powered by our strength and Specialty. Our leading customer portfolio in our ability to enhance patient care.

Uh, I want to again, thank our, uh, incredible team members at Senora who, uh, every day are executing at a very high level, uh, bringing their passion and expertise, uh, to our customers, both Upstream to manufacturers and downstream to Providers, uh, and delivering our purpose every day. Thank you, everyone.

Lucy: This concludes today's call. Thank you for joining. You may now disconnect your lines.

this concludes

today's call, thank you for joining. You may now disconnect your lines.