Cardinal Health Q2 2026 Cardinal Health Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q2 2026 Cardinal Health Inc Earnings Call
Speaker #1: Hello and welcome to the second quarter fiscal year 2026 CARDINAL HEALTH Inc. earnings conference call. My name is Sergey, and I will be your coordinator for today's is being recorded, and for the duration of the call, your lines will be on a listen only.
Operator: Hello and welcome to the Q2 fiscal year 2026 Cardinal Health Incorporated Earnings Conference Call. My name is Sergey, and I will be your coordinator for today's event. Please note that this conference is being recorded, and for the duration of the call, your lines will be on listen-only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. Can you also please limit yourself to one question each to allow the maximum of attendees to ask the question? If you require assistance at any point, please press star 0, and you will be connected to an operator. I will now hand you over to your host, Matt Sims, Vice President, Investor Relations, to begin today's conference. Thank you.
Operator: Hello and welcome to the Q2 fiscal year 2026 Cardinal Health Incorporated Earnings Conference Call. My name is Sergey, and I will be your coordinator for today's event. Please note that this conference is being recorded, and for the duration of the call, your lines will be on listen-only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. Can you also please limit yourself to one question each to allow the maximum of attendees to ask the question? If you require assistance at any point, please press star 0, and you will be connected to an operator. I will now hand you over to your host, Matt Sims, Vice President, Investor Relations, to begin today's conference. Thank you.
Speaker #1: However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question.
Speaker #1: Can you also please limit yourself to one question each to allow the maximum of attendees to ask the question? If you require assistance at any point, please press star 0, and you will be connected to an operator.
Speaker #1: I will now hand you over to your host, Matt Sims, Vice President, Investor Relations, to begin today's conference. Thank
Speaker #1: you.
Speaker #2: Good morning, and welcome
Matt Sims: Good morning and welcome to Cardinal Health Second Quarter Fiscal 2026 Earnings Conference Call, and thank you for joining us. With me today are Cardinal Health CEO Jason Hollar and our CFO Aaron Alt. You can find this morning's earnings press release and investor presentation on the investor relations section of our website at ir.cardinalhealth.com. Since we will be making forward-looking statements today, let me remind you that the matters addressed in these statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected or implied. Please refer to our SEC filings and the forward-looking statements slide at the beginning of our presentation for a description of these risks and uncertainties. Please note that during our discussion today, the comments will be on a non-GAAP basis and less specifically called out as GAAP.
Matt Sims: Good morning and welcome to Cardinal Health Second Quarter Fiscal 2026 Earnings Conference Call, and thank you for joining us. With me today are Cardinal Health CEO Jason Hollar and our CFO Aaron Alt. You can find this morning's earnings press release and investor presentation on the investor relations section of our website at ir.cardinalhealth.com. Since we will be making forward-looking statements today, let me remind you that the matters addressed in these statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected or implied. Please refer to our SEC filings and the forward-looking statements slide at the beginning of our presentation for a description of these risks and uncertainties. Please note that during our discussion today, the comments will be on a non-GAAP basis and less specifically called out as GAAP.
Speaker #2: to CARDINAL HEALTH, second quarter fiscal '26 earnings conference call. And thank you for joining us. With me today are CARDINAL HEALTH CEO, Jason Hollar, and our CFO, Aaron Alt.
Speaker #2: You can find this morning's earnings press release and investor presentation on the Investor Relations section of our website, at ir.cardinalhealth.com. Since we will be making forward-looking statements today, let me remind you that the matters addressed in these statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected or implied.
Speaker #2: Please refer to our SEC filings and the forward-looking statement slide at the beginning of our presentation for a description of these risks and uncertainties.
Speaker #2: Please note that during our discussion today, the comments will be on a non-GAAP basis unless specifically called out as GAAP. GAAP to non-GAAP reconciliations for all relevant periods can be found in the supporting schedules attached to our press release.
Matt Sims: GAAP to non-GAAP reconciliations for all relevant periods can be found in the supporting schedules attached to our press release. For the Q&A portion of today's call, we kindly ask that you limit questions to one per participant so that we can try and give everyone an opportunity. With that, I will now turn the call over to Jason.
Matt Sims: GAAP to non-GAAP reconciliations for all relevant periods can be found in the supporting schedules attached to our press release. For the Q&A portion of today's call, we kindly ask that you limit questions to one per participant so that we can try and give everyone an opportunity. With that, I will now turn the call over to Jason.
Speaker #2: For the Q&A portion of today's call,
Speaker #1: kindly ask We that you questions to one per limit participant so that we can try and give everyone an opportunity . With the call that , I will over to Jason .
Jason Hollar: Thanks, Matt. Good morning, everyone. We are pleased to report that the Cardinal Health team has delivered another excellent quarter driven by broad-based performance across the enterprise. I am encouraged by our results, which are a direct reflection of our continued operating momentum and relentless commitment to serving our customers and driving our strategy forward. We have continued to prioritize strengthening our core and expanding in specialty, accelerating our other growth businesses, and executing our GMPD turnaround. What stands out to me most in this quarter's performance is the balance of results across our portfolio as we achieve strong profit growth of at least double digits from all five of our operating segments. Our performance was again led by strength in our Pharmaceutical and Specialty Solutions segment, where we continue to see a robust demand environment coupled with strong operational execution. Our strategic focus on specialty is delivering tangible results.
Jason Hollar: Thanks, Matt. Good morning, everyone. We are pleased to report that the Cardinal Health team has delivered another excellent quarter driven by broad-based performance across the enterprise. I am encouraged by our results, which are a direct reflection of our continued operating momentum and relentless commitment to serving our customers and driving our strategy forward. We have continued to prioritize strengthening our core and expanding in specialty, accelerating our other growth businesses, and executing our GMPD turnaround.
Speaker #2: Matt and good Thanks , morning everyone . We are pleased to report that the Cardinal Health Team has delivered another excellent . .
Speaker #1: that , I With will now turn the to Jason .
Speaker #2: and good call over Thanks , Matt , morning , everyone . We are pleased to the report that Cardinal Health Team has delivered another excellent quarter , driven by broad based across the performance enterprise .
Speaker #2: I am encouraged by our results , direct which are a of our continued and relentless to commitment operating reflection our forward . customers strategy prioritize to We have continued and driving other strengthening our in core and growth businesses specialty , and , accelerating our executing our GMP .
Jason Hollar: What stands out to me most in this quarter's performance is the balance of results across our portfolio as we achieve strong profit growth of at least double digits from all five of our operating segments. Our performance was again led by strength in our Pharmaceutical and Specialty Solutions segment, where we continue to see a robust demand environment coupled with strong operational execution. Our strategic focus on specialty is delivering tangible results.
Speaker #2: turnaround What stands out to me most quarter's performance in this is the balance of results across our serving our As we achieve strong profit at least portfolio .
Speaker #2: digits growth of from all segments . Our performance was by again led strength in our five of our operating Specialty Solutions segment , where we continue to see a robust demand and coupled with environment operational strong execution .
Jason Hollar: As we shared at a recent industry conference, we expect our specialty revenues will surpass $50 billion in fiscal 2026, a testament to our progress in this high-growth, higher-margin space. Our MSO platforms continue to be a meaningful driver of our growth, in particular led by the Specialty Alliance's leading multi-specialty platform. With the acquisition of the country's leading urology MSO, Solaris Health, officially completed in early November, we are positioned to further expand as we add additional practices and capabilities to our platform. Turning to our GMPD segment, we are pleased to report continued progress against our improvement plan initiatives. The team remains focused on driving Cardinal Health brand growth, where we continue to see positive results and simplification, which is driving improved operational health. Our other growth businesses, at-Home Solutions, Nuclear and Precision Health Solutions, and OptiFreight Logistics, also again delivered a strong quarter.
Jason Hollar: As we shared at a recent industry conference, we expect our specialty revenues will surpass $50 billion in fiscal 2026, a testament to our progress in this high-growth, higher-margin space. Our MSO platforms continue to be a meaningful driver of our growth, in particular led by the Specialty Alliance's leading multi-specialty platform. With the acquisition of the country's leading urology MSO, Solaris Health, officially completed in early November, we are positioned to further expand as we add additional practices and capabilities to our platform. Turning to our GMPD segment, we are pleased to report continued progress against our improvement plan initiatives.
Speaker #2: Our focus on specialty is results tangible . As we shared at a industry recent conference , we expect specialty delivering surpass $50 billion in fiscal 26 .
Speaker #2: testament to A our progress in this high growth , higher margin space . Our MSL platforms continue to be a meaningful driver of our growth .
Speaker #2: In particular , led by the specialty alliances leading multi-specialty platform . With the acquisition of the leading urology Solaris MSO , health officially completed in early We are positioned to further expand as we add additional and capabilities to our platform country's .
Jason Hollar: The team remains focused on driving Cardinal Health brand growth, where we continue to see positive results and simplification, which is driving improved operational health. Our other growth businesses, at-Home Solutions, Nuclear and Precision Health Solutions, and OptiFreight Logistics, also again delivered a strong quarter.
Speaker #2: Turning to GMP segment , we are pleased to our continued progress against our improvement plan initiatives . The team remains focused on driving brand Cardinal Health growth , where we continue to positive see results and which is driving improved health .
Jason Hollar: Performance of these businesses is driven by secular tailwinds, the strength of their value propositions, and our focused long-term investments. Our second quarter performance gives us confidence as we move forward, and as a result, I'm pleased to share that we are again raising our outlook. With that, I'll turn over to Aaron to go through the financials.
Jason Hollar: Performance of these businesses is driven by secular tailwinds, the strength of their value propositions, and our focused long-term investments. Our second quarter performance gives us confidence as we move forward, and as a result, I'm pleased to share that we are again raising our outlook. With that, I'll turn over to Aaron to go through the financials.
Speaker #2: other growth Our simplification , businesses at Home Nuclear Precision Opti health Logistics Solutions and Solutions , again quarter also performance of these businesses is driven by secular tailwinds .
Speaker #2: propositions and value our The strength focused long term investments . Our second quarter performance gives us confidence move as we of their forward and as a result , I'm share that we are raising our again outlook .
Aaron Alt: Thank you, Jason. Good morning. We provided an interim update at a recent industry conference, but noted at the time that our books were still open for Q2. I am now pleased to share the final details of our Q2 results, which reflect another period of exceptional execution and broad-based demand strength across our enterprise. Our performance demonstrates the resilience of our business model and the tangible benefits of our diversified portfolio, as demonstrated by the significant earnings growth in all five of our operating segments. As a result of this momentum and factoring in our updated forecast for the remainder of the fiscal year, I'm also pleased to note that we are raising again our fiscal year 2026 earnings per share guidance. Our new range is $10.15 to $10.35, up from the at least $10 interim guidance update.
Aaron Alt: Thank you, Jason. Good morning. We provided an interim update at a recent industry conference, but noted at the time that our books were still open for Q2. I am now pleased to share the final details of our Q2 results, which reflect another period of exceptional execution and broad-based demand strength across our enterprise. Our performance demonstrates the resilience of our business model and the tangible benefits of our diversified portfolio, as demonstrated by the significant earnings growth in all five of our operating segments. As a result of this momentum and factoring in our updated forecast for the remainder of the fiscal year, I'm also pleased to note that we are raising again our fiscal year 2026 earnings per share guidance. Our new range is $10.15 to $10.35, up from the at least $10 interim guidance update.
Speaker #2: I'll turn it over to Aaron to go through the With that , financials . Thank you . John .
Speaker #3: morning . Good We provided an interim update at a recent noted at the time that our books were still open for the second quarter .
Speaker #3: Good morning. We provided an interim update at a recent conference and noted at the time that our books were still open for the conference. I am pleased to share the second quarter final results, which reflect another period of strong execution and broad-based strength across our enterprise.
Speaker #3: Our performance demonstrates the resilience business of our tangible model benefits of our demand diversified portfolio . As demonstrated by the significant earnings growth in all five of our segments operating .
Speaker #3: As a result of this momentum and factoring updated forecast for the remainder in our of the fiscal year , I'm also pleased to note that we are again our fiscal year 2026 earnings per share guidance .
Speaker #3: New raising range: our EPS is $10.15 to $10.35, up from the at least $10 interim guidance update. This update represents year-over-year EPS growth of 23% to 26%.
Aaron Alt: This updated outlook represents year-over-year EPS growth of 23% to 26%. Let us begin with the second quarter consolidated results, which are most easily explained with the observation that when revenue and gross margin grow faster than SG&A, positive progress is the result. Total revenue for the second quarter increased 19% to $66 billion. This top-line expansion was primarily driven by continued strong demand within the pharmaceutical and specialty solutions segment, as well as other. Gross margin dollars increased 24% to $2.4 billion, driven by favorable mix across our businesses. We remain disciplined with our cost structure even as we expand our capabilities and invest for the future.
Aaron Alt: This updated outlook represents year-over-year EPS growth of 23% to 26%. Let us begin with the second quarter consolidated results, which are most easily explained with the observation that when revenue and gross margin grow faster than SG&A, positive progress is the result. Total revenue for the second quarter increased 19% to $66 billion. This top-line expansion was primarily driven by continued strong demand within the pharmaceutical and specialty solutions segment, as well as other. Gross margin dollars increased 24% to $2.4 billion, driven by favorable mix across our businesses. We remain disciplined with our cost structure even as we expand our capabilities and invest for the future.
Speaker #3: Let us with the begin second quarter consolidated results , which are explained with most easily when revenue and the gross that margin grow faster than observation , positive result .
Speaker #3: Progress is the total revenue for the second quarter increased 19% to $66 billion. This top line expansion was continued strong demand within the, driven by Pharmaceutical and Specialty Solutions segment, as well as other gross margin.
Speaker #3: Dollars 24% increased $2.4 billion , driven by to favorable mix across our businesses . We remain our cost disciplined with even as we expand our capabilities and invest for the future .
Aaron Alt: While SG&A expenses increased 16% to $1.5 billion, it is important to note that excluding the impact of recent acquisitions, our organic SG&A growth was more modest in the low single digits, and that the turnaround part of our business, GMPD, actually saw lower SG&A year-over-year from optimization efforts. The combination of robust growth and disciplined expense management resulted in operating earnings of $877 million at the total enterprise level, an increase of 38% compared to the prior year period. Moving below the operating line, interest and other expense increased to $77 million compared to $38 million in the prior year. This increase was driven primarily by the financing costs associated with our announced acquisitions, including the Solaris Health transaction, which we were excited to close during the quarter. Our effective tax rate for the quarter was flat at 21.4%.
Aaron Alt: While SG&A expenses increased 16% to $1.5 billion, it is important to note that excluding the impact of recent acquisitions, our organic SG&A growth was more modest in the low single digits, and that the turnaround part of our business, GMPD, actually saw lower SG&A year-over-year from optimization efforts. The combination of robust growth and disciplined expense management resulted in operating earnings of $877 million at the total enterprise level, an increase of 38% compared to the prior year period. Moving below the operating line, interest and other expense increased to $77 million compared to $38 million in the prior year. This increase was driven primarily by the financing costs associated with our announced acquisitions, including the Solaris Health transaction, which we were excited to close during the quarter. Our effective tax rate for the quarter was flat at 21.4%.
Speaker #3: While structure SG&A increased 16% to $1.5 billion , important to note that excluding the impact of expenses it is recent acquisitions , our organic growth was more modest in the low single digits that the turnaround and business , Jmpd , actually lower saw a year over year from optimization efforts .
Speaker #3: The combination of robust growth and expense disciplined management operating earnings resulted in of $877 million at the total level , enterprise an increase of 38% compared to the prior year period .
Speaker #3: Moving below the operating line , interest and other expense increased to compared to $77 million , year . increase was primarily This driven by the costs $38 million in the prior with our financing announced including the Solaris Health acquisitions , transaction , which we were close during the quarter .
Aaron Alt: Average diluted shares outstanding were 237 million, a decrease of 2% from the prior year. In the quarter, we repurchased $375 million in shares, reaching our full-year fiscal 2026 target for baseline share repurchase of $750 million. Our weighted average price on these repurchases has been $173 per share. The net result for the quarter was non-GAAP diluted EPS of $2.63, an increase of 36% compared to $1.93 in the second quarter of last year. Now let us turn to the segment results, starting with Pharmaceutical and Specialty Solutions. Revenue for the segment increased 19% to $61 billion. This growth was driven by both existing and new customers, and we observed a continuation of strong pharmaceutical demand across the portfolio. This included approximately 6 percentage points of revenue growth from GLP-1 sales. Segment profit increased 29% to $687 million.
Aaron Alt: Average diluted shares outstanding were 237 million, a decrease of 2% from the prior year. In the quarter, we repurchased $375 million in shares, reaching our full-year fiscal 2026 target for baseline share repurchase of $750 million. Our weighted average price on these repurchases has been $173 per share. The net result for the quarter was non-GAAP diluted EPS of $2.63, an increase of 36% compared to $1.93 in the second quarter of last year. Now let us turn to the segment results, starting with Pharmaceutical and Specialty Solutions. Revenue for the segment increased 19% to $61 billion. This growth was driven by both existing and new customers, and we observed a continuation of strong pharmaceutical demand across the portfolio. This included approximately 6 percentage points of revenue growth from GLP-1 sales. Segment profit increased 29% to $687 million.
Speaker #3: excited to effective tax rate for the quarter was flat at Average diluted shares outstanding were 237 million , a decrease of 2% from the prior year the quarter , we repurchased .
Speaker #3: $375 million in shares, reaching year end for a fiscal baseline share repurchase of $750 million. Our weighted average price on these repurchases has been $173 per share.
Speaker #3: The result for the quarter was non-GAAP diluted of $2.63 , an 26 target increase of compared 36% to $1.93 in the second quarter of last year EPs .
Speaker #3: Now , to the let us turn segment results , starting with specialty pharmaceutical and solutions revenue for the segment increased 19% to $61 billion .
Speaker #3: This growth was driven and customers , and we observed a continuation of strong pharmaceutical demand existing portfolio across the included approximately six percentage revenue growth from points of one sales increased 29% to profit segment significant profit $687 million .
Speaker #3: new expansion was driven by contributions from brand specialty products . and MSO platforms and Our within our results generics program positive . We experienced consistent market dynamics in our Red Oak enabled generics program , and once again , we saw healthy unit growth that exceeded our long term expectations generic .
Aaron Alt: This significant profit expansion was driven by contributions from brand and specialty products, our MSO platforms, and positive results within our generics program. We experienced consistent market dynamics in our Red Oak-enabled generics program, and once again, we saw healthy generic unit growth that exceeded our long-term expectations. Furthermore, these results benefited from our continuous focus on efficiency initiatives across our distribution network. Our teams are leveraging our investments in technology infrastructure, such as the Vantis HQ e-commerce platform, to drive customer efficiency and streamline our operations, which directly supports our margin profile. Moving to the GMPD segment, revenue increased 3% to $3.3 billion, driven by volume growth from our existing customer base. We were particularly pleased with the performance of our Cardinal Health brand portfolio, which saw revenue growth of 10% in the United States.
Aaron Alt: This significant profit expansion was driven by contributions from brand and specialty products, our MSO platforms, and positive results within our generics program. We experienced consistent market dynamics in our Red Oak-enabled generics program, and once again, we saw healthy generic unit growth that exceeded our long-term expectations.
Aaron Alt: Furthermore, these results benefited from our continuous focus on efficiency initiatives across our distribution network. Our teams are leveraging our investments in technology infrastructure, such as the Vantis HQ e-commerce platform, to drive customer efficiency and streamline our operations, which directly supports our margin profile. Moving to the GMPD segment, revenue increased 3% to $3.3 billion, driven by volume growth from our existing customer base. We were particularly pleased with the performance of our Cardinal Health brand portfolio, which saw revenue growth of 10% in the United States.
Speaker #3: Furthermore , results benefited these from our continuous focus on efficiency initiatives across our distribution . Our teams are leveraging our investments in network technology infrastructure such as the HQ , e-commerce platform to drive customer efficiency and streamline our operations , which directly supports our margin profile .
Speaker #3: GMP Moving to the segment , revenue increased 3% to $3.3 billion , driven by volume growth from our customer base . We were particularly pleased with the our performance of Cardiohealth brand portfolio , which saw revenue growth of States .
Aaron Alt: It is worth noting that we estimate 3 to 4 percentage points of this growth in the quarter was driven by the timing of inventory restocking by other distributors, which we anticipate offsetting in Q3. Segment profit for GMPD increased to $37 million compared to $18 million in the prior year period. This improvement was driven by volume growth from existing customers and the realization of benefits from our cost optimization initiatives. These positive drivers were partially offset by the adverse net impact of tariffs. Despite the tariff headwind, the segment's transition from past challenges to solid profitability is evident, and we remain committed to the improvement plan initiatives that focus on growing Cardinal Health brand, enhancing our supply chain, and simplifying operations. Now let us discuss our other growth businesses, Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight Logistics.
Aaron Alt: It is worth noting that we estimate 3 to 4 percentage points of this growth in the quarter was driven by the timing of inventory restocking by other distributors, which we anticipate offsetting in Q3. Segment profit for GMPD increased to $37 million compared to $18 million in the prior year period. This improvement was driven by volume growth from existing customers and the realization of benefits from our cost optimization initiatives. These positive drivers were partially offset by the adverse net impact of tariffs.
Speaker #3: It is 10% in the United that we worth noting estimate points of this growth in the quarter 3 to 4 percentage was driven by the timing restocking by other inventory distributors , which we offsetting in anticipate Q3 of .
Speaker #3: profit Segment for Gapdh to increased $37 million compared to period . $18 million in the prior year improvement was driven by from existing customers and the realization of benefits from This cost optimization initiatives .
Aaron Alt: Despite the tariff headwind, the segment's transition from past challenges to solid profitability is evident, and we remain committed to the improvement plan initiatives that focus on growing Cardinal Health brand, enhancing our supply chain, and simplifying operations. Now let us discuss our other growth businesses, Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight Logistics.
Speaker #3: our These positive drivers partially offset by the adverse net impact of tariffs . Despite were segments transition from past challenges headwind , the to solid profitability is evident and we remain committed to the improvement plan initiatives that focus on cardinal growing Health brand , enhancing our supply chain and operations simplifying .
Aaron Alt: Revenue increased 34% to $1.7 billion, driven by strong demand across all three businesses, and the contribution from the acquisition of Advanced Diabetes Supply, or ADS. Segment profit increased 52% to $179 million. This impressive growth was driven by strong underlying performance across all three businesses, as well as the acquisition of ADS. The integration of ADS into our at-Home Solutions business continues to progress well. This combination has created a powerful platform for patients with chronic conditions, and we are seeing the benefits of our dual strategy as both a direct-to-home distributor and a direct provider. In Nuclear and Precision Health Solutions, we were pleased to see continued momentum in our theranostics offerings, with revenue growth exceeding 30%. Our leadership in the radiopharmaceutical space and our end-to-end service capabilities continue to resonate with pharmaceutical partners and providers alike. OptiFreight Logistics also delivered an exceptional quarter.
Aaron Alt: Revenue increased 34% to $1.7 billion, driven by strong demand across all three businesses, and the contribution from the acquisition of Advanced Diabetes Supply, or ADS. Segment profit increased 52% to $179 million. This impressive growth was driven by strong underlying performance across all three businesses, as well as the acquisition of ADS. The integration of ADS into our at-Home Solutions business continues to progress well. This combination has created a powerful platform for patients with chronic conditions, and we are seeing the benefits of our dual strategy as both a direct-to-home distributor and a direct provider.
Speaker #3: us discuss our growth businesses . Nuclear and health precision solutions at home Solutions and Opti freight other logistics Now , let $1.7 billion , driven by strong across three businesses and the contribution from the acquisition of Advanced Diabetes demand , or Ads to segment profit increased to $179 million .
Speaker #3: This impressive all growth was driven by strong underlying performance across all three businesses , as ads of acquisition integration . The of our at the business well as solutions continues to progress well .
Speaker #3: combination has created a This platform for patients chronic with and we are seeing conditions , the strategy as benefits of both a direct to home our dual distributor powerful direct provider in nuclear and precision solutions .
Aaron Alt: In Nuclear and Precision Health Solutions, we were pleased to see continued momentum in our theranostics offerings, with revenue growth exceeding 30%. Our leadership in the radiopharmaceutical space and our end-to-end service capabilities continue to resonate with pharmaceutical partners and providers alike. OptiFreight Logistics also delivered an exceptional quarter.
Speaker #3: We were pleased to see continued momentum in our Theranostics offerings, with revenue growth. Our leadership in the space and our end-to-end service capabilities continue to resonate with radiopharmaceutical and pharmaceutical providers alike.
Aaron Alt: Welcoming new customers to our logistics management program and helping current customers succeed in expanding utilization of our program drove significant growth in inbound and outbound shipments. As a result, the business was able to grow revenues by over 30% this quarter, further validating our position as the leader in healthcare logistics management. Turning to the balance sheet and cash flow. Year to date, we've now generated $1.8 billion in adjusted free cash flow. Our teams continue to focus on working capital efficiency to support our capital deployment priorities. We ended the quarter with a cash position of $2.8 billion. Regarding capital allocation, we deployed significant capital during the quarter to drive value for shareholders and invest in our future. Year to date, we've invested approximately $240 million back into the business through capital expenditures to support our organic growth initiatives.
Aaron Alt: Welcoming new customers to our logistics management program and helping current customers succeed in expanding utilization of our program drove significant growth in inbound and outbound shipments. As a result, the business was able to grow revenues by over 30% this quarter, further validating our position as the leader in healthcare logistics management.
Speaker #3: Optic freight logistics also delivered an partners and quarter , welcoming new customers to our exceptional management helping logistics customers succeed in expanding our utilization of program .
Speaker #3: Drove significant inbound growth in outbound shipments and, as a business, was able to grow as a result, increasing revenues by over 30% this quarter.
Aaron Alt: Turning to the balance sheet and cash flow. Year to date, we've now generated $1.8 billion in adjusted free cash flow. Our teams continue to focus on working capital efficiency to support our capital deployment priorities. We ended the quarter with a cash position of $2.8 billion. Regarding capital allocation, we deployed significant capital during the quarter to drive value for shareholders and invest in our future. Year to date, we've invested approximately $240 million back into the business through capital expenditures to support our organic growth initiatives.
Speaker #3: Further position validating our as the leader in healthcare . Turning to the and cash flow year to date , we've now generated management $1.8 billion in adjusted flow .
Speaker #3: free cash Our continue to teams on working efficiency to support our capital deployment priorities . We ended the quarter with balance sheet cash position of $2.8 billion .
Speaker #3: Regarding capital allocation, we deployed significant capital during the quarter to drive value for shareholders and invest into our future. Year to date, we've invested $240 million back into the business through expenditures to support organic growth capital for our initiatives.
Aaron Alt: We've also returned $1 billion to shareholders so far this year, comprised of approximately $250 million in dividends and, as mentioned, $750 million through accelerated share repurchase programs. We accomplished all of this and still closed the quarter with a Moody's adjusted leverage ratio of 3.2 times, which is back within our targeted range of 2.75 times to 3.25 times. We achieved this target well ahead of schedule, and that provides us with flexibility to assess opportunities consistent with our disciplined capital allocation framework. I will now highlight our updated fiscal year 26 guidance. With two strong quarters behind us and signs of continued momentum across our portfolio, we are raising again our outlook for the full year to a new range of $10.15 to $10.35. In the pharma segment, our revenue guidance remains unchanged.
Aaron Alt: We've also returned $1 billion to shareholders so far this year, comprised of approximately $250 million in dividends and, as mentioned, $750 million through accelerated share repurchase programs. We accomplished all of this and still closed the quarter with a Moody's adjusted leverage ratio of 3.2 times, which is back within our targeted range of 2.75 times to 3.25 times. We achieved this target well ahead of schedule, and that provides us with flexibility to assess opportunities consistent with our disciplined capital allocation framework. I will now highlight our updated fiscal year 26 guidance. With two strong quarters behind us and signs of continued momentum across our portfolio, we are raising again our outlook for the full year to a new range of $10.15 to $10.35. In the pharma segment, our revenue guidance remains unchanged.
Speaker #3: We've also returned $1 billion to shareholders so far this year , comprised of $250 million in dividends as . And mentioned , accelerated approximately repurchase $750 million through .
Speaker #3: We accomplished these programs, still all closed the quarter with a Moody's share-adjusted leverage ratio of 3.2 times, which is back within our targeted range of 2.75 times to 3.25 times.
Speaker #3: our We achieved this target well ahead of schedule , provides and that flexibility to opportunities assess disciplined capital with our consistent allocation framework .
Speaker #3: I will now highlight updated fiscal year '26 guidance, with two strong quarters behind us and signs of continued momentum across our portfolio.
Speaker #3: raising We are our outlook for the full year to a new range of $10.15 to $10.35 in the pharma segment , our revenue remains guidance unchanged .
Aaron Alt: Our prior guidance had already contemplated an anticipated impact from manufacturer-list price decreases associated with IRA. For pharma segment profit, we are pleased to raise our outlook to a range of 20% to 22% growth, up from the prior range of 16% to 19%. This increase reflects the strength we have seen year to date and the confidence we have in the continued performance of our largest operating segment. As we've previously highlighted, in the second half of fiscal 2026, we annualized the $10 billion of new customer revenue that we onboarded last year, as well as the prior acquisitions of ION and GIA, while also benefiting from Solaris contributions this year. Although we aren't assuming the same level of outsized demand to persist for the balance of the year, we have incorporated some of the recent strength and anticipate mid-teens profit growth in the second half of the year.
Aaron Alt: Our prior guidance had already contemplated an anticipated impact from manufacturer-list price decreases associated with IRA. For pharma segment profit, we are pleased to raise our outlook to a range of 20% to 22% growth, up from the prior range of 16% to 19%. This increase reflects the strength we have seen year to date and the confidence we have in the continued performance of our largest operating segment. As we've previously highlighted, in the second half of fiscal 2026, we annualized the $10 billion of new customer revenue that we onboarded last year, as well as the prior acquisitions of ION and GIA, while also benefiting from Solaris contributions this year. Although we aren't assuming the same level of outsized demand to persist for the balance of the year, we have incorporated some of the recent strength and anticipate mid-teens profit growth in the second half of the year.
Speaker #3: Our prior guidance had already anticipated impact from contemplated manufacturer list price associated with IRA performance decreases. We are pleased to raise our outlook to a range of 20% to 22% growth, up from the prior range of 16% to 19%.
Speaker #3: This increase strength we reflects the have seen year to date and the confidence we have in the continued performance largest operating our segment .
Speaker #3: As we've previously highlighted, of fiscal second half '26, we annualized the $10 billion of new revenue that we onboarded last year, in the case of GIA.
Speaker #3: Ion and While also benefiting from Solaris contributions . . Although This year we aren't assuming the same level of outsized demand to persist for the balance of the we have year , some of the recent strength and anticipate mid-teens profit growth in the second half of the year .
Aaron Alt: In the GMPD segment, we are updating our revenue outlook to 1% to 3% growth. On GMPD segment profit, we are raising our guidance to approximately $150 million. This raised outlook reflects the continued progress our team is making against the GMPD improvement plan, including with Cardinal Health brand. As I mentioned when reviewing the GMPD Q2 results, some of the outperformance in Q2 was attributed to the timing of Cardinal Health brand distributor buying patterns, which we anticipate will normalize in Q3. We continue to anticipate sequential profit growth from Q3 to Q4. In our other growth businesses, our revenue guidance remains unchanged at 26% to 28% growth. We are increasing our segment profit guidance for other to a range of 33% to 35% growth, up from the prior range of 29% to 31%. This revision is driven by the strong performance across all three growth businesses to date.
Aaron Alt: In the GMPD segment, we are updating our revenue outlook to 1% to 3% growth. On GMPD segment profit, we are raising our guidance to approximately $150 million. This raised outlook reflects the continued progress our team is making against the GMPD improvement plan, including with Cardinal Health brand. As I mentioned when reviewing the GMPD Q2 results, some of the outperformance in Q2 was attributed to the timing of Cardinal Health brand distributor buying patterns, which we anticipate will normalize in Q3. We continue to anticipate sequential profit growth from Q3 to Q4. In our other growth businesses, our revenue guidance remains unchanged at 26% to 28% growth. We are increasing our segment profit guidance for other to a range of 33% to 35% growth, up from the prior range of 29% to 31%. This revision is driven by the strong performance across all three growth businesses to date.
Speaker #3: In the segment, we are updating our revenue outlook to 1% to 3% growth on BPD segment profit. We are raising our guidance to approximately $150 million.
Speaker #3: raised outlook This reflects the continued progress our team is making against the GPD Improvement including with Cardinal Health brand mentioned when reviewing the GMP Q2 results .
Speaker #3: the . outperformance Some of in Q2 As I was to the attributed timing of Cardinal Health brand distributor buying patterns , which we will anticipate normalize in Q3 .
Speaker #3: We continue to anticipate sequential profit Q3 to Q4 . In growth revenue businesses , our guidance remains unchanged at 26% to 28% . Growth .
Speaker #3: We are increasing our segment profit guidance for other to a range of 33% to 35% growth , up from the prior This revision is driven by the strong 29% to 31% .
Aaron Alt: As you model the remainder of the year, please remember that we will lap the acquisition of ADS in our Q4. Additionally, we will face more difficult comparisons in our nuclear business in the Q3 as we begin to lap some of the robust Theranostics growth that we experienced a year ago. Moving below the operating line, we are lowering our outlook for our effective tax rate by one percentage point to a range of 21% to 23%, down from the prior outlook of 22% to 24%. This improvement reflects our first half performance and the expectations of positive discrete items in the back half of fiscal 2026. We are also updating our share count assumptions, reflecting our Q2 accelerated share repurchase program. We are lowering our outlook for diluted weighted average shares to a range of 237 million to 238 million shares from approximately 238 million shares.
Aaron Alt: As you model the remainder of the year, please remember that we will lap the acquisition of ADS in our Q4. Additionally, we will face more difficult comparisons in our nuclear business in the Q3 as we begin to lap some of the robust Theranostics growth that we experienced a year ago. Moving below the operating line, we are lowering our outlook for our effective tax rate by one percentage point to a range of 21% to 23%, down from the prior outlook of 22% to 24%. This improvement reflects our first half performance and the expectations of positive discrete items in the back half of fiscal 2026. We are also updating our share count assumptions, reflecting our Q2 accelerated share repurchase program. We are lowering our outlook for diluted weighted average shares to a range of 237 million to 238 million shares from approximately 238 million shares.
Speaker #3: Performance in all three businesses has shown growth across the year to date. As you model the remainder of the year, please remember that we will lap the acquisition of We Ads in our fourth quarter.
Speaker #3: Additionally , we more will face comparisons in difficult our nuclear business in the third quarter as we lap to some of the begin theranostics growth that we year ago experienced a .
Speaker #3: below the Moving operating lowering are line , we outlook for our our effective tax rate by one percentage point to a range of 21% to 23% , down from the prior outlook of 22% to 24% .
Speaker #3: This improvement reflects our first half and the expectations of positive , discrete items in the back half of fiscal 2026 . We updating our share count assumptions reflecting are also our accelerated share repurchase program .
Speaker #3: We are Q2 our outlook for diluted weighted average shares to a range of 237 million to 238 million shares from approximately 238 million shares .
Aaron Alt: Finally, regarding Adjusted Free Cash Flow, we continue to anticipate robust Adjusted Free Cash Flow generation between $3 billion and $3.5 billion for the year. In conclusion, our Q2 results demonstrate that Cardinal Health is executing effectively on its strategy. We are strengthening our core distribution business while aggressively expanding in higher margin areas such as specialty and our other growth businesses. We remain focused on operational excellence, simplification, and delivering value to our customers and partners. Our updated guidance reflects our confidence in the remainder of the fiscal year and our ability to navigate the dynamic healthcare environment. We are well-positioned to deliver sustainable growth and long-term value for our shareholders. With that, I will turn the call back over to Jason. Thanks, Aaron. Our strategy within pharmaceutical and specialty solutions remains clear, and the team's consistent execution gives us confidence in the long-term potential ahead.
Aaron Alt: Finally, regarding Adjusted Free Cash Flow, we continue to anticipate robust Adjusted Free Cash Flow generation between $3 billion and $3.5 billion for the year. In conclusion, our Q2 results demonstrate that Cardinal Health is executing effectively on its strategy. We are strengthening our core distribution business while aggressively expanding in higher margin areas such as specialty and our other growth businesses. We remain focused on operational excellence, simplification, and delivering value to our customers and partners. Our updated guidance reflects our confidence in the remainder of the fiscal year and our ability to navigate the dynamic healthcare environment. We are well-positioned to deliver sustainable growth and long-term value for our shareholders. With that, I will turn the call back over to Jason. Thanks, Aaron. Our strategy within pharmaceutical and specialty solutions remains clear, and the team's consistent execution gives us confidence in the long-term potential ahead.
Speaker #3: Finally , regarding adjusted free cash continue to anticipate robust adjusted free cash flow generation and $3 billion in conclusion , our results demonstrate the cardinal Health is executing effectively on its strategy .
Speaker #3: We are strengthening our distribution between businesses while aggressively expanding in higher-margin areas such as specialty and our other growth businesses. We remain focused on operational excellence, delivering simplification, and creating value for our partners.
Speaker #3: guidance reflects our Our updated confidence in the remainder of the fiscal year ability to and our navigate the healthcare dynamic environment . We are well positioned to sustainable deliver growth and long term shareholders .
Speaker #3: With that , I will turn the call back over Jason .
Speaker #2: Thanks , Aaron . Our
Aaron Alt: We continue to prioritize the core, and the investments in our footprint and technology have contributed to improved service levels, including a 10% improvement over the past two years, setting a new benchmark for product availability. In specialty, we are seeing growing contributions across specialty distribution, our MSO platforms, and biopharma solutions. Our acquisition of Solaris Health is already gaining momentum in the market with the addition of our first urology practice under this new structure in Michigan. Moving upstream to a key part of our specialty growth, biopharma solutions. We are pleased to highlight that a number of key manufacturer partners have recently selected our Sonexus Access and Patient Support business to support their hub programs, totaling over 1 million new patients served. These wins were enabled by our significant investments to digitize the patient support journey.
Aaron Alt: We continue to prioritize the core, and the investments in our footprint and technology have contributed to improved service levels, including a 10% improvement over the past two years, setting a new benchmark for product availability. In specialty, we are seeing growing contributions across specialty distribution, our MSO platforms, and biopharma solutions. Our acquisition of Solaris Health is already gaining momentum in the market with the addition of our first urology practice under this new structure in Michigan. Moving upstream to a key part of our specialty growth, biopharma solutions. We are pleased to highlight that a number of key manufacturer partners have recently selected our Sonexus Access and Patient Support business to support their hub programs, totaling over 1 million new patients served. These wins were enabled by our significant investments to digitize the patient support journey.
Speaker #2: pharmaceutical and Specialty strategy within Solutions remains clear , team's consistent execution and the confidence in the long potential term We ahead . gives us continue to prioritize the core and the investments in our footprint and improved contributed to levels , improvement over the including 10% a two years , past setting a new service benchmark for in specialty .
Speaker #2: We are seeing contributions growing across specialty distribution. Our platforms and biopharma solutions are continuing to grow. Our acquisition of Solaris is already gaining momentum in the market, with the addition of our first urology practice under this new structure in Michigan. Moving upstream to be part of our specialty growth and biopharma solutions, we are pleased to highlight that a number of key manufacturers have selected our Scynexis access and patient support business to support their hub programs, totaling over 5,000 patients. These wins were enabled by our significant investments to digitize the patient support journey.
Aaron Alt: We are seeing similar momentum in our leading 3PL business, where we continue to partner with manufacturers in the commercialization of their specialty therapies. As an example, in calendar 2025, our business supported roughly 1/2 of all new product launches that utilized the 3PL. Turning to GMPD, our improvement plan initiatives are yielding tangible results. We remain focused on simplification while continuing to invest in our network, and are encouraged by the positive trends within the Cardinal Health branded portfolio. This is particularly evident in our more clinically differentiated product categories, where innovation remains central to our product portfolio. For example, the SmartFlow intermittent pneumatic compression device, designed to reduce the risk of deep vein thrombosis, has had a very positive market response, with volume exceeding our launch expectations.
Aaron Alt: We are seeing similar momentum in our leading 3PL business, where we continue to partner with manufacturers in the commercialization of their specialty therapies. As an example, in calendar 2025, our business supported roughly 1/2 of all new product launches that utilized the 3PL. Turning to GMPD, our improvement plan initiatives are yielding tangible results. We remain focused on simplification while continuing to invest in our network, and are encouraged by the positive trends within the Cardinal Health branded portfolio. This is particularly evident in our more clinically differentiated product categories, where innovation remains central to our product portfolio. For example, the SmartFlow intermittent pneumatic compression device, designed to reduce the risk of deep vein thrombosis, has had a very positive market response, with volume exceeding our launch expectations.
Speaker #2: We are seeing similar momentum in our leading where we three PL business , continue to partner with manufacturers in the commercialization specialty therapies .
Speaker #2: As example , in an calendar 25 , our business supported roughly half of served . product launches that utilize the three PL . Turning to GMP , our improvement plan initiatives are tangible yielding results .
Speaker #2: focused on remain We simplification while continuing to invest in our network , and are the encouraged by positive within the trends Health portfolio .
Speaker #2: This is particularly evident in our more clinically Cardinal differentiated product categories , where innovation remains branded central to our product portfolio . For example , the Smart Flow intermittent Pneumatic Compression designed device to reduce the risk of deep vein thrombosis , has had a very positive market response with volume our launch exceeding expectations .
Aaron Alt: Now, turning to our other growth businesses, where we remain encouraged by both the momentum in their results and strong positioning for future growth. Increasingly, we see additional points of connectivity across Nuclear, at-Home Solutions, and OptiFreight, and an ability to leverage the full strength of our enterprise portfolio. Nuclear and Precision Health Solutions continue to outpace the market, backed by our differentiated offerings and our team's deep expertise. I'm pleased to share that Nuclear recently conducted their 2025 customer survey and again earned a net promoter score well above the industry average, a clear reflection of the reliability, adaptability, and cutting-edge technology we deliver to customers. Our performance is driven by our unique end-to-end capabilities and strong demand for Theranostics, which again delivered over 30% revenue growth for the quarter.
Aaron Alt: Now, turning to our other growth businesses, where we remain encouraged by both the momentum in their results and strong positioning for future growth. Increasingly, we see additional points of connectivity across Nuclear, at-Home Solutions, and OptiFreight, and an ability to leverage the full strength of our enterprise portfolio. Nuclear and Precision Health Solutions continue to outpace the market, backed by our differentiated offerings and our team's deep expertise. I'm pleased to share that Nuclear recently conducted their 2025 customer survey and again earned a net promoter score well above the industry average, a clear reflection of the reliability, adaptability, and cutting-edge technology we deliver to customers. Our performance is driven by our unique end-to-end capabilities and strong demand for Theranostics, which again delivered over 30% revenue growth for the quarter.
Speaker #2: turning to our other growth businesses where we remain by both the momentum in their results and strong positioning for encouraged future growth . Increasingly we see additional points of connectivity across nuclear at home solutions and freight , and an ability to the full strength leverage enterprise of our portfolio .
Speaker #2: Nuclear and opti precision health Solutions continues to market , backed by our differentiated offerings and our team's deep expertise . to share that recently conducted nuclear 2025 customer their survey and again earned a Net Promoter Score above the industry clear average .
Speaker #2: reflection of the reliability , A adaptability technology cutting edge we and customers deliver to . Our performance is driven by our unique end to end capabilities and strong demand for Theranostics , which again delivered over 30% revenue growth for the quarter .
Aaron Alt: The expansion of these products has meaningful impacts for our customers and the patients they serve, and we will continue to invest to support the business's growth of the more than 70 products in our pipeline, which is largely dominated by novel theranostics in the areas of oncology and urology. We continue to see opportunities for greater connectivity between our nuclear business and our MSO and specialty businesses, aided by industry shifts driving greater demand for precision medicine. We are uniquely positioned to equip community practices with the know-how to establish and manage a theranostics program to accelerate adoption. Within at-home solutions, the demand environment continues to be strong, supported by the shift of care to the home. We are executing a smooth and efficient integration of ADS, positioning us for long-term growth.
Aaron Alt: The expansion of these products has meaningful impacts for our customers and the patients they serve, and we will continue to invest to support the business's growth of the more than 70 products in our pipeline, which is largely dominated by novel theranostics in the areas of oncology and urology. We continue to see opportunities for greater connectivity between our nuclear business and our MSO and specialty businesses, aided by industry shifts driving greater demand for precision medicine. We are uniquely positioned to equip community practices with the know-how to establish and manage a theranostics program to accelerate adoption. Within at-home solutions, the demand environment continues to be strong, supported by the shift of care to the home. We are executing a smooth and efficient integration of ADS, positioning us for long-term growth.
Speaker #2: Expansion of these products has meaningful impacts for our customers and the patients we serve, and we will invest to support the business growth of continuing more than 70 products in our pipeline, which is largely dominated by theranostics in the novel areas of oncology and urology.
Speaker #2: We continue to see opportunities for greater connectivity between our nuclear business and our MSO and specialty the more industry shifts aided by driving greater demand precision for medicine .
Speaker #2: We are uniquely positioned to equip community practices with the know how to establish and manage Theranostics program to accelerate adoption within at home solutions .
Speaker #2: The demand environment strong , supported by the shift of care home . We are executing a to the smooth and efficient integration of positioning us for long term growth .
Aaron Alt: We see synergistic opportunities with our large core pharma and specialty solutions business, with the latest example seen in the announcement of our Continue Care Pathways program. This program leverages the full Cardinal Health portfolio to simplify diabetes supply management for partner pharmacies and patients, which is already supporting over 11,000 pharmacies today, with more opportunities in the pilot testing phase. We are pleased to announce a key partnership with Publix Super Markets, a recent new customer in our pharma business, to further expand our reach. Finally, OptiFreight Logistics continues to demonstrate its market-leading value proposition. With ongoing investments in our proprietary technology-driven platform, TotalView Insights, we see long-term potential to deliver cost savings, transparency, and operational efficiency for our customers. We are also making strong progress with new customer-centric technology to expand our presence in the pharmacy space as we continue to drive core growth and tech-forward transformation.
Aaron Alt: We see synergistic opportunities with our large core pharma and specialty solutions business, with the latest example seen in the announcement of our Continue Care Pathways program. This program leverages the full Cardinal Health portfolio to simplify diabetes supply management for partner pharmacies and patients, which is already supporting over 11,000 pharmacies today, with more opportunities in the pilot testing phase. We are pleased to announce a key partnership with Publix Super Markets, a recent new customer in our pharma business, to further expand our reach.
Speaker #2: We see synergistic opportunities with our large pharma and core ads , continues to be business with the solutions example seen announcement Pathways in the continued Care This program leverages the full Cardinal Health portfolio to simplify diabetes supply management for partner pharmacies and patients , which is already supporting over 11,000 pharmacies today .
Speaker #2: With more of our opportunities in the pilot program . phase . testing We are pleased to announce a key with public partnership supermarkets , a recent new customer in our pharma business , to further expand our reach .
Aaron Alt: Finally, OptiFreight Logistics continues to demonstrate its market-leading value proposition. With ongoing investments in our proprietary technology-driven platform, TotalView Insights, we see long-term potential to deliver cost savings, transparency, and operational efficiency for our customers. We are also making strong progress with new customer-centric technology to expand our presence in the pharmacy space as we continue to drive core growth and tech-forward transformation.
Speaker #2: Finally , Opti freight continues to logistics market demonstrate its leading value proposition with ongoing investments in our proprietary technology driven platform . Total View Insights We see long term potential to deliver cost savings , transparency and operational efficiency for our customers .
Speaker #2: We are also making strong progress with new customer centric technology to expand our presence in the pharmacy As we continue to space . drive core growth and forward tech transformation .
Aaron Alt: In closing, we have great confidence in the resilience of our business model and our essential position as the backbone of the U.S. healthcare system, delivering daily to tens of thousands of locations with products sourced from several thousand manufacturers. This vital role was on full display during the recent storms that impacted much of the United States, where the Cardinal Health team demonstrated its extraordinary commitment to ensuring critical products and services reach customers and patients. The team's commitment and actions are instrumental to our success, and we're deeply grateful for their contributions. As we move into the back half of the fiscal year, the momentum across our business reinforces our belief in the opportunities in front of us and gives us confidence in our ability to continue delivering sustainable value creation. With that, we will take your questions. Thank you.
Aaron Alt: In closing, we have great confidence in the resilience of our business model and our essential position as the backbone of the U.S. healthcare system, delivering daily to tens of thousands of locations with products sourced from several thousand manufacturers. This vital role was on full display during the recent storms that impacted much of the United States, where the Cardinal Health team demonstrated its extraordinary commitment to ensuring critical products and services reach customers and patients. The team's commitment and actions are instrumental to our success, and we're deeply grateful for their contributions. As we move into the back half of the fiscal year, the momentum across our business reinforces our belief in the opportunities in front of us and gives us confidence in our ability to continue delivering sustainable value creation. With that, we will take your questions. Thank you.
Speaker #2: In closing , confidence in the resilience of our business our model and we have great position as essential backbone of the the US healthcare system , delivering daily to tens of thousands of locations with products several from thousand manufacturers This vital role display was on full .
Speaker #2: recent storms that impacted much of the United States , where the Cardinal Health team demonstrated his extraordinary commitment to ensuring critical products and sourced reach customers and patients .
Speaker #2: services The team's commitment and actions are instrumental to our we're deeply success , and grateful for contributions . As we move into the back half of the fiscal year , the momentum across our business reinforces our belief in the opportunities in front of us and gives us confidence in our to continue delivering ability value creation .
Aaron Alt: As a reminder, if you have any questions, please press star one on your telephone keypad. Once again, can you please limit yourself to one question each to allow the maximum of attendees to ask a question? Now, the first question is from Aaron Wright from Morgan Stanley. Please go ahead. Great. Thanks for taking my question. So can you unpack or break down some of the components of the profit performance in pharma solutions? And can you break down what's organic versus inorganic? And for the balance of the year, what's implied in terms of that underlying organic growth in the second half and just that underlying demand trend? I think you commented on that in your prepared remarks. How do you think about that continued underlying strength and stability of the business from a utilization trend perspective, as well as strength and specialty? Thanks. Good morning, Aaron.
Operator: As a reminder, if you have any questions, please press star one on your telephone keypad. Once again, can you please limit yourself to one question each to allow the maximum of attendees to ask a question? Now, the first question is from Aaron Wright from Morgan Stanley. Please go ahead.
Speaker #2: that , we will take your questions With sustainable .
Speaker #4: you . As a reminder , if you have any Thank questions , please press star one on your telephone keypad . Once again , can you please limit yourself to one question allow the maximum each to of to ask attendees ?
Aaron Wright: Great. Thanks for taking my question. So can you unpack or break down some of the components of the profit performance in pharma solutions? And can you break down what's organic versus inorganic? And for the balance of the year, what's implied in terms of that underlying organic growth in the second half and just that underlying demand trend? I think you commented on that in your prepared remarks. How do you think about that continued underlying strength and stability of the business from a utilization trend perspective, as well as strength and specialty?Thanks.
Speaker #4: The first question is from Erin Wright from Morgan Please Stanley . go ahead .
Speaker #5: Great, thanks for taking my questions. So, can you unpack or break down some of the components of the profit performance in Pharma Solutions?
Speaker #5: And can you break down what's organic versus inorganic ? And for the balance of the year , what's implied in terms of that underlying organic growth in the And and just second half .
Speaker #5: demand trend . I think you commented on that in your prepared remarks . How do you about that ? think Continued underlying strength and stability of the business from a utilization trend perspective , as well as specialty ?
Aaron Alt: Good morning, Aaron. Thank you for the question. We saw momentum in the quarter within the pharma business, as we've seen in the last several quarters, with strong demand really across all categories and parts of the business: brand, specialty, consumer, and generics. You saw the significant revenue growth and profit growth as well. It's really driven, in particular, on the profit line by specialty, right?
Aaron Alt: Thank you for the question. We saw momentum in the quarter within the pharma business, as we've seen in the last several quarters, with strong demand really across all categories and parts of the business: brand, specialty, consumer, and generics. You saw the significant revenue growth and profit growth as well. It's really driven, in particular, on the profit line by specialty, right? Trending above historical levels. As we talked about at JPMorgan, we're going to be above the $50 billion for the year there, seeing strength in the key priority areas: urology, oncology. Nice strength within the biopharma parts of the business as well. You've heard us talk about the Sonexus. We saw the contributions we expected from the MSOs, and we're pleased to close the Solaris transaction in November. So we got two months of benefit in a quarter there.
Speaker #5: strength and Thanks
Speaker #3: . Good morning
Speaker #3: Erin , thank you for the question . We saw momentum in the quarter within the . pharma business , as in the last several strong quarters , with demand really across all categories and parts of the business brand we've seen , specialty , consumer generics .
Speaker #3: You saw the revenue significant growth and profit growth well . It's as really driven in particular the by profit line by . Right .
Aaron Alt: Trending above historical levels. As we talked about at JPMorgan, we're going to be above the $50 billion for the year there, seeing strength in the key priority areas: urology, oncology. Nice strength within the biopharma parts of the business as well. You've heard us talk about the Sonexus. We saw the contributions we expected from the MSOs, and we're pleased to close the Solaris transaction in November. So we got two months of benefit in a quarter there.
Speaker #3: specialty Trending above historical lovers , as we talked about at JPMorgan , to be we're going above the $50 billion for year . the There .
Speaker #3: strength Seeing in the priority Urology , areas . oncology , nice key strength within the biopharma parts of the business as well . You've heard us talk about annexes .
Speaker #3: We saw the contributions we expected from the MSOs, and we're pleased to close the Solaris transaction in November. So we got two months' benefit in the quarter.
Aaron Alt: But I want to emphasize the contributions in the quarter from the MSOs were consistent with our expectations. We really saw strong core growth. Generics is always a positive, or recently has always been a positive story for us when we see growing volumes, which we saw, and consistent market dynamics, which we saw, right? That is certainly a nice contributor to the underlying business. And of course, you can't get past just strong execution by our operations teams in the quarter as well. As we think about where pharma goes from there and the guide for the rest of the year, I guess I'd observe that the raise to our guide is really driven by both reflecting the strong Q2 performance and improved expectations as we carry forward, particularly in the core part of the business. We do have higher growth in H1 than we have called.
Aaron Alt: But I want to emphasize the contributions in the quarter from the MSOs were consistent with our expectations. We really saw strong core growth. Generics is always a positive, or recently has always been a positive story for us when we see growing volumes, which we saw, and consistent market dynamics, which we saw, right? That is certainly a nice contributor to the underlying business. And of course, you can't get past just strong execution by our operations teams in the quarter as well. As we think about where pharma goes from there and the guide for the rest of the year, I guess I'd observe that the raise to our guide is really driven by both reflecting the strong Q2 performance and improved expectations as we carry forward, particularly in the core part of the business. We do have higher growth in H1 than we have called.
Speaker #3: But I want to emphasize the contributions in there. From the MSOs, they were consistent with expectations. We saw strong core growth quarter over quarter.
Speaker #3: Generics is always a positive or recently has always been a positive story for us . When we see growing volumes , which we saw and consistent market dynamics , which we saw , right , that that is a certainly a nice contributor to underlying the business .
Speaker #3: And of course , you can't get just past strong execution by our operations teams in the quarter as well as we think about where pharma goes from there and the guide for the for the rest of the guess I'd year .
Speaker #3: that , raise to you know , the our guide is really driven by both reflecting the strong Q2 performance and improved expectations as we carry forward , particularly in core part of the the I business .
Aaron Alt: We called mid-teens profit growth in the back half. That's not a deceleration of expectation on demand. It's rather the observation that, as part of our guidance all along, we've referenced the fact that we'll be lapping $10 billion of new customers in the back half from last year and lapping, of course, ION and GIA, which we acquired in the second half last year, with some benefit from Solaris not being in the portfolio. We are assuming stronger demand, if you will. As we called out in my prepared remarks, we did raise our expectation in part based on demand we're seeing. But we are not calling outsized demand. That would be an opportunity, and that's consistent with our guidance philosophy from prior quarters as well.
Aaron Alt: We called mid-teens profit growth in the back half. That's not a deceleration of expectation on demand. It's rather the observation that, as part of our guidance all along, we've referenced the fact that we'll be lapping $10 billion of new customers in the back half from last year and lapping, of course, ION and GIA, which we acquired in the second half last year, with some benefit from Solaris not being in the portfolio. We are assuming stronger demand, if you will. As we called out in my prepared remarks, we did raise our expectation in part based on demand we're seeing. But we are not calling outsized demand. That would be an opportunity, and that's consistent with our guidance philosophy from prior quarters as well. And lastly, I would observe that we are not assuming, as is our practice, that the Solaris distribution moves over to Cardinal Health. If it were to come to us, it would be toward the end of our fiscal year, so that is not baked in. Jason, anything you want to add?
Speaker #3: We do have higher growth in H1 than we have called . We called mid-teens profit growth back half , and that's in the not a that's not a deceleration of demand .
Speaker #3: It's expectation rather the on observation that as part of our guidance all along , we've referenced the fact that we'll be lapping $10 billion of new customers in the back half from last and lapping , of course , iron and Gia , which we acquired in the second half last year with some year Solaris not being in the portfolio .
Speaker #3: We assuming are stronger strong , will , as we as we called out in my prepared remarks , we did raise our expectation in part based on We're seeing .
Speaker #3: But we are not demand . calling outsized demand . That would be a opportunity . And that's consistent with our guidance philosophy prior from quarters as well .
Aaron Alt: And lastly, I would observe that we are not assuming, as is our practice, that the Solaris distribution moves over to Cardinal Health. If it were to come to us, it would be toward the end of our fiscal year, so that is not baked in. Jason, anything you want to add? Yeah, I know this question will probably come up a variety of different ways. I think it is helpful to remind you all what we said in the last call. It's still pretty consistent with our current expectations that M&A for the pharma business is expected to be about 8% of our total growth for the full year. So that's the same ballpark that we're anticipating today and can help you kind of piece together all those different elements.
Speaker #3: And lastly, I would observe that we are not assuming, as is practice, that the distribution moves Solaris Cardinal Health to.
Jason Hollar: Yeah, I know this question will probably come up a variety of different ways. I think it is helpful to remind you all what we said in the last call. It's still pretty consistent with our current expectations that M&A for the pharma business is expected to be about 8% of our total growth for the full year. So that's the same ballpark that we're anticipating today and can help you kind of piece together all those different elements.
Speaker #3: You , that know were to come to us , it would be toward the end of if it our fiscal year . So not that is baked in .
Speaker #3: Jason , you want to add ?
Speaker #2: just I would I know this question will probably come up a variety of different ways . think it is helpful to remind I you all what we said in the call is still last pretty consistent with our current expectations that M&A for the pharma business is expected to be about 8% of our total growth for the for the full year .
Aaron Alt: But definitely very pleased with the core performance of the business, not just the pharma business, but throughout the other operating segments. So while M&A has been a nice accelerator of our strategy, what we've continued to demonstrate is that the core is strong and that our organic core investments and priorities continue to drive the business forward as well. Next question, please. The next question is from Elizabeth Anderson from Evercore ISI. Please go ahead. Hi, guys. Good morning. Congrats on the quarter. I was wondering if you could maybe parse apart the other segment a little bit. Is ADSG sort of performing ahead of your expectations in terms of how you thought that sort of full first-year performance would be? Is it sort of improved competitive position? You talked about some of the underlying dynamics in nuclear.
Jason Hollar: But definitely very pleased with the core performance of the business, not just the pharma business, but throughout the other operating segments. So while M&A has been a nice accelerator of our strategy, what we've continued to demonstrate is that the core is strong and that our organic core investments and priorities continue to drive the business forward as well.
Speaker #2: So that's the same ballpark that we're anticipating today and can help you kind of piece together all those different elements , but definitely very pleased with the core performance of the business , not just the pharma business , but throughout , you know , the the other operating segments .
Speaker #2: So M&A, while it has been a nice accelerator of our strategy, continued to demonstrate is that the core is strong and that our organic core investments and priorities continue to drive the business forward as well.
Matt Sims: Next question, please.
Operator: The next question is from Elizabeth Anderson from Evercore ISI. Please go ahead.
Speaker #1: Next question , please .
Elizabeth Anderson: Hi, guys. Good morning. Congrats on the quarter. I was wondering if you could maybe parse apart the other segment a little bit. Is ADSG sort of performing ahead of your expectations in terms of how you thought that sort of full first-year performance would be? Is it sort of improved competitive position? You talked about some of the underlying dynamics in nuclear.
Speaker #4: question is The next from Elizabeth Anderson Evercore ISI . Please go from ahead .
Speaker #6: Hi , guys . Good morning and congrats on the quarter was maybe you could wondering if parse . I apart other the segment , you know , bit adzed sort of performing other a , in you know , ahead of expectations in terms your thought that sort of full first year performance would be ?
Aaron Alt: So I'm just maybe trying to parse apart on the sort of three underlying business levels, some of that outperformance there, as that was obviously a very nice result in the quarter. Yeah, I'll go ahead. This is Jason. I'll go ahead and start and have Aaron add in any additional details. I'd say it's a very similar type of commentary that Aaron and I just provided for our pharma business. The core was strong for each of the three businesses within our other segment. We saw good double-digit growth irrespective of the M&A and the ADS acquisition as well. That acquisition has gone at least consistent, perhaps a little bit better than what we had anticipated. It's still early in terms of all the integration and synergy opportunities, but the core business remains strong overall for that home business, but also for our nuclear and OptiFreight businesses.
Elizabeth Anderson: So I'm just maybe trying to parse apart on the sort of three underlying business levels, some of that outperformance there, as that was obviously a very nice result in the quarter.
Speaker #6: would you is it sort of How competitive improved position ? You talked about some of the underlying dynamics in nuclear . So I'm just maybe trying to parse apart on the sort of three underlying business level .
Jason Hollar: Yeah, I'll go ahead. This is Jason. I'll go ahead and start and have Aaron add in any additional details. I'd say it's a very similar type of commentary that Aaron and I just provided for our pharma business. The core was strong for each of the three businesses within our other segment. We saw good double-digit growth irrespective of the M&A and the ADS acquisition as well. That acquisition has gone at least consistent, perhaps a little bit better than what we had anticipated. It's still early in terms of all the integration and synergy opportunities, but the core business remains strong overall for that home business, but also for our nuclear and OptiFreight businesses.
Speaker #6: Some of that outperformance there , as that was obviously a very nice result in the quarter .
Speaker #2: I'll go I'll go Yeah , start and have Erin add in any additional details . I'd say very similar type it's a commentary that I , Aaron and I just provided our pharma business .
Speaker #2: for The core was strong for each of the three businesses other within our segment . We saw good double digit growth irrespective of the M&A and the ads well .
Speaker #2: acquisition as has acquisition has That that gone at consistent , least perhaps a little bit better than what we had anticipated . It's still early in terms of all the integration and synergy opportunities , core but the business strong for overall that home business .
Aaron Alt: Each one of these three businesses are very much focused on core organic investments, making sure that that core is strong and that we're taking care of customers and patients that we have today. We are investing organically in each of these three businesses in different ways to further propel their capabilities and their growth going forward. Then as it relates to at-home, of course, we are also doing the inorganic investments. But it's really important for us that we keep that organic investments and that organic growth going. Each one of those three businesses have a little bit of a different story. Within our at-home business organically, we're very much focused on the distribution network, continuing to build out the automation and the technology there. We've completed three of the 11 DCs. We have another three to go for the next three years.
Jason Hollar: Each one of these three businesses are very much focused on core organic investments, making sure that that core is strong and that we're taking care of customers and patients that we have today. We are investing organically in each of these three businesses in different ways to further propel their capabilities and their growth going forward. Then as it relates to at-home, of course, we are also doing the inorganic investments. But it's really important for us that we keep that organic investments and that organic growth going. Each one of those three businesses have a little bit of a different story. Within our at-home business organically, we're very much focused on the distribution network, continuing to build out the automation and the technology there. We've completed three of the 11 DCs. We have another three to go for the next three years.
Speaker #2: also for our remains and nuclear opti-free businesses . Each these one of are three businesses very much focused on core organic investments , that core is making sure strong that and that we're taking care of customers and patients today have .
Speaker #2: also for our remains and nuclear opti-free businesses . Each these one of are three businesses very much focused on core organic investments , that core is making sure strong that and that we're taking care of customers and patients today have are investing We in organically each businesses of these three ways to further in different propel their capabilities and their And then forward .
Speaker #2: going growth as it relates to at home , are also we doing the inorganic investments , but it's really important for us keep that that we organic investments and organic growth going .
Speaker #2: Each one of a little bit of a those three businesses have different story within our ad business . We're very Organically . much focused on the network distribution , continuing to build out the automation and the technology there .
Aaron Alt: Nuclear, it's very much a story around the continued growth of Theranostics and the innovation that we're seeing in that space. We're investing into our capabilities and our cyclotron capacity to get there. OptiFreight, it's to take the leadership and the capability that we already have a long history of in the medical side and expand that into a greater share of wallet with those medical customers, but also expanding over time into the pharmacy side of that. So each of them are operating very well, very consistent growth right now, and we'll continue to evaluate the right type of M&A to further accelerate that as appropriate. But for the time being, we're still wanting to make certain we're taking care of the at-home customers and make sure that this integration goes flawlessly. Aaron, anything I missed there?
Jason Hollar: Nuclear, it's very much a story around the continued growth of Theranostics and the innovation that we're seeing in that space. We're investing into our capabilities and our cyclotron capacity to get there. OptiFreight, it's to take the leadership and the capability that we already have a long history of in the medical side and expand that into a greater share of wallet with those medical customers, but also expanding over time into the pharmacy side of that. So each of them are operating very well, very consistent growth right now, and we'll continue to evaluate the right type of M&A to further accelerate that as appropriate. But for the time being, we're still wanting to make certain we're taking care of the at-home customers and make sure that this integration goes flawlessly. Aaron, anything I missed there?
Speaker #2: We've completed three of the 11 . We have another three to go for the next three years . Nuclear . It's very much a story around the continued growth of Theranostics and the innovation that we're seeing in that space , and we're investing into our capabilities and our cyclotron capacity to get there .
Speaker #2: And is to opti freight take the leadership and the capability that we already have a long history of in the medical side and expand that into greater share of wallet with those medical customers , but also expanding into over time the pharmacy side of that .
Speaker #2: So, some of them each are operating very well, very consistent growth right now. And we'll continue to evaluate the right type of M&A to further accelerate that as appropriate.
Speaker #2: But as for the time being , we're still wanting to make certain we're taking care of the at home customers and make sure that this integration goes flawlessly .
Aaron Alt: I would just emphasize strong positioning, positive secular trends, double-digit core profit growth in each of the three businesses, setting aside the positive impact of the ADS acquisition. And Jason did reference the Theranostics point. I would point out that we will be lapping strong Q3 in Theranostics with the product launches from last year. And so that is part of our guidance already as well. Next question, please. The next question is from Eric Percher for Nephron Research. Please go ahead. Thank you. Question on capital allocation. I believe your prior commentary was somewhat predicated on returning to the low threes. You're back there maybe earlier than we expected, significant cash flow over the balance of the year. Can you give us a bit more on capital allocation and maybe also the capacity or opportunity for further transactions?
Aaron Alt: I would just emphasize strong positioning, positive secular trends, double-digit core profit growth in each of the three businesses, setting aside the positive impact of the ADS acquisition. And Jason did reference the Theranostics point. I would point out that we will be lapping strong Q3 in Theranostics with the product launches from last year. And so that is part of our guidance already as well.
Speaker #2: anything
Speaker #3: I would just
Speaker #3: emphasize strong there . positive positioning , secular double digit trends , core profit growth in each of the three businesses . Setting aside the positive impact of the ads acquisition .
Speaker #3: And reference the Theranostics Jason did point . I would point out that we will be lapping strong Q3 in theranostics as the product launches from last year , and so that will be that is part of our guidance already as well .
Matt Sims: Next question, please.
Operator: The next question is from Eric Percher for Nephron Research. Please go ahead.
Eric Percher: Thank you. Question on capital allocation. I believe your prior commentary was somewhat predicated on returning to the low threes. You're back there maybe earlier than we expected, significant cash flow over the balance of the year. Can you give us a bit more on capital allocation and maybe also the capacity or opportunity for further transactions? Do you need some time on MSOs, and do you see opportunities in the other segment?
Speaker #3: Next question please .
Speaker #4: The next question is from Eric Parker Nephron Research . Please go ahead .
Speaker #7: Thank you . A on capital allocation . question I believe your prior commentary was somewhat predicated on returning to the low threes . back there .
Speaker #7: You're maybe earlier than we expected. Flow over significant cash balance of the year. Can you give us a bit more on capital allocation and also maybe the capacity or opportunity for further transactions?
Aaron Alt: Do you need some time on MSOs, and do you see opportunities in the other segment? Thank you for the question, Eric. I would observe two things. First, that we try very hard to tell you what we're going to do and then go do it and report back. And we are very disciplined in following the aptly named disciplined capital reallocation framework that we have. And so two quarters into the year, we are on track to make the $600 to $650 million of CapEx investments that we've talked about before. We have protected our balance sheet and gotten us back within our targeted leverage range at the end of Q2. So that's good news as well. And we've, two quarters in, fulfilled our baseline share repurchase commitment of $750 million.
Aaron Alt: Thank you for the question, Eric. I would observe two things. First, that we try very hard to tell you what we're going to do and then go do it and report back. And we are very disciplined in following the aptly named disciplined capital reallocation framework that we have. And so two quarters into the year, we are on track to make the $600 to $650 million of CapEx investments that we've talked about before. We have protected our balance sheet and gotten us back within our targeted leverage range at the end of Q2. So that's good news as well. And we've, two quarters in, fulfilled our baseline share repurchase commitment of $750 million.
Speaker #7: Do you need some time on . And do you see MSOs opportunities in the other segment
Speaker #3: question ,
Speaker #3: Eric . ? Thank you for the would observe two things . First , that we try I to tell you what we're going to do and then go do it report and .
Speaker #3: And we are back disciplined very in following the Disciplined Capital aptly named allocation framework that we have . so And two quarters into the year , we are on track to make the CapEx investments that we talked about before .
Speaker #3: We 600 to $650 million of have protected our balance sheet and gotten us back within our targeted leverage range . At the end Q2 of .
Speaker #3: that's good So news as well . And we've two quarters in fulfilled our share baseline repurchase commitment of And means for what that $750 million .
Aaron Alt: What that means for a business that is continuing to generate strong cash is that we have flexibility to assess how we will create the most shareholder value as we carry forward. As you can tell from Jason's comments, we are investing for growth in the businesses really across the portfolio, whether it's in the pharma business with specialty, within the other three parts of the other business we just highlighted, or indeed continuing the progress against the turnaround plan for GMPD. Now, part of that as well is we are looking at the landscape and seeing where can we drive more growth, or where should we be returning additional capital to shareholders?
Aaron Alt: What that means for a business that is continuing to generate strong cash is that we have flexibility to assess how we will create the most shareholder value as we carry forward. As you can tell from Jason's comments, we are investing for growth in the businesses really across the portfolio, whether it's in the pharma business with specialty, within the other three parts of the other business we just highlighted, or indeed continuing the progress against the turnaround plan for GMPD. Now, part of that as well is we are looking at the landscape and seeing where can we drive more growth, or where should we be returning additional capital to shareholders?
Speaker #3: that is a business continuing to generate strong that we have flexibility to cash is assess how will we create the most shareholder as value we carry ?
Speaker #3: forward are We working , as you can tell from comments , we Jason's are for investing growth in the businesses , really across the portfolio , it's in the pharma business with specialty within the other three parts of the other business , we just highlighted , or indeed continuing the progress against the plan turnaround for Gapdh part of well that as .
Speaker #3: is Now , we are looking at . landscape The can we where drive more growth and seeing or where should we , where should we be returning additional capital to And while we have nothing shareholders ?
Aaron Alt: While we have nothing to provide today from a commitment in that respect, we are very mindful of the flexibility that the business is generating for us to ensure that we are relentlessly focused on creating that shareholder value. Yeah, what I would add is we've worked real hard. The team has done a fantastic job and worked very hard to generate a lot of cash. We're going to be very careful as how we deploy that. When you think about, in our industry, where there's been some of the greatest operational challenges, it's very much on these core decisions on where to allocate capital. We have learned from that and are very intentional around where we put that to work. As I already mentioned, we're really focused on the core of the business, and the strategy is not predicated on any significant M&A.
Aaron Alt: While we have nothing to provide today from a commitment in that respect, we are very mindful of the flexibility that the business is generating for us to ensure that we are relentlessly focused on creating that shareholder value. Yeah, what I would add is we've worked real hard. The team has done a fantastic job and worked very hard to generate a lot of cash. We're going to be very careful as how we deploy that. When you think about, in our industry, where there's been some of the greatest operational challenges, it's very much on these core decisions on where to allocate capital. We have learned from that and are very intentional around where we put that to work. As I already mentioned, we're really focused on the core of the business, and the strategy is not predicated on any significant M&A.
Speaker #3: Provide today from a commitment in that we are very mindful of the flexibility that the business is for us generating. Ensure that we are relentlessly focused on creating the value shareholder.
Speaker #2: Yeah , what I would add is , you know , we've worked hard . The team has done a real fantastic job and worked very hard to generate a lot of And we're we're going to be very careful as cash .
Speaker #2: deploy that . And when you think in our , where about some of the there's been greatest operational challenges , very much it's on poor this decisions on where to allocate capital .
Speaker #2: learned from that we So and are very intentional around where we put that to . As work mentioned , really we're already focused on the core of the business and the strategy is not predicated on any I significant M&A .
Aaron Alt: With that said, I think the word opportunistic will come up, whether we're talking about repurchases or whether we'll talk about additional M&A. I don't see that there's a large gap or anything that we're going to be really leaning into. We're really pleased on the MSO side with the three different platforms that we have now acquired and/or built: oncology, autoimmune, and neurology. We're going to want to look at how we can create more value with each of those partnerships and those assets. We think that there's opportunities probably to do more, but smaller types of acquisitions in that type of space. The at-home space and other in general remains quite fragmented. So there will be opportunities if we so choose.
Aaron Alt: With that said, I think the word opportunistic will come up, whether we're talking about repurchases or whether we'll talk about additional M&A. I don't see that there's a large gap or anything that we're going to be really leaning into. We're really pleased on the MSO side with the three different platforms that we have now acquired and/or built: oncology, autoimmune, and neurology. We're going to want to look at how we can create more value with each of those partnerships and those assets. We think that there's opportunities probably to do more, but smaller types of acquisitions in that type of space. The at-home space and other in general remains quite fragmented. So there will be opportunities if we so choose.
Speaker #2: said , I think With that opportunistic will will whether we're talking about repurchases come up whether we'll talk about additional the word M&A .
Speaker #2: I don't see that there's a , you large gap or anything that we're going to be into . We're or MSO side on the the three different platforms that we have now acquired and or built oncology , autoimmune and know , a neurology .
Speaker #2: really leaning think that there's And we opportunities probably to do more . But types of smaller acquisitions and that type of , the at space and space other in general remains home quite fragmented .
Speaker #2: And we're going to want to look at how we can create more value with with each of those , those partnerships and those those assets .
Aaron Alt: But we're going to make certain that we protect the core with any of those additional acquisitions to ensure that it truly does create synergistic value, helps build capabilities, and that we're not going to be doing anything defensively here. We'll be looking to see if some offensive actions take place. And while we're pleased with the leverage, our cash is at a little bit of the lower side where it's historically been. And that's something that we'll be having a lot of flexibility with all of our other levers that are in place to continue to have the flexibility as needed when those opportunities do arise. So we'll continue to evaluate all that and certainly report back as we get better clarity on it. Yeah, just to summarize, I guess what I would say is we're pleased that both internally and externally, there is competition for our capital.
Aaron Alt: But we're going to make certain that we protect the core with any of those additional acquisitions to ensure that it truly does create synergistic value, helps build capabilities, and that we're not going to be doing anything defensively here. We'll be looking to see if some offensive actions take place. And while we're pleased with the leverage, our cash is at a little bit of the lower side where it's historically been. And that's something that we'll be having a lot of flexibility with all of our other levers that are in place to continue to have the flexibility as needed when those opportunities do arise. So we'll continue to evaluate all that and certainly report back as we get better clarity on it. Yeah, just to summarize, I guess what I would say is we're pleased that both internally and externally, there is competition for our capital.
Speaker #2: there will be opportunities if we so choose . But we're going to make certain that we protect core with the any of those additional acquisitions to ensure that it truly does create synergistic value , build helps capabilities , and that , you know , we're to be doing not going defensively here .
Speaker #2: We'll be looking to see if offensive there's some take place and while . And we're pleased with the leverage actions cash is at a little bit of the lower side of where it's historically been .
Speaker #2: And that's something that will be having a will lot of flexibility with , you know , all of our other levers that are in place to continue to to have the flexibility as needed .
Speaker #2: When those opportunities arise . do So so we'll continue to that evaluate all you . And , know , certainly report back as we get better clarity on it .
Speaker #3: Yeah. Just to, I would say, guess what I were to summarize, I think both we're pleased internally, and there is, for our externally, capital competition.
Aaron Alt: Final question, please. The next question is from Michael Cherney from Leerink Partners. Please go ahead. Good morning, and thanks for taking the question. Maybe if I can build on that a little more. Clearly, the last couple of years, the story in many eyes has been about the improvement on specialty, both from an MSO as well as distribution capability, the scaling you've done. As you think about that prioritization of internal capital and external capital, how has the experience you've had with specialty combined with the pipeline for a variety of different new launches and biosimilars impacted your thought process of where strategic advancement should be as you continue to push for driving towards your LRP and potentially higher? Yeah, great question. I'd love to go deeper. Our view has changed very little.
Aaron Alt: Final question, please.
Operator: The next question is from Michael Cherney from Leerink Partners. Please go ahead. Good morning, and thanks for taking the question. Maybe if I can build on that a little more. Clearly, the last couple of years, the story in many eyes has been about the improvement on specialty, both from an MSO as well as distribution capability, the scaling you've done. As you think about that prioritization of internal capital and external capital, how has the experience you've had with specialty combined with the pipeline for a variety of different new launches and biosimilars impacted your thought process of where strategic advancement should be as you continue to push for driving towards your LRP and potentially higher? Yeah, great question. I'd love to go deeper. Our view has changed very little.
Speaker #3: Please .
Speaker #4: The next question is from Michael Cherny from capital . Please go ahead .
Speaker #8: Good thanks for and taking the question . Maybe if build on I can that a little more morning clearly , the last couple of years , the story many eyes has been in about the improvement on specialty , both from an MSO as well as a distribution scaling you've done think about as you that capability , the of internal capital and external capital .
Speaker #8: How is the experience with you've had specialty combined with the pipeline for variety of different new launches and biosimilars ? Impacted your thought process of where advancement should be strategic as you continue to push for towards your driving LRP and potentially higher ?
Aaron Alt: If you go back to not this last investor day, but the one before that, we talked about the specialty flywheel effect and benefits that we anticipate. That while distribution is important to us, the MSO strategy, the biopharma solution strategy, all these capabilities, both upstream with the manufacturers and downstream with our customers and ultimately patients, all work together. And I don't think it's a surprise that what we're seeing in specialty is across-the-board performance improvements. The MSOs certainly help bring it all together in different ways. Our biopharma solution strength has absolutely improved our credibility in the distribution space. We have fantastic relationships both upstream and downstream. So we're executing very well both directions. And that then creates additional opportunities.
Aaron Alt: If you go back to not this last investor day, but the one before that, we talked about the specialty flywheel effect and benefits that we anticipate. That while distribution is important to us, the MSO strategy, the biopharma solution strategy, all these capabilities, both upstream with the manufacturers and downstream with our customers and ultimately patients, all work together. And I don't think it's a surprise that what we're seeing in specialty is across-the-board performance improvements. The MSOs certainly help bring it all together in different ways. Our biopharma solution strength has absolutely improved our credibility in the distribution space. We have fantastic relationships both upstream and downstream. So we're executing very well both directions. And that then creates additional opportunities.
Speaker #2: Yeah , great . Great question . I'd love to go into that deeper I view our our has changed very little . If you go back this last to not Investor Day , but the one before that , we talked specialty effect and flywheel benefits that we anticipate that while distribution is important to us , the MSO the strategy , solutions strategy , all biopharma these capabilities both upstream with the with and downstream manufacturers our customers and ultimately patients all work together .
Speaker #2: think it's a surprise that what we're seeing in specialty is across the board performance And I don't improvements , the the MSOs help certainly bring it all together in different ways .
Speaker #2: Our our or our biopharma solutions . Strength has absolutely credibility distribution and the We have a space . fantastic upstream relationships both and So we're downstream .
Aaron Alt: And having really referenced our other businesses of nuclear, at-Home, and OptiFreight, all three of which plug into pharmacy capabilities in different ways, one of which we've talked about a little bit this last month with our Continue Care Pathways program with at-Home and connecting the dots with those large pharmacy customers. So we see a lot of opportunity to continue to bring that together. And that's why we're less focused on expanding into new and different areas, because there's still a lot of opportunity to expand within the customers, within the products, within the platforms, within the capabilities that we already have. And I think when you look at those opportunities, there's more than enough there that we just don't need to get distracted and grow in other ways because we just don't have a gap in that portfolio that currently we're worried about.
Aaron Alt: And having really referenced our other businesses of nuclear, at-Home, and OptiFreight, all three of which plug into pharmacy capabilities in different ways, one of which we've talked about a little bit this last month with our Continue Care Pathways program with at-Home and connecting the dots with those large pharmacy customers. So we see a lot of opportunity to continue to bring that together. And that's why we're less focused on expanding into new and different areas, because there's still a lot of opportunity to expand within the customers, within the products, within the platforms, within the capabilities that we already have. And I think when you look at those opportunities, there's more than enough there that we just don't need to get distracted and grow in other ways because we just don't have a gap in that portfolio that currently we're worried about.
Speaker #2: well . Both executing very directions . creates additional opportunities . Having really then referenced our other businesses , businesses of nuclear at home and which all three of plug into pharmacy in different capabilities we've talked one of which little bit about a this last with our month continued cares Pathways program with At Home Continue Care connecting those dots those large with pharmacy customers .
Speaker #2: So we see a lot of opportunity to bring that to continue together . And less we're that's focused on expanding into new and different areas , because there's still a lot of opportunity to expand within the customers , within the products , within the platforms , within the we capabilities that already have .
Speaker #2: And I think when you look at those opportunities , more than enough there that we just don't need to get there's grow in other ways because we just don't have a gap in that portfolio that currently we're about .
Aaron Alt: So that means we can just, again, be more offensive and take on additional growth vectors within what we already have. Next question, please. The next question is from Alan Lutz from Bank of America. Please go ahead. Good morning, and thanks for taking the questions. The Cardinal Health brands in GMPD continue to accelerate, even if you net the timing issue that you mentioned. Is there anything specific to call out there around that strength? And then a second question on GMPD, lower SG&A in the quarter around optimization efforts. Can you talk a little bit about what you're seeing there, specifically where those savings are coming from, and then what's implied in the GMPD guide for the remainder of the year? Thanks. Yeah, great. Yeah, I'll start and then hand it over to Aaron for the SG&A question.
Aaron Alt: So that means we can just, again, be more offensive and take on additional growth vectors within what we already have. Next question, please. The next question is from Alan Lutz from Bank of America. Please go ahead. Good morning, and thanks for taking the questions. The Cardinal Health brands in GMPD continue to accelerate, even if you net the timing issue that you mentioned. Is there anything specific to call out there around that strength? And then a second question on GMPD, lower SG&A in the quarter around optimization efforts. Can you talk a little bit about what you're seeing there, specifically where those savings are coming from, and then what's implied in the GMPD guide for the remainder of the year? Thanks. Yeah, great. Yeah, I'll start and then hand it over to Aaron for the SG&A question.
Speaker #2: distracted and we can worried again , just be more offensive and and take on , you know , growth additional factors with we already have .
Speaker #1: Next question
Speaker #1: please within what
Speaker #1: .
Speaker #4: question is The next from . Allen Lutz from Bank of America . ahead Please go .
Speaker #9: Good morning and thanks for taking the questions . The Cardinal Health Brands in continues to accelerate . Even if GMP you timing issue that you mentioned .
Speaker #9: specific Is there anything there to call around that then strength ? And a second question on lower in the quarter around GMP optimization efforts .
Speaker #9: Can you talk a little bit about what you're , specifically seeing there where those savings are coming from . And then what's implied in the GMP guide remainder of year ?
Speaker #9: the Thanks .
Aaron Alt: As it relates to Cardinal brand growth, it's really not all that sophisticated. It goes back, similar to my last commentary. You have to go back at least a few years, probably more like several years, to when the GMPD team really started to not only focus on, but really invest into their core. So that's the five-point plan that we walked through before, really focused on the basics of the business. We had to invest in some capacity and capability at the manufacturing sites. We have fantastic products, and we had great demand, but we weren't always getting product to the customer at the right time and place. So getting those capabilities right, our back orders, I don't think it's ever been lower. Our service levels have never been higher. I mean, we're at levels of operational excellence that we've just not seen before.
Aaron Alt: As it relates to Cardinal brand growth, it's really not all that sophisticated. It goes back, similar to my last commentary. You have to go back at least a few years, probably more like several years, to when the GMPD team really started to not only focus on, but really invest into their core. So that's the five-point plan that we walked through before, really focused on the basics of the business. We had to invest in some capacity and capability at the manufacturing sites. We have fantastic products, and we had great demand, but we weren't always getting product to the customer at the right time and place. So getting those capabilities right, our back orders, I don't think it's ever been lower. Our service levels have never been higher. I mean, we're at levels of operational excellence that we've just not seen before.
Speaker #2: Yeah , great . Yeah . I'll start and then hand it over to Aaron for the question . As it relates to Cardinal brand growth really not all , it's that sophisticated .
Speaker #2: It back goes similar to my last commentary . You have to go at least a few years , probably more like several to when that the years team really GMP started to focus on , only invest into their but really core .
Speaker #2: that's the five point plan walked through So before , that we really focused on the basics of the business . We had to in some invest capacity and at the capability manufacturing sites .
Speaker #2: You know, we have fantastic products and we demand—had great demand—but we weren't always getting product to the customer at the right time and place.
Speaker #2: You know , we have fantastic products and we demand , had great but we weren't always getting product to the customer at the right time and those capabilities So getting right , our think it's back ever been lower .
Speaker #2: You know , we have fantastic products and we demand , had great but we weren't always getting product to the customer at the right time and those capabilities So getting right , our think it's back ever been orders , I don't Our service levels have never been higher .
Aaron Alt: That creates lots of opportunities. It was hard for us to expand into new customers, new categories with those constraints we had before. Those constraints are largely off. We're really executing quite well to those customer requirements. It's nice that the underlying utilization is still relatively robust. It's not like what we see on the pharma side, but that low single-digit consistent type of market growth. It allows us to have enough underlying volume that we're then able to come in and take care of more of our customers' needs. I'll now turn it over to Aaron for the SG&A. On the SG&A topic, certainly, GMPD is a highlight there, which we'll come to in a second.
Aaron Alt: That creates lots of opportunities. It was hard for us to expand into new customers, new categories with those constraints we had before. Those constraints are largely off. We're really executing quite well to those customer requirements. It's nice that the underlying utilization is still relatively robust. It's not like what we see on the pharma side, but that low single-digit consistent type of market growth. It allows us to have enough underlying volume that we're then able to come in and take care of more of our customers' needs. I'll now turn it over to Aaron for the SG&A. On the SG&A topic, certainly, GMPD is a highlight there, which we'll come to in a second.
Speaker #2: we're at levels of I mean , operational just not that we've excellence before , seen and that creates of opportunities . hard for It was us to expand into new lots new new categories with , you know , those constraints we had before , those constraints largely are off .
Speaker #2: And really executing quite we're those well customer to It's nice that the underlying utilization is still relatively You know , it's not like what we see on the robust .
Speaker #2: pharma side , that , you know , low single digit consistent type of market growth . So it allows us to enough have underlying volume that we're then able in and to come take care of more of our needs customers .
Aaron Alt: But I want to emphasize that Jason and I are really pleased with the focus that the entire enterprise has been putting on how do we both invest for the future and relentlessly optimize our cost structure to, of course, reinforce that flywheel. The GMPD business, in the face of executing against the GMPD improvement plan, has been relentless in looking for opportunities on how do we both, consistent with the five-point plan, raise our game and service our customers better, but do it in a much more efficient way. This quarter is testament to the progress they've been making and that their overall SG&A costs, both direct and from an enterprise perspective, really came down in ways that we were pleased to see in support of that business. Next question, please. The next question is from George Hill from Deutsche Bank.
Aaron Alt: But I want to emphasize that Jason and I are really pleased with the focus that the entire enterprise has been putting on how do we both invest for the future and relentlessly optimize our cost structure to, of course, reinforce that flywheel. The GMPD business, in the face of executing against the GMPD improvement plan, has been relentless in looking for opportunities on how do we both, consistent with the five-point plan, raise our game and service our customers better, but do it in a much more efficient way. This quarter is testament to the progress they've been making and that their overall SG&A costs, both direct and from an enterprise perspective, really came down in ways that we were pleased to see in support of that business. Next question, please. The next question is from George Hill from Deutsche Bank.
Speaker #2: It's over. I'll now turn to Aaron for the next section.
Speaker #3: And on the topic . Certainly GMP is a highlight there , which second , but I want to emphasize we'll come to in a that Jason and I are really pleased focus that the enterprise has putting entire on .
Speaker #3: we been How do the invest for both future and relentlessly cost structure optimize our to , of course , reinforce that flywheel ? The business face of in the GMP has been relentless in looking for opportunities on how do we GPD both with the five point plan , raise our game and service our customers better , but do it at efficient and much more efficient and this way , quarter a much more testament to progress the they've been that their making and overall costs , both and from an enterprise perspective , came really down in ways that we were pleased to see in support of that business .
Aaron Alt: Please go ahead. So there's two primary ways we pay in the future of this model. The first is, of course. George Hill, please go ahead with your question. Yeah, good morning, guys, and thanks for taking the question. I guess, Jason, I'd like to ask about the macro pricing environment as we're seeing some brand drug manufacturers take price increases as 2026 starts. It doesn't seem to have impacted your guys' guidance at all. But as you look forward, I guess I'm wondering, should we expect to see manufacturer brand drug price decreases? I'm sorry, not increases, decreases, impact either the revenue line or the operating income line as we think about calendar 2026? And maybe also, if you could talk about the offsets that you guys have used to preserve your operating earnings on the income statement. Thanks. Sure. Yeah.
Aaron Alt: Please go ahead. So there's two primary ways we pay in the future of this model. The first is, of course. George Hill, please go ahead with your question. Yeah, good morning, guys, and thanks for taking the question. I guess, Jason, I'd like to ask about the macro pricing environment as we're seeing some brand drug manufacturers take price increases as 2026 starts. It doesn't seem to have impacted your guys' guidance at all. But as you look forward, I guess I'm wondering, should we expect to see manufacturer brand drug price decreases? I'm sorry, not increases, decreases, impact either the revenue line or the operating income line as we think about calendar 2026? And maybe also, if you could talk about the offsets that you guys have used to preserve your operating earnings on the income statement. Thanks. Sure. Yeah.
Speaker #3: Next question please .
Speaker #4: The next question George Hill Deutsche from Bank . Please go is from .
Speaker #3: Primary ways .
Speaker #10: We pay for model. The.
Speaker #4: George Hill . Please go ahead with your question .
Speaker #7: Yeah . Good morning guys , and thanks for taking the question .
Speaker #2: I guess , Jason , I'd like .
Speaker #2: I guess , Jason , I'd like .
Speaker #7: macro pricing about the environment To as we're seeing some brand manufacturers ask drug take price increases . 2026 starts . doesn't seem to have guidance at impacted your It all .
Speaker #7: look forward , I guess I'm But as you should we expect to see wondering , manufacturer , brand , brand drug price decreases ?
Speaker #7: I'm not increases decreases impact either . The revenue either the revenue line operating or the income line . As we think about calendar 26 and maybe also if you could talk about the offsets that you guys have used to preserve your operating earnings on the income statement .
Aaron Alt: Well, I mean, when you talk about prices, I don't think your question was around the contingent inflation, but that piece of it has been pretty consistent with what we've anticipated as it relates to IRA, MFN, all those types of discussions. There's really no new news as it relates to this. You've heard from us quite consistently that we anticipate that whatever changes do occur to that top line will be adjusted within our cost structure, and with the DSA fees with the manufacturers to preserve that margin. We communicated at the recent industry conference that we indeed were successful with that for all the 2026 items. There's nothing at this moment that we see with the 2027 and 2028 items that would make us believe it would be any different than that. You are right, George, that revenue is a different story.
Aaron Alt: Well, I mean, when you talk about prices, I don't think your question was around the contingent inflation, but that piece of it has been pretty consistent with what we've anticipated as it relates to IRA, MFN, all those types of discussions. There's really no new news as it relates to this. You've heard from us quite consistently that we anticipate that whatever changes do occur to that top line will be adjusted within our cost structure, and with the DSA fees with the manufacturers to preserve that margin. We communicated at the recent industry conference that we indeed were successful with that for all the 2026 items. There's nothing at this moment that we see with the 2027 and 2028 items that would make us believe it would be any different than that. You are right, George, that revenue is a different story.
Speaker #7: Thanks .
Speaker #2: Sure . Yeah . well . I mean , As about prices , I don't question think your around the was contingent inflation , that has been that pretty consistent piece of it with what we've but anticipated as it relates to IRA , MFN and all those types of discussions .
Speaker #2: There's really no new news as it relates to this . You know , you've heard from us quite consistently that we anticipate that whatever changes do occur to that top line will be adjusted within our cost with the DSA structure .
Speaker #2: There's really no new news as it relates to this . You know , you've heard from us quite consistently that we anticipate that whatever changes do occur to that top line will be adjusted within our cost with the DSA structure . manufacturers to fees , with the preserve that margin communicated And at recent , we industry conference that we indeed were that .
Speaker #2: For all the 26, there's nothing at this, see, with the that we and that would 28 items make us believe it would be any 27 different than that.
Aaron Alt: So as the WACC levels come down, that will adjust through revenue as well as our cost of goods sold so that our margins remain stable. But that's all been factored in for 2026. We didn't see anything that came through as it relates to WACC level adjustments that was significantly different than our original guidance. And so we've not adjusted our revenue meaningfully for any changes there. We would anticipate that, like what we've seen in 2026 in the future, we would anticipate something similar, that some manufacturers will choose to adjust WACC and some will choose to utilize more of a rebate structure. And it's our expectation in our as we think about longer term that while that should not impact our margin in any meaningful way, it could impact revenue a little bit differently than what's anticipated.
Aaron Alt: So as the WACC levels come down, that will adjust through revenue as well as our cost of goods sold so that our margins remain stable. But that's all been factored in for 2026. We didn't see anything that came through as it relates to WACC level adjustments that was significantly different than our original guidance. And so we've not adjusted our revenue meaningfully for any changes there. We would anticipate that, like what we've seen in 2026 in the future, we would anticipate something similar, that some manufacturers will choose to adjust WACC and some will choose to utilize more of a rebate structure. And it's our expectation in our as we think about longer term that while that should not impact our margin in any meaningful way, it could impact revenue a little bit differently than what's anticipated.
Speaker #2: You are right , George , that revenue is a different story . So , as the you know , whack levels come down , that adjust will revenue well as our as cost through of goods sold margins so that our remain stable .
Speaker #2: But that's all been factored 26 . We in for didn't see that came as it anything through relates to whack level adjustments . That was significantly different than our original guidance .
Speaker #2: not And so we've adjusted our revenue meaningfully for for any changes there . We would anticipate that , like what we've seen in 26 , in the future , we something similar that some anticipate manufacturers will choose to adjust some choose to utilize more of a rebate structure will .
Speaker #2: And whack and it's our in our expectation as we think longer about term , that while that should not impact our margin in any meaningful way , it could impact revenue a little bit differently than what's anticipated .
Aaron Alt: But we don't see that being, again, very impactful across those years at this point in time. But we still need to get a little bit more information before we can solidify any of that. Next question, please. The next question is from Steven Baxter from Wells Fargo. Please go ahead. Hey, this is James Armstrong for Steve. Thanks for taking the question. As far as GLP-1s, we're seeing a lot of change in the market between pricing changes, channel changes, and the introduction of orals. Is there any way you're seeing any difference in how you're modeling revenue or earnings for GLP-1s this year, or maybe how you're thinking about it in the long term? No. The oral contribution that we see so far is slow. We anticipate it growing quickly, but it's not something I would expect to be material for this fiscal year.
Aaron Alt: But we don't see that being, again, very impactful across those years at this point in time. But we still need to get a little bit more information before we can solidify any of that. Next question, please. The next question is from Steven Baxter from Wells Fargo. Please go ahead. Hey, this is James Armstrong for Steve. Thanks for taking the question. As far as GLP-1s, we're seeing a lot of change in the market between pricing changes, channel changes, and the introduction of orals. Is there any way you're seeing any difference in how you're modeling revenue or earnings for GLP-1s this year, or maybe how you're thinking about it in the long term? No. The oral contribution that we see so far is slow. We anticipate it growing quickly, but it's not something I would expect to be material for this fiscal year.
Speaker #2: But we don't that being , again , see very , very impactful across those years . At time . But still need to get a little this point in bit more information before we can solidify any of that .
Speaker #2: .
Speaker #1: Next question , please .
Speaker #4: Next question is from Boxer from Stephen Wells Fargo. Please go ahead.
Speaker #11: Hi , this is James on for Steve . Thanks for taking the . As far as one , we're GLP market in the between seeing a pricing changes , changes , the channel introduction of orals .
Speaker #11: Is there any way—Is there a difference in how you're thinking about your revenue or earnings for GLP-1s on this, or maybe how you're thinking about it in terms of your year?
Speaker #2: No . You know , the oral contribution that we so far you know is , , slow . anticipate it growing quickly . it's But not I would expect to be material for this We And underlying economics We've talked the behind it .
Aaron Alt: And the underlying economics behind it, we've talked before that the cost to serve, we anticipate, being a little bit better on the oral versus the injectables. But it's just too early to determine what the volume contributions will be for the different pieces. Irrespective of all that, I've been fairly consistent on this point. What you've seen is a massive increase in volume growth over the last couple of years, and you just haven't heard us call it out as a meaningful driver. And I do not anticipate that you're going to hear us call it out as a meaningful driver going forward, irrespective of how strong the oral growth is or the mix between the two. While there are some differences, it's just relatively unlikely that that's going to be a big driver for underlying profitability. Revenue, certainly, it's been much more of a contributor.
Aaron Alt: And the underlying economics behind it, we've talked before that the cost to serve, we anticipate, being a little bit better on the oral versus the injectables. But it's just too early to determine what the volume contributions will be for the different pieces. Irrespective of all that, I've been fairly consistent on this point. What you've seen is a massive increase in volume growth over the last couple of years, and you just haven't heard us call it out as a meaningful driver. And I do not anticipate that you're going to hear us call it out as a meaningful driver going forward, irrespective of how strong the oral growth is or the mix between the two. While there are some differences, it's just relatively unlikely that that's going to be a big driver for underlying profitability. Revenue, certainly, it's been much more of a contributor.
Speaker #2: that the cost to serve , we anticipate being before bit better the oral a little versus the injectables . But it's , you know , just too early to know , what the volume contributions will be for the pieces determine , you that different I've been fairly consistent on this point .
Speaker #2: I , you know , what you've I , seen is a massive increase in volume growth last couple over the of years . just haven't And you heard us call it out as a driver .
Speaker #2: And not that you're I do going to call it out as anticipate hear us driver forward , irrespective of going strong the . Oral growth meaningful is or the mix the two .
Speaker #2: While there are some between differences , it's just relatively unlikely that that's going to be a big driver a meaningful for profitability . Revenue has been certainly contributor .
Aaron Alt: We saw similar contributions this quarter than what we've seen in the last several quarters in terms of the growth pieces. Yeah, 6% of sales in Q2. And we expect a 6% of the growth rates being for GLPs. And while we would expect that to start to slow down a little bit for the injectables just by the nature of the size of the market, that's where the orals will come in and start to offset that slower growth rate. But make no mistake, we expect both to be growing fairly significantly still for at least the near term. Next question, please. The next question is from Kevin Caliendo from UBS. Please go ahead. Hey, good morning, guys. I want to change up a little bit and ask a GMPD question. Specifically, CMS put out a proposal around domestic PPE recently. I know it's just a proposal.
Aaron Alt: We saw similar contributions this quarter than what we've seen in the last several quarters in terms of the growth pieces. Yeah, 6% of sales in Q2. And we expect a 6% of the growth rates being for GLPs. And while we would expect that to start to slow down a little bit for the injectables just by the nature of the size of the market, that's where the orals will come in and start to offset that slower growth rate. But make no mistake, we expect both to be growing fairly significantly still for at least the near term. Next question, please. The next question is from Kevin Caliendo from UBS. Please go ahead. Hey, good morning, guys. I want to change up a little bit and ask a GMPD question. Specifically, CMS put out a proposal around domestic PPE recently. I know it's just a proposal.
Speaker #2: much more of a similar contributions this quarter than what we've last several the growth seen in the Yeah , quarters . pieces . 6% of sales Q2 , in expect a 6% .
Speaker #2: we rates Glps and The being for and that to start to would slow expect while we little bit for the injectables just by the of nature the size of the market , the orals will come that's where in .
Speaker #2: we rates Glps and The being for and that to start to would slow expect while we little bit for the injectables just by the of nature the size of the market , the orals will come that's where down a offset that rate , start but make slower no mistake , we expect be growing fairly Still , for at least the near term significantly .
Speaker #2: .
Speaker #1: Next question
Speaker #1: . from
Speaker #4: The
Speaker #4: question is
Speaker #4: from UBS . Please go Caliendo ahead please
Speaker #12: morning guys want to . I change up a little and bit ask question . Specifically a a , CMS put out proposal around domestic PPE recently .
Aaron Alt: There's comments and the like. But if it were to go through, would this be a positive or a negative for you guys? How would it impact what you're doing or the profits potentially on PPE? What do you think happens to pricing? I'm just trying to understand if this is something, as investors, we should be following and care about, and if it will impact you or the industry in any way. So you're going to have to make me go way back and give a little bit of a history lesson on PPE in general. I can't recall how long ago it was, but it was probably several years ago.
Aaron Alt: There's comments and the like. But if it were to go through, would this be a positive or a negative for you guys? How would it impact what you're doing or the profits potentially on PPE? What do you think happens to pricing? I'm just trying to understand if this is something, as investors, we should be following and care about, and if it will impact you or the industry in any way. So you're going to have to make me go way back and give a little bit of a history lesson on PPE in general. I can't recall how long ago it was, but it was probably several years ago.
Speaker #12: just a proposal . There's comments like , but if it go through , and the were to would this negative for you guys .
Speaker #12: Like how would it impact doing or the profits potentially what you're PPE positive think ? I'm just What do you trying to this is if happens to as investors , we be following about and if it and care will impact you or the industry
Speaker #2: not to me make back and way bit of a
Speaker #2: history give a little PPE in
Aaron Alt: I remember when we were dealing with the COVID impacts, making statements like, "Well, normally, you would never expect us to talk about PPE because the revenue and margin is relatively low and fairly consistent." Obviously, with COVID, the volatility on both the volume, the price, and the cost created a bit of a perfect storm of volatility. So I guess I start off by saying that because it's not a huge category for our business. It's an important one, certainly for customers. But it's not a key part of the growth that we just described, certainly. And given its importance to our customers, that means it is important to us. And if they see value in buying PPE domestically or if they're incentivized to do so in some way or whether we're incentivized to do some way, absolutely, we can support that.
Aaron Alt: I remember when we were dealing with the COVID impacts, making statements like, "Well, normally, you would never expect us to talk about PPE because the revenue and margin is relatively low and fairly consistent." Obviously, with COVID, the volatility on both the volume, the price, and the cost created a bit of a perfect storm of volatility. So I guess I start off by saying that because it's not a huge category for our business. It's an important one, certainly for customers. But it's not a key part of the growth that we just described, certainly. And given its importance to our customers, that means it is important to us. And if they see value in buying PPE domestically or if they're incentivized to do so in some way or whether we're incentivized to do some way, absolutely, we can support that.
Speaker #2: general lesson ago it . . long So you're was , but it I can't was probably several years ago . I go remember were dealing with the Covid impacts statements like , when we , normally you would never expect us to PPE because talk about the revenue and margin is relatively low and is should consistent .
Speaker #2: Obviously , with Covid fairly , the volatility both the volume , the price and the cost created a perfect storm of bit of a volatility .
Speaker #2: I guess I start So saying off by that not a because it's huge business . one , certainly for customers . But it's category It's an important a key part just that we described .
Speaker #2: growth Certainly . And given its to our importance customers , that important to us . And means it is if they see value in buying PPE domestically incentivized to do way , or whether in some we're to do some way , absolutely .
Speaker #2: growth Certainly . And given its to our importance customers , that important to us . And means it is if they see value in buying PPE domestically incentivized to do way , or whether in some we're to do some way so can that .
Aaron Alt: We have a very flexible, talented procurement team in our GMPD business. And we source very diverse sources today throughout the world that, of course, was expanded as a result of COVID. We would love to source even more in the United States. Quite frankly, today, the cost is not typically something our customers choose to buy, but we are very, very open, willing, and flexible to support that. But there's not a lot of choice today in that type of marketplace, especially at the price points that are competitive in the market. But that's where the incentives are going to be important within this equation. And if doing so, we are very able, very flexible in order to support that type of action. Next question, please. The next question is from Lisa Gill from J.P. Morgan. Please go ahead. Hi. Thanks very much. Good morning.
Aaron Alt: We have a very flexible, talented procurement team in our GMPD business. And we source very diverse sources today throughout the world that, of course, was expanded as a result of COVID. We would love to source even more in the United States. Quite frankly, today, the cost is not typically something our customers choose to buy, but we are very, very open, willing, and flexible to support that. But there's not a lot of choice today in that type of marketplace, especially at the price points that are competitive in the market. But that's where the incentives are going to be important within this equation. And if doing so, we are very able, very flexible in order to support that type of action. Next question, please. The next question is from Lisa Gill from J.P. Morgan. Please go ahead. Hi. Thanks very much. Good morning.
Speaker #2: Incentivized, we have a very flexible, talented procurement team, and in our business we have GMP. We have very diverse sources to date throughout the world to support, of course. That expanded as a result of COVID.
Speaker #2: We would love to more in the was source even United States frankly , . Quite is today , the typically something our customers choose to buy , not are very , very and flexible to support open , willing that .
Speaker #2: there's not a lot But of of , you know , today in that type of marketplace , especially at the points that are price market in the choice .
Speaker #2: But that's the , you know , where the to be incentives important within are going equation . And if doing competitive very flexible able , very in order to support that action type of .
Speaker #1: Next question , .
Aaron Alt: I was wondering if you could just spend a few minutes discussing your relationship with hospital and health systems on the specialty side. And do you see incremental opportunities there when we think about your specialty business? Well, so we're quite present today and have a great relationship and reasonable share within that particular part of the market. So we are very much capable of supporting the broad needs of specialty, irrespective of what channel, what customer. So we've seen growth consistent across the different channels over the last several years. As a reminder, up until recently, we have talked about the 14% overall specialty revenue, and we've increased that recently in our 3-year CAGR to about 16%. So we've seen a little bit of an acceleration. And that is part of the market that we have been winning, at least our fair share within.
Aaron Alt: I was wondering if you could just spend a few minutes discussing your relationship with hospital and health systems on the specialty side. And do you see incremental opportunities there when we think about your specialty business? Well, so we're quite present today and have a great relationship and reasonable share within that particular part of the market. So we are very much capable of supporting the broad needs of specialty, irrespective of what channel, what customer. So we've seen growth consistent across the different channels over the last several years. As a reminder, up until recently, we have talked about the 14% overall specialty revenue, and we've increased that recently in our 3-year CAGR to about 16%. So we've seen a little bit of an acceleration. And that is part of the market that we have been winning, at least our fair share within.
Speaker #4: The please question is Lisa Gill from from J.P. Please go Morgan . ahead .
Speaker #13: Hi . Thanks very much . wondering if you could was just spend morning . Good a few I minutes discussing your hospital and health systems on the relationship side specialty with , and do you incremental opportunities see there ?
Speaker #13: When we think about your business specialty ?
Speaker #2: Well , so we're we're quite
Speaker #2: within particular market . part of the you know , we are very much capable of broad need specialty of irrespective what channel , what customer what .
Speaker #2: supporting the So we're seen consistent across the different years . channels over the several last reminder , up until recently growth about the 14% overall specialty revenue and we've increased that recently in our three year care to about 16% .
Speaker #2: So we've seen a little bit next acceleration . And , you know that is that part of that we have the market least our winning .
Aaron Alt: And I really have to go back to three and a half years ago when I put Debbie Weitzman into the leadership role. That business, one of the first things that she did in terms of the pharma business is she brought together the specialty and the non-specialty side and had created a one face, one voice to the customer that allows us to make sure that we're taking care of all of those customers' needs. And because while specialty is really interesting and important to us, it's only one component of what they need to have their support with. And so we've changed our go-to-market type of strategy, and it's really resonated quite well with our customers. And that's the type of innovation and very high-touch type of support that we'll continue to drive to ensure that their needs are met. Next question, please.
Aaron Alt: And I really have to go back to three and a half years ago when I put Debbie Weitzman into the leadership role. That business, one of the first things that she did in terms of the pharma business is she brought together the specialty and the non-specialty side and had created a one face, one voice to the customer that allows us to make sure that we're taking care of all of those customers' needs. And because while specialty is really interesting and important to us, it's only one component of what they need to have their support with. And so we've changed our go-to-market type of strategy, and it's really resonated quite well with our customers. And that's the type of innovation and very high-touch type of support that we'll continue to drive to ensure that their needs are met. Next question, please.
Speaker #2: fair share within . And I really have to go to back three and a half years ago when I put W Weitzman into the leadership role , that was one of the first things that she did in terms of the that business is she brought together the specialty and the non-specialty side and had created a one face , one voice to the customer allows that us to make we're taking care of customers sure that needs .
Speaker #2: all because while specialty And is really of those interesting and important to us , it's only one component of what to have their support with .
Speaker #2: All because, while specialty is really one of those interesting and important components to us, it's only one component of what they need to have our support. So we've changed our go-to-market type of strategy.
Speaker #2: And it's really resonated quite well with our And that's the type of innovation and very high touch type of support that will continue to to drive , to ensure that their met needs are .
Aaron Alt: The next question is from Daniel Grosslight from Citi. Please go ahead. Hi, guys. Thanks for taking the question. I wanted to commend a strong quarter here. I wanted to go back to the Biopharma Services and specifically the new business wins that you've highlighted for Sonexus, including a significant competitive takeaway. What specific capabilities are resonating most with manufacturers? And then as we look forward for the next year or so, are there any significant investments that you anticipate making to keep you guys competitive in your hub business? Thanks. Yeah, love the question. Thank you. So I'd put it into two key buckets. First of all, I guess start with the team. Not only is it a great group of people, they understand the customer, and they really listen to what the customer is wanting and needing and demanding.
Aaron Alt: The next question is from Daniel Grosslight from Citi. Please go ahead. Hi, guys. Thanks for taking the question. I wanted to commend a strong quarter here. I wanted to go back to the Biopharma Services and specifically the new business wins that you've highlighted for Sonexus, including a significant competitive takeaway. What specific capabilities are resonating most with manufacturers? And then as we look forward for the next year or so, are there any significant investments that you anticipate making to keep you guys competitive in your hub business? Thanks. Yeah, love the question. Thank you. So I'd put it into two key buckets. First of all, I guess start with the team. Not only is it a great group of people, they understand the customer, and they really listen to what the customer is wanting and needing and demanding.
Speaker #1: Next please .
Speaker #4: next The question is
Speaker #4: Daniel Cross from question , Citi . go ahead .
Speaker #11: Thanks for Hi guys . taking the For question . a quarter strong here . wanted to go I to the back Biopharma to the solutions and specifically the new business wins that you've for highlighted including a significant Scynexis , competitive takeaway specific .
Speaker #11: Thanks for Hi guys . taking the For question . a quarter strong here . wanted to go I to the back Biopharma to the solutions and specifically the new business wins that you've for highlighted including a significant Scynexis , competitive takeaway specific . capabilities are What most with resonating manufacturers .
Speaker #11: then as we And look forward for the next year or so , are there any significant that you investments anticipate making to keep you guys competitive in your Thanks business ?
Speaker #11: how
Speaker #11: .
Speaker #2: Yeah , love the question . Thank you . So I put it into two key First of all buckets . , you guys start team not .
Speaker #2: is it a great group of people , they understand the customer and they Not listen to what the customer is wanting and really needing and demanding .
Aaron Alt: And that's where it starts because then from there, you then implement the solutions to take care of those customers. And the solutions is the digitization that we did with our tool, our platform. And while there's always technology, we really leaned into it in a way that simplified their work with us. We allow them to once when they bring one of their products under our platform, it allows it to be replicated quite seamlessly to other products that they have. So once when we get that foot in the door and we can prove that we have a better tool, a better process, then we see a lot of follow-on opportunities that go from there. This is not a recent investment that we've made. This team has been all over this for years.
Aaron Alt: And that's where it starts because then from there, you then implement the solutions to take care of those customers. And the solutions is the digitization that we did with our tool, our platform. And while there's always technology, we really leaned into it in a way that simplified their work with us. We allow them to once when they bring one of their products under our platform, it allows it to be replicated quite seamlessly to other products that they have. So once when we get that foot in the door and we can prove that we have a better tool, a better process, then we see a lot of follow-on opportunities that go from there. This is not a recent investment that we've made. This team has been all over this for years.
Speaker #2: And where it that's Because then starts . from you then implement the solutions there , to take care of those customers . And the solutions is the digitization with our our did tool , our that we .
Speaker #2: while there's And platform , you know , we technology we really into always it leaned in a that simplified their work way We allowed them to bring one of their products onto with to allows it be quite replicated seamlessly to products that they other have .
Speaker #2: while there's And platform , you know , we technology we really into always it leaned in a that simplified their work way We allowed them to bring one of their products onto with to allows it be quite replicated seamlessly to products that they once they So once we platform , it and we get that foot our process than we see a lot of follow on that go from there .
Speaker #2: opportunities not a This is recent investment that we've made . This team has been all over this for years , and your last part of your question is I think , you know , terms of in future investments , you know , we're always going to have additional investments .
Aaron Alt: The last part of your question is, I think in terms of future investments, we're always going to have additional investments. What we're trying to instill is a culture and a process that is not ever starving any of our businesses and then requiring some big catch-up. It may mean that we have elevated levels of spend for longer periods of time, but we like having less volatility on spend and more of a consistent investment so that we're getting in front of those opportunities and not having to be more defensive and catching up. And so we have made widespread investments across each of our investments. There's nothing that we're calling out today that will be significant. Just keep in mind, we are spending more today on whether it's capital or these types of projects than we have in the past.
Aaron Alt: The last part of your question is, I think in terms of future investments, we're always going to have additional investments. What we're trying to instill is a culture and a process that is not ever starving any of our businesses and then requiring some big catch-up. It may mean that we have elevated levels of spend for longer periods of time, but we like having less volatility on spend and more of a consistent investment so that we're getting in front of those opportunities and not having to be more defensive and catching up. And so we have made widespread investments across each of our investments. There's nothing that we're calling out today that will be significant. Just keep in mind, we are spending more today on whether it's capital or these types of projects than we have in the past.
Speaker #2: trying to We're instill is a is a culture and process not ever that is starving any of our businesses . And then requiring some a up .
Speaker #2: may It that we have , you elevated levels of spend for longer periods of time , but we mean like having less we volatility on spend and a consistent more of investment so that in front of those we're getting opportunities and having to not defensive and catching And so have made up .
Speaker #2: investments each of our across investments . There's nothing that we're calling out today that will be But just keep in mind significant . spending are more whether capital today on types of or these projects than we have in the past .
Aaron Alt: So we're already at, to some degree, elevated levels. I don't anticipate that dropping, but I also am expecting that to spike in any significant way. The SG&A comments that Aaron made, and he was answering a specific question around GMPD. But I think those types of that type of answer goes for each of our businesses. What we are looking to do is take away the excess and the waste in the system that always exists in any business and reinvest that in much more productive areas. So we're always looking for productivity, efficiency using technology, AI, and just elbow grease to go after it and to take costs out. But then we're always also looking for, well, where can we invest that with a great return, not only to drive financials, but to solve more of our customers and patients' problems?
Aaron Alt: So we're already at, to some degree, elevated levels. I don't anticipate that dropping, but I also am expecting that to spike in any significant way. The SG&A comments that Aaron made, and he was answering a specific question around GMPD. But I think those types of that type of answer goes for each of our businesses. What we are looking to do is take away the excess and the waste in the system that always exists in any business and reinvest that in much more productive areas. So we're always looking for productivity, efficiency using technology, AI, and just elbow grease to go after it and to take costs out. But then we're always also looking for, well, where can we invest that with a great return, not only to drive financials, but to solve more of our customers and patients' problems?
Speaker #2: And so we're already at degree , elevated levels , I don't , to some that anticipate dropping , but I also don't expecting that spike to to in any significant way .
Speaker #2: The comments that Aaron made and he was specific question answering a around GMP , types of think those that we type of be more goes answer each of our businesses .
Speaker #2: What we are for do is take away the excess and the waste and the system that always exists in any business , and reinvest that in much more but I we're always looking areas .
Speaker #2: productivity , efficiency , for technology , using AI and So just , you know , elbow grease to after it go and to take cost then we're out .
Speaker #2: always also looking invest a great that with for , well , return . where can we Not only to drive solve more financials but to of our patients problems customers and what's well with the really going organization right now is that we're we're able to look ahead that's farther than we ever past .
Speaker #2: always also looking invest a great that with for , well , return . where can we Not only to drive solve more financials but to of our patients problems customers and what's well with the really going organization right now is that we're we're able to look ahead that's farther than we ever .
Aaron Alt: And that's what's really going well with the organization right now is that we're able to look ahead farther than we ever have in the past. And that's what we're spending on is not today's problems, but we're spending on tomorrow's opportunities. Just as a reminder, we have committed to getting the biopharma services part of the portfolio to $1 billion revenue by 2028. Jason's been highlighting the successes at Sonexus with doubling the therapy supported, etc. That's all been a key part of that internal and external competition for our capital that I referenced before. So we're quite excited about Sonexus being half of the growth to get to that $1 billion target. Next question, please. The next question is from Glen Santangelo from Barclays. Please go ahead. Yeah, thanks for taking my question. Hey, Jason, I just wanted to come back to the pharma and specialty segment.
Aaron Alt: And that's what's really going well with the organization right now is that we're able to look ahead farther than we ever have in the past. And that's what we're spending on is not today's problems, but we're spending on tomorrow's opportunities. Just as a reminder, we have committed to getting the biopharma services part of the portfolio to $1 billion revenue by 2028. Jason's been highlighting the successes at Sonexus with doubling the therapy supported, etc. That's all been a key part of that internal and external competition for our capital that I referenced before. So we're quite excited about Sonexus being half of the growth to get to that $1 billion target. Next question, please. The next question is from Glen Santangelo from Barclays. Please go ahead. Yeah, thanks for taking my question. Hey, Jason, I just wanted to come back to the pharma and specialty segment.
Speaker #2: have in the that's what spending on is not problems , we're spending tomorrow's opportunities .
Speaker #3: Just as a reminder , we have
Speaker #3: getting the services part biopharma of the portfolio $1 billion of revenue on to
Speaker #3: 2028 . Jason's been highlighting successes that scynexis with doubling the the supported therapy all been that's part of , etc. that . Internal external and competition for our capital that I referenced before .
Speaker #3: So we're excited about quite being half of the Scynexis growth to that get to $1 billion target .
Speaker #1: Next question please .
Speaker #4: The question is from next Glenn Santangelo from Barclays . Please go ahead .
Aaron Alt: I think in your prepared remarks, you seemed to suggest that one of the big drivers was the Red Oak generics program maybe performing a little bit better than you thought. And I think you sort of highlighted maybe better generic volumes than maybe you were expecting. And I'm kind of curious if you could just give us a little bit more details there on what's maybe driving that. Is it greater generic introductions, or is it greater penetration within your existing customers? And any sort of comments you have around generic pricing would be helpful. Thanks. Yeah, I think Aaron and I made the comments around strength in terms of the generics program. I believe it was more from the perspective as a year-over-year driver, which it certainly is. And when you look at Red Oak, the utilization has been strong. That part is clear.
Aaron Alt: I think in your prepared remarks, you seemed to suggest that one of the big drivers was the Red Oak generics program maybe performing a little bit better than you thought. And I think you sort of highlighted maybe better generic volumes than maybe you were expecting. And I'm kind of curious if you could just give us a little bit more details there on what's maybe driving that. Is it greater generic introductions, or is it greater penetration within your existing customers? And any sort of comments you have around generic pricing would be helpful. Thanks. Yeah, I think Aaron and I made the comments around strength in terms of the generics program. I believe it was more from the perspective as a year-over-year driver, which it certainly is. And when you look at Red Oak, the utilization has been strong. That part is clear.
Speaker #14: Yeah . taking my Thanks for question . Hey , Jason , I And just wanted to come back to the to the farm and specialty segment .
Speaker #14: In your, I think, prepared remarks, you seemed to suggest that one of the drivers was the Red Oak generics—maybe the program did a bit better than you, I think you sort of highlighted maybe better generics than, than maybe you were expecting.
Speaker #14: And on kind of volumes, if you could just, you know, give us a little bit more detail there on what's maybe driving that.
Speaker #14: Is it greater generic introductions or is it greater penetration within your existing customers and any sort of comments you , and have generic around helpful .
Speaker #14: pricing would Thanks .
Speaker #2: Yeah , I think made the Aaron had comments around strength in terms of the generics program . I believe it was more from the perspective as a year over year driver , which it certainly is .
Aaron Alt: In terms of the spread, the margin per units, we didn't call out anything in particular. It remains very consistent market dynamics. It also remains a year that does have good launches. The launches aren't any greater than what we had thought in terms of new items this year. But the underlying utilization across industry remains quite good. So I'd focus more on the volume than any other type of price, cost, or new item type of perspective. Yeah, we manage the business to average margin per unit, right? That's why we call it consistent market dynamics. The business did see great service levels. That is certainly supportive of the volume trends. And of course, we were onboarding new customers. And so that is helpful from a generic volume perspective as well. Next question, please. The next question is from Charles Rhyee from TD Cowen. Please go ahead.
Aaron Alt: In terms of the spread, the margin per units, we didn't call out anything in particular. It remains very consistent market dynamics. It also remains a year that does have good launches. The launches aren't any greater than what we had thought in terms of new items this year. But the underlying utilization across industry remains quite good. So I'd focus more on the volume than any other type of price, cost, or new item type of perspective. Yeah, we manage the business to average margin per unit, right? That's why we call it consistent market dynamics. The business did see great service levels. That is certainly supportive of the volume trends. And of course, we were onboarding new customers. And so that is helpful from a generic volume perspective as well. Next question, please. The next question is from Charles Rhyee from TD Cowen. Please go ahead.
Speaker #2: when you And at Red Oak look , the utilization has been strong . That that part is clear in terms of the the spread , the margin per call out unit .
Speaker #2: anything in We didn't particular . It remains very consistent market dynamics . It also remains a year that does have good launches , not , you know , the launches aren't any greater than what we had in terms of new thought items this year underlying .
Speaker #2: But the utilization across industry remains , you know , quite good . So I'd focus more on the volume than any type other of Cost or price .
Speaker #2: item type of perspective .
Speaker #3: We manage the business to average
Speaker #3: per right ? margin That's why we call consistent new market dynamics . The did see great service levels . That is certainly of the volume trends .
Speaker #3: Supportive, of course, and we were onboarding new customers. And so that is helpful from a generic volume perspective, business as well.
Speaker #1: Next question please .
Aaron Alt: Yeah, thanks for taking the question. Maybe just sticking with sort of the pharma segment and sort of thinking about the guide for the second half. If we look at the first half performance, I think AOI growth was up 28%. And if you look at the guide for the second half, it's roughly about 16%. Should we think about this delta being sort of entirely just lapping new customers and M&A and understanding we have contribution from Solaris? And of course, we're raising our second-half expectations, just trying to understand sort of what the moving parts is and really trying to get a sense for how you're thinking about underlying sort of core growth in the pharma segment. Thanks. Sure. A couple of thoughts. I want to point out that our second-half guide is well above our long-term growth target within that business.
Aaron Alt: Yeah, thanks for taking the question. Maybe just sticking with sort of the pharma segment and sort of thinking about the guide for the second half. If we look at the first half performance, I think AOI growth was up 28%. And if you look at the guide for the second half, it's roughly about 16%. Should we think about this delta being sort of entirely just lapping new customers and M&A and understanding we have contribution from Solaris? And of course, we're raising our second-half expectations, just trying to understand sort of what the moving parts is and really trying to get a sense for how you're thinking about underlying sort of core growth in the pharma segment. Thanks. Sure. A couple of thoughts. I want to point out that our second-half guide is well above our long-term growth target within that business.
Speaker #4: Question is next from Charles Rhyee from TD Cowen. Please go ahead.
Speaker #7: Yeah . Thanks for taking the question . Maybe sticking just the pharma segment and with sort of thinking about the guide for the second half .
Speaker #7: You know , if we look at the first half performance , you know , I think our growth was 28% . look at the And if you up guide for the second half , it's roughly delta we think about this 16% .
Speaker #7: Should being sort of entirely just lapping new customers and M&A and understanding we have contribution from Solaris . Of course . We're raising our second half trying to Just expectations .
Speaker #7: understand the moving parts And I'm get a sense sort of what you're thinking about underlying sort of core growth in the pharma Thanks segment .
Speaker #7: .
Speaker #3: A couple Sure . of to point our second half out that above our well term long growth target . Within guide is business .
Aaron Alt: It is the case that our guidance philosophy all year long has been to call out the fact that we will be lapping that $10 billion of new customer in the back half as well as lapping the M&A. So we want to make sure people are modeling that appropriately as we carry forward. I did call out that we are, based on the success and the strength we saw in Q1 and Q2 from an internal forecast and guidance perspective, we have factored in some stronger demand within for the back half for us than what we had originally been anticipating. But we've not gone so far as to assume that the outsized demand we've seen so far will be there. I consistently call that out as an opportunity for everyone if it continues at that higher rate. We have not assumed Solaris, the distribution coming in.
Aaron Alt: It is the case that our guidance philosophy all year long has been to call out the fact that we will be lapping that $10 billion of new customer in the back half as well as lapping the M&A. So we want to make sure people are modeling that appropriately as we carry forward. I did call out that we are, based on the success and the strength we saw in Q1 and Q2 from an internal forecast and guidance perspective, we have factored in some stronger demand within for the back half for us than what we had originally been anticipating. But we've not gone so far as to assume that the outsized demand we've seen so far will be there. I consistently call that out as an opportunity for everyone if it continues at that higher rate. We have not assumed Solaris, the distribution coming in.
Speaker #3: It is the case that our guidance philosophy all along has been to, year after year, call out the fact that we will be lapping that $10 billion of new customer in the back half, as well as lapping the M&A.
Speaker #3: And so we want to make sure people modeling that are, as we carry appropriately forward. I did call out that we are based on the success and the strength we saw in Q1 and Q2 from an internal guidance perspective.
Speaker #3: forecasting factored in We have some stronger within for the back half for us than what we had anticipating , but demand we've not gone so far as to assume it's the seen so be far will demand we've outsized that I will be there consistently call opportunity that out as for If it continues at an the that higher rate , we have not assumed Solaris , the distribution coming in , that would of be end everyone . .
Speaker #3: forecasting factored in We have some stronger within for the back half for us than what we had anticipating , but demand we've not gone so far as to assume it's the seen so be far will demand we've outsized that I will be there consistently call opportunity that out as for If it continues at an the that higher rate , we have not assumed Solaris , the distribution coming in , that would of be end everyone .
Aaron Alt: That would be end of fiscal year if that happens as well. Those are the drivers we've provided. Next question, please. The next question is from Steven Valiquette from Mizuho. Please go ahead. Great. Thanks. Good morning. So I just have a question also on the GMPD segment. If we go back to the analyst day last year, you guys talked about as part of the five-point plan, new product development and commercialization. So I'm just kind of wondering as we fast forward another six months or so and still a lot of moving parts on Terrace and everything else, just the progression of the new products. And with the better-than-average growth right now, how much of that is driven from either growth from the existing portfolio versus new products?
Aaron Alt: That would be end of fiscal year if that happens as well. Those are the drivers we've provided. Next question, please. The next question is from Steven Valiquette from Mizuho. Please go ahead. Great. Thanks. Good morning. So I just have a question also on the GMPD segment. If we go back to the analyst day last year, you guys talked about as part of the five-point plan, new product development and commercialization. So I'm just kind of wondering as we fast forward another six months or so and still a lot of moving parts on Terrace and everything else, just the progression of the new products. And with the better-than-average growth right now, how much of that is driven from either growth from the existing portfolio versus new products?
Speaker #3: .
Speaker #1: Next question please .
Speaker #4: The next from question is Steven Valiquette from Mizuho . Please go ahead
Speaker #15: Great . morning . Thanks . So I just have a also
Speaker #15: the the Good GM , PD segment . If we go back to the question Analyst last year , you guys talked about as part of the five point plan , new product development .
Speaker #15: and commercialization . So I'm just kind of you know , fast forward . You know , six months or so and you know , still a lot parts on of moving tariffs and else .
Speaker #15: Just the everything progression of like the new products and with the better than average growth right now , how much of that is driven from either , of , you know , growth from existing portfolio versus new what's ?
Aaron Alt: And also what's your appetite for just runway to still increase that number of Cardinal private label SKUs within the overall GMPD portfolio? Thanks. Yeah, I'm happy you asked the question because after Aaron and I answered the prior question, it hit me that I missed that point of our five-point plan. New product development investment is certainly a component of our prioritization and of the success we've had. Now, to be clear, what we mean by that and where we're prioritized is within the product categories that we participate in today, like the new compression device that I referenced in my commentary or our new pump in our nutrition business. These are all categories that we already have a significant presence that allows us to grow through providing broader products to those existing customers, those existing markets. We have not prioritized new products into new product categories.
Aaron Alt: And also what's your appetite for just runway to still increase that number of Cardinal private label SKUs within the overall GMPD portfolio? Thanks. Yeah, I'm happy you asked the question because after Aaron and I answered the prior question, it hit me that I missed that point of our five-point plan. New product development investment is certainly a component of our prioritization and of the success we've had. Now, to be clear, what we mean by that and where we're prioritized is within the product categories that we participate in today, like the new compression device that I referenced in my commentary or our new pump in our nutrition business. These are all categories that we already have a significant presence that allows us to grow through providing broader products to those existing customers, those existing markets. We have not prioritized new products into new product categories.
Speaker #15: products And also your appetite for just your runway just still that increase number of cardinal private label SKUs within the overall Thanks GMP .
Speaker #15: portfolio ?
Speaker #2: I'm Yeah , happy you asked the question because after Aaron and I prior answered the question , it hit me that I missed that our five point plan .
Speaker #2: New Of product development investment is certainly a point . component our prioritization and of of the success we've had . Now . To clear , what we mean by that and where we're be prioritize is within the product categories that participate in we , like the the today new compression device .
Speaker #2: With that I referenced in my my commentary or new pump in our our nutrition these are business , all categories that we have a significant already presence , but allows us to grow through a broader , providing broader products those to existing customers , those existing markets .
Aaron Alt: It's a similar reason for what I described before with our other businesses, where we have a fantastic opportunity to still grow a Cardinal brand mix within the product categories that we're already participating in today. We can get at it faster, more efficient, more effective, solving more patients' problems, and create more value for our customers by prioritizing on those product categories. So it is a key component of our growth, but it's a little bit of a broader, better products within those same exact categories. So we'll continue to invest into that, and that will remain our priorities for at least the near term with this business. Next question, please. We'll now take our last question today from Brian Tanquilut from Jefferies. Please go ahead. Hey, good morning, and congrats on the quarter again.
Aaron Alt: It's a similar reason for what I described before with our other businesses, where we have a fantastic opportunity to still grow a Cardinal brand mix within the product categories that we're already participating in today. We can get at it faster, more efficient, more effective, solving more patients' problems, and create more value for our customers by prioritizing on those product categories. So it is a key component of our growth, but it's a little bit of a broader, better products within those same exact categories. So we'll continue to invest into that, and that will remain our priorities for at least the near term with this business. Next question, please. We'll now take our last question today from Brian Tanquilut from Jefferies. Please go ahead. Hey, good morning, and congrats on the quarter again.
Speaker #2: have We not new prioritized products into new product categories . It's similar reason for what I described before with our other businesses , where we have fantastic opportunity to still grow Cardinal brand mix within the product categories that we're participating in today .
Speaker #2: We can get at it faster , more already , more effective , solving more patients efficient problems and create more value for our customers .
Speaker #2: By on those product it is categories . So a key component of our growth prioritizing , but it's a little bit of a broader , better products those same exact within those categories .
Speaker #2: So we'll continue to invest into that . And that will remain our priorities for at term with business this
Speaker #2: So we'll continue to invest into that. And that will remain our priority for, at least, the near term with business.
Speaker #1: please question .
Speaker #4: We'll our now take last question today
Aaron Alt: Maybe, Aaron, as I think about the growth in the embedded tech segments or tech businesses within the core like Sonexus, anything you can share with us in terms of the growth rates for those tech operations? I know last quarter, I think you pointed to Sonexus growing more than 30%. So just curious how we should be thinking about that and how do you think about it going forward? Thanks. Yeah, we've called out both the aspirational goal of the $1 billion by fiscal 2028 and biopharma services growing within the year up 30%, half of it from Sonexus. We don't separately break the parts of the portfolio out, but I do want to emphasize that when Jason talks about how our key strategic investments are in specialty, we view this as an important part of the specialty business.
Aaron Alt: Maybe, Aaron, as I think about the growth in the embedded tech segments or tech businesses within the core like Sonexus, anything you can share with us in terms of the growth rates for those tech operations? I know last quarter, I think you pointed to Sonexus growing more than 30%. So just curious how we should be thinking about that and how do you think about it going forward? Thanks. Yeah, we've called out both the aspirational goal of the $1 billion by fiscal 2028 and biopharma services growing within the year up 30%, half of it from Sonexus. We don't separately break the parts of the portfolio out, but I do want to emphasize that when Jason talks about how our key strategic investments are in specialty, we view this as an important part of the specialty business.
Speaker #4: From Jefferies. Please go ahead, Brian.
Speaker #16: Hey , good morning congrats on the quarter again . and . Maybe
Speaker #16: , as I think about the growth in the embedded tech Next tech business businesses within the core like Scynexis , any anything you can share with us terms of the growth rates for those you know , tech in know last quarter , I think you pointed to some .
Speaker #16: You were more than 30% . just So curious how we should be thinking about that . do you think about that going Thanks .
Speaker #3: Yeah , called out both the aspirational goal of the $1 billion fiscal by biopharma services 28 and growing within the year , up 30% , half of it from Scynexis .
Speaker #3: We don't separately break the parts of the portfolio out , but I do want to emphasize that when Jason talks how our key about strategic investments are in specialty , we view this as an important part of the specialty business .
Speaker #3: We don't separately break the parts of the portfolio out , but I do want to emphasize that when Jason talks how
Aaron Alt: And so we continue to invest, whether it's in Sonexus, the hub business, Cellengene, 3PL, the other parts of the portfolio; we are investing for the long term there to help support the broader growth objective for the specialty part of our business. Great. Thank you. Thank you. We do not appear to have any further questions. And I would like to turn the call back over to Jason Hollar for any additional or closing remarks. Over to you, sir. Yeah, thanks. Thanks for joining us today. Obviously, we're very pleased with our performance this quarter as well as the progress in advancing our strategy. As always, please reach out if you have any further questions. With that, have a great day. This concludes today's conference call. Thank you for your participation. You may now disconnect.
Aaron Alt: And so we continue to invest, whether it's in Sonexus, the hub business, Cellengene, 3PL, the other parts of the portfolio; we are investing for the long term there to help support the broader growth objective for the specialty part of our business. Great. Thank you. Thank you. We do not appear to have any further questions. And I would like to turn the call back over to Jason Hollar for any additional or closing remarks. Over to you, sir. Yeah, thanks. Thanks for joining us today. Obviously, we're very pleased with our performance this quarter as well as the progress in advancing our strategy. As always, please reach out if you have any further questions. With that, have a great day. This concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker #3: And so we continue to invest , whether in it's Scynexis , the hub business cell and three PL , the other parts of portfolio , the we are Nexus gene the long there to investing for help support the we've broader growth objective for the term business part of our specialty
Speaker #1: Great .
Speaker #1: Thank you . .
Speaker #4: you Thank . We do not have any further appear to I would like and the call back questions , over to Jason Hollar for any additional or closing remarks with you .
Speaker #4: to turn .
Speaker #2: Yeah . Thanks . Thanks for us . Obviously , we're we're very today performance pleased with our this quarter as well as the progress in advancing our strategy .
