Cencora, Inc. Q3 FY2025 earnings call

Bob Mauch thanked the Cencora team and highlighted growth priorities: enhancing patient care and adherence through pharmaceutical distribution, strengthening specialty leadership via initiatives like Retina Consultants of America (RCA) and supporting specialty product innovation, and leading with market leaders through focused customer engagement. Jim Cleary discussed strong financial performance, updated guidance, and detailed segment results, noting the impact of RCA acquisition on gross profit and operating income, and the performance of U.S. and International segments. Mauch also mentioned focus on 4 drivers: digital transformation, talent and culture, productivity, and prioritizing growth-oriented investments.

Consolidated revenue was $80.7 billion, up 9%. The U.S. Healthcare Solutions segment, which makes up the significant majority of revenue and operating income, had revenue of $72.9 billion, up 9%, with operating income increasing 29% to $902 million. International Healthcare Solutions revenue was $7.8 billion, up approximately 11% on an as-reported basis and 9% on a constant currency basis. However, International Healthcare Solutions operating income was $156 million, down 13% on an as-reported basis and 16% on a constant currency basis, driven by softness in higher-margin global specialty logistics and consulting businesses.

Cencora raised full-year fiscal 2025 guidance. Adjusted diluted EPS is now in the range of $15.85 to $16, up from previous. Consolidated revenue guidance is narrowed to approximately 9%. U.S. Healthcare Solutions operating income guidance is 20% to 21%, up from prior. International Healthcare Solutions operating income guidance on an as-reported basis is down ~6% compared to prior expectations, but on constant currency basis, expected to return to growth exiting the fiscal year.

Clinical trial activity subdued is pressuring International segment, particularly global specialty logistics and consulting businesses. Tariffs could potentially impact supply chain and patient access, though no material impacts have been called out yet.

Q: Hello, everyone, and thank you for joining the Cencora Fiscal 2025 Third Quarter Results call. My name is Lucy, and I'll be coordinating your call today. [Operator Instructions] It is now my pleasure to hand over to your host, Bennett Murphy, Senior Vice President of Investor Relations and Treasury, to begin. Please go ahead.

A: Thank you. Good morning, good afternoon, and thank you all for joining us for this conference call to discuss Cencora's Fiscal 2025 Third Quarter Results. I am Bennett Murphy, Senior Vice President, Head of Investor Relations and Treasury. Joining me today are Bob Mauch, President and CEO; and Jim Cleary, Executive Vice President and CFO. On today's call, we'll be discussing non-GAAP financial measures. Reconciliations of these measures to GAAP are provided in today's press release, which is available on our website at investor.cencora.com. We have also posted a slide presentation to accompany today's press release on our investor website. During this conference call, we will discuss forward-looking statements about our business and financial expectations on an adjusted non-GAAP basis, including, but not limited to, EPS, operating income and income taxes. Forward-looking statements are based on our management's current expectations and are subject to uncertainty and change. For a discussion of key risks and assumptions, we refer to today's press release and our SEC filings, including our most recent 10-Q. Cencora assumes no obligation to update any forward-looking statements, and this call cannot be rebroadcast without the expressed permission of the company. You will have the opportunity to ask questions after today's remarks by management. We ask that you limit your questions to one per participant in order for us to get to as many participants as possible within the hour. With that, I'll turn the call over to Bob.

Q: Hello, everyone, and thank you for joining the Cencora Fiscal 2025 Third Quarter Results call. My name is Lucy, and I'll be coordinating your call today. [Operator Instructions] It is now my pleasure to hand over to your host, Bennett Murphy, Senior Vice President of Investor Relations and Treasury, to begin. Please go ahead.

A: Thank you. Good morning, good afternoon, and thank you all for joining us for this conference call to discuss Cencora's Fiscal 2025 Third Quarter Results. I am Bennett Murphy, Senior Vice President, Head of Investor Relations and Treasury. Joining me today are Bob Mauch, President and CEO; and Jim Cleary, Executive Vice President and CFO. On today's call, we'll be discussing non-GAAP financial measures. Reconciliations of these measures to GAAP are provided in today's press release, which is available on our website at investor.cencora.com. We have also posted a slide presentation to accompany today's press release on our investor website. During this conference call, we will discuss forward-looking statements about our business and financial expectations on an adjusted non-GAAP basis, including, but not limited to, EPS, operating income and income taxes. Forward-looking statements are based on our management's current expectations and are subject to uncertainty and change. For a discussion of key risks and assumptions, we refer to today's press release and our SEC filings, including our most recent 10-Q. Cencora assumes no obligation to update any forward-looking statements, and this call cannot be rebroadcast without the expressed permission of the company. You will have the opportunity to ask questions after today's remarks by management. We ask that you limit your questions to one per participant in order for us to get to as many participants as possible within the hour. With that, I'll turn the call over to Bob.

Q: Hello, everyone, and thank you for joining the Cencora Fiscal 2025 Third Quarter Results call. My name is Lucy, and I'll be coordinating your call today. [Operator Instructions] It is now my pleasure to hand over to your host, Bennett Murphy, Senior Vice President of Investor Relations and Treasury, to begin. Please go ahead.

A: Thank you. Good morning, good afternoon, and thank you all for joining us for this conference call to discuss Cencora's Fiscal 2025 Third Quarter Results. I am Bennett Murphy, Senior Vice President, Head of Investor Relations and Treasury. Joining me today are Bob Mauch, President and CEO; and Jim Cleary, Executive Vice President and CFO. On today's call, we'll be discussing non-GAAP financial measures. Reconciliations of these measures to GAAP are provided in today's press release, which is available on our website at investor.cencora.com. We have also posted a slide presentation to accompany today's press release on our investor website. During this conference call, we will discuss forward-looking statements about our business and financial expectations on an adjusted non-GAAP basis, including, but not limited to, EPS, operating income and income taxes. Forward-looking statements are based on our management's current expectations and are subject to uncertainty and change. For a discussion of key risks and assumptions, we refer to today's press release and our SEC filings, including our most recent 10-Q. Cencora assumes no obligation to update any forward-looking statements, and this call cannot be rebroadcast without the expressed permission of the company. You will have the opportunity to ask questions after today's remarks by management. We ask that you limit your questions to one per participant in order for us to get to as many participants as possible within the hour. With that, I'll turn the call over to Bob.

Q: Lisa Christine Gill of JPMorgan asks about the U.S. Healthcare segment's revenue trim and International business.

A: James F. Cleary responds that in the U.S. segment, factors like biosimilars, moderated GLP-1 growth, and a lost high-revenue low-margin customer impact revenue, but operating income is strong due to higher-margin businesses. For International, subdued clinical trial activity pressures global specialty logistics and consulting, but sequential improvement is expected.

Q: Elizabeth Hammell Anderson of Evercore ISI asks about RCA tracking and MFN impact.

A: Robert P. Mauch says RCA integration is going well with strong cultural fit and customer feedback. On MFN, it's too early to call, but they're engaged in Washington to maintain access to community providers.

Q: Michael Aaron Cherny of Leerink Partners asks about forward planning and long-term growth.

A: James F. Cleary states they'll provide fiscal 2026 guidance later, but they're confident in long-term guidance with RCA lap and other factors impacting growth.

Q: Stephen C. Baxter of Wells Fargo asks about U.S. Healthcare earnings acceleration.

A: James F. Cleary says it's due to core business strength, specialty market performance, and less COVID headwind.

Q: Eric R. Percher of Nephron Research asks about tariffs and inflation.

A: James F. Cleary says no material tariff impacts, and they monitor supply chain risks to patient access. Bob Mauch adds they're educating on patient access impact of shortages.

Q: Charles Rhyee of TD Cowen asks about International project lead time.

A: Robert P. Mauch says project visibility is variable based on project size and market.

Q: Kevin Caliendo of UBS asks about U.S. growth slowdown.

A: James F. Cleary says GLP-1 slowdown won't majorly impact guidance, and they're confident in long-term guidance.

Q: George Robert Hill of Deutsche Bank asks about specialty distribution competition.

A: Robert P. Mauch says they're focused on strengths in retina and oncology, with ongoing investments in capabilities.

Q: Erin Elizabeth Wilson Wright of Morgan Stanley asks about International business alignment.

A: Robert P. Mauch says they apply rigorous discipline to portfolio, prioritizing strategic aligned investments.

Q: Steven James Valiquette of Mizuho Securities asks about brand drug price increases.

A: James F. Cleary says price increases were in line with expectations, with less impact on P&L now.

Q: Daniel R. Grosslight of Citi asks about hospital outpatient rule and tax benefits.

A: James F. Cleary says new tax bill is incrementally beneficial, and the hospital rule impacts competitive environment for MSO assets.

Q: Jack Slevin on behalf of Brian Tanquilut of Jefferies asks about GLP-1 competition impact.

A: James F. Cleary says GLP-1s are minimally profitable now, and future profitability depends on market normalization.