The operator welcomes listeners to the Cencora Q3 earnings call and introduces the moderator, Bennett Murphy, who then introduces the other speakers. The call will discuss non-GAAP financial measures and forward-looking statements. The company assumes no obligation to update these statements and listeners will have an opportunity to ask questions after the speakers' remarks.

The speaker, Steve Collis, is the CEO of Cencora and is giving his last earnings call after 13 years. He highlights the company's growth and success, with revenue of over $74 billion and increased EPS. He credits their pharmaceutical-centric strategy and agility for their success in the evolving healthcare landscape. Cencora's comprehensive approach and collaboration sets them apart in the market, and they are currently serving as an integrated launch partner for a biopharma company.

Cencora is dedicated to supporting market access and efficient distribution for novel therapies, showcasing their diverse capabilities and ability to drive innovation. They recently hosted a conference for leaders in the biopharmaceutical industry to discuss developments and challenges in the market, and also held a trade show for independent pharmacists to connect and learn about the latest technologies. Cencora values collaboration and believes in the important role of independent pharmacies in promoting access to healthcare in their local communities.

Cencora, a leader in the Good Neighbor Pharmacy network, prioritizes strategic partnerships with market-leading customers to better understand their challenges and provide tailored services. They also invest in innovative technology and analytics to improve efficiency and drive mutual value. Their specialty distribution and services offering is a key area of focus, with continued investments in infrastructure and emerging technologies to stay ahead in the rapidly growing specialty market.

The success of Cencora is driven by its purpose-driven culture and commitment to fostering an inclusive and supportive workplace for all team members. This has been recognized through various awards and events, such as a global pride celebration and recognition as a Best Place to Work for Disability Inclusion. The company's continued growth and resiliency is also attributed to its ability to adapt to industry changes and leverage business synergies. The incoming CEO, Bob Mauch, is focused on learning from team members and customers and reinforcing the company's value and investment in innovation.

The company's success is attributed to its focus on customer-centric solutions, a learning mindset, and embracing enterprise-powered capabilities. The team is motivated by their work and collaboration within the company. The company values diversity and will continue to prioritize its pharmaceutical-centric strategy and support growth in innovative products. The new CEO acknowledges the previous CEO's contributions to the company's growth and success.

In the third quarter, Cencora's CEO Steve led the company through strategic decisions that positioned it for long-term value creation. This includes partnerships with healthcare organizations, expanding their services and solutions, and successfully navigating challenges. Steve will transition to the role of Executive Chair with the support of the team. The company had a strong performance, with adjusted diluted EPS increasing by 14%. This was driven by positive utilization trends, leadership in specialty, and strong free cash flow generation. The company also made opportunistic share repurchases, demonstrating their commitment to returning value to shareholders.

In the third quarter, our consolidated revenue increased by 11% to $74.2 billion, driven by growth in our distribution businesses and sales of GLP-1 products. Gross profit also increased by 6%, while operating expenses were up 6% due to higher support for revenue growth. Consolidated operating income increased by 7%, with strong growth in the U.S. Healthcare Solutions segment. Our net interest expense and effective tax rate for the quarter will be discussed in more detail.

In the third quarter, net interest expense decreased by 46% due to strong cash flow and higher investment rates. The effective income tax rate was 21.0%, and the diluted share count decreased by 2% due to share repurchases. The company ended the quarter with a cash balance of $3.3 billion and $2.3 billion of adjusted free cash flow. In the U.S. Healthcare Solutions segment, revenue increased by 12%, driven by strong script utilization trends and sales of GLP-1 and specialty products. Operating income also increased by 10% in this segment. The International Healthcare Solutions segment will now be discussed.

In the quarter, International Healthcare Solutions revenue was flat compared to the prior year, but increased by 6% on a constant currency basis. Operating income for the segment decreased by 4% on an as reported basis, but increased by 1% on a constant currency basis. The global specialty logistics business is seeing positive signs of demand and is investing to strengthen its market position. The company has raised its fiscal 2024 EPS guidance for the fourth time this year, now expecting growth of 13% to 14%. This is due to expected growth in the U.S. Healthcare Solutions segment, lower net interest expense, and tapered expectations in the International Healthcare Solutions segment.

The company has increased its revenue growth expectations to approximately 12% and narrowed its adjusted operating income growth guidance to 10-11%. This is due to strong growth in the U.S. segment and lower growth in the international segment. In the U.S., growth is expected to be 11-12%, while in the international segment it is expected to be 5-7%. The company will also lap the prior-year contribution from COVID therapy distribution and begin comparing to prior-year quarters with contributions from commercial COVID vaccines.

The company has updated its guidance for fiscal 2024, expecting a 10-12% growth in adjusted operating income on a constant currency basis. They have also narrowed their International operating income guidance range and reduced their net interest expense range due to better-than-expected free cash flow. The weighted average share count is expected to be under 201 million shares, and adjusted free cash flow is expected to be $2.5 billion to $3 billion. The company's purpose-driven team members have contributed to their strong results and their pharmaceutical-centric strategy has enabled them to deliver sustainable growth and create value for stakeholders.

The speaker congratulates Steve and Bob on their leadership transition plan and praises Steve for his 13 years as CEO, citing the company's strong financial growth under his leadership. The speaker then hands the call back to Steve, who thanks the team and stakeholders for the opportunity to serve as CEO. In his first call as CEO, Steve emphasized the company's focus on increasing value for customers and shareholders.

The writer reflects on their tenure at Cencora and how the company has grown in various aspects, such as operationally, geographically, and financially. They highlight the company's focus on pharmaceutical distribution and specialty services, and their partnerships with both upstream biopharma and downstream providers. The new CEO, Bob, is praised for his experience and leadership, and the writer expresses excitement for the company's future under his guidance. They conclude by expressing gratitude for being a part of the company's growth and looking forward to seeing how Cencora will continue to evolve.

The speaker thanks their colleagues for their contributions to the company's success and announces that they will now move on to the question-and-answer portion of the call. They are asked about any changes in the company's strategy and guidance for the future, and the speaker states that there will be no changes and comprehensive guidance will be provided at the end of the fiscal year.

The speaker expresses confidence in their long-term guidance for operating income and EPS growth. They also mention factors that could affect their performance, such as growth in specialty products, utilization trends, and timing of capital deployment. They also mention the potential impact of the upcoming fiscal year's comparison to the first season with commercial COVID vaccines. The speaker attributes their strong financial performance to their market positions, team execution, and pharmaceutical-centric foundation. The next speaker, Bob, is introduced and the call is opened for questions. A question is asked about the market and the speaker mentions changes in list prices and their impact on quarterly results. They are asked about the current state of the market and the speaker responds by saying they are seeing a sequential uptick in revenue in the U.S. and expects to continue seeing growth.

The speaker, Jim Cleary, is asked about the current state of the markets and how it may affect the company's future trajectory. He mentions positive utilization trends and strong sales in specialty products. He also notes that drug pricing and generic deflation are in line with expectations. The next question comes from Elizabeth Anderson, who congratulates Steve and looks forward to working with Bob in the future.

The question asks about the performance of PharmaLex business and the current cycle in the industry. The company has seen some softness in their consulting business, but there are early positive indicators in the market. The team is focused on identifying revenue-generating actions. The company remains confident in their decision to acquire the business. The next question congratulates Steve on his run and asks about the decline in gross margin, which is attributed to the reacceleration of GLP-1s.

The speaker is responding to a question about the decline in gross profit margin and explains that it is due to a mix of factors including an increase in sales of lower-margin GLP-1s and a mix of higher and lower-margin businesses in the US and International markets. The next question is about the recent trend of large oncology groups being up for sale and the speaker, Steve, shares his thoughts that the specialty market is dynamic and there is pressure for aggregation in the oncology field. He also mentions that this trend may create both opportunities and risks for Cencora.

During a recent earnings call, Steve and Bob discussed the impact of various factors on their oncology business, including geography, payer mixes, and value-based care. They expressed their commitment to being leaders in the market and investing in their company, OneOncology. Bob also noted the value of community oncology and the positive trend of consolidation in the industry. When asked about the impact of large customers undergoing restructuring, Steve stated that they are in discussions with clients and are aware of their plans, but details are still being worked out.

The speaker addresses a question about how the company works with Walgreens to ensure successful execution of their strategies. They emphasize the close relationship and collaboration between the two companies. They also mention that they take into account customer growth when developing annual plans. In regards to the International business, they mention FX dynamics and technology investments as potential factors, and in animal health, they mention livestock and companion animal demand trends.

The International segment of the company saw a 4.1% decrease in operating income this quarter, with higher IT expenses and lower rates per shipment in the global specialty logistics business being the main factors. The Canadian business performed well, but the guidance for operating income growth was lowered by 1 percentage point due to the third quarter results and softness in the PharmaLex business. Results in the International segment tend to be more lumpy compared to the U.S. segment, which is driven by pharmaceutical distribution. There is nothing new to report in the animal health segment, which has seen a 7% increase in revenue year-to-date.

The speaker discusses the trends in both companion animal and production animal segments and praises the team's execution. The next question is about the guidance and the speaker explains that there will be a sequential decline in operating income for the U.S. segment in the fourth quarter, but overall, the operating income is expected to increase. The decline is due to the strong performance of various business units and a decrease in contribution from COVID-related products.

The company expects comparable contribution from commercial vaccines in the fourth quarter, but little from therapies, creating a headwind in the comparison to last year. The management team at Walgreens has been focused on extracting more value from their relationship, causing investor concern. The company views Walgreens as a strategic partner and collaboration efforts are ongoing.

The speaker discusses the company's relationship with WBA and their efforts to support WBA's strategy. They mention their distribution relationships with Walgreens and Boots, as well as their joint purchase of generics. They emphasize their long-term strategic partnership and their commitment to creating value. The speaker also addresses the company's approach to contract renewals and how they differentiate themselves from their peers. They mention that the environment is competitive but stable.

The company is focused on supporting all of its customers across its entire portfolio, both in the United States and internationally. They are working to drive efficiency and improve service levels for their customers, with a customized approach for each customer segment. They have long-term strategic partnerships with their customers and have balanced their contracts to avoid subsidizing one product category over another. The company believes this is positive for their customer relationships. In terms of the rebound, there are early positive signs in both specialty logistics and PharmaLex, though it is not specified what those signs are.

During a discussion about specialty logistics, Jim Cleary mentions that there have been early positive signs in terms of volume trends. He also comments on the strong performance of the business in the long term. In response to a question about the impact of NADAC on independent pharmacies, Bob Mauch states that they have not received any specific requests for support from their independent customers at this time.

The speaker thanks the analyst community and acknowledges their support throughout the call, as well as thanking the teams behind the preparation of the numbers. The speaker also wishes the new CEO success and expresses gratitude for his own tenure as CEO. The call concludes with the speaker thanking everyone for their time.

This summary was generated with AI and may contain some inaccuracies.