The paragraph is the introduction to Cencora's Q1 fiscal year 2025 earnings call hosted by Bennett Murphy, the company's Senior Vice President and Head of Investor Relations and Treasury. Key speakers include Bob Mauch, the President and CEO, and Jim Cleary, the Executive Vice President and CFO. It mentions the discussion of non-GAAP financial measures, with reconciliations available in the press release on Cencora's investor website. The call will involve forward-looking statements, and participants are invited to ask questions, with a request to limit to one question each to accommodate all inquiries during the call. Various guidelines for interacting with the call, such as how to register or withdraw questions, are also provided.

In the earnings call, Robert Mauch highlights Cencora's strong start to fiscal 2025 with significant revenue and EPS growth in the first quarter. The company is elevating its fiscal year guidance due to successful U.S. business execution. Mauch attributes these achievements to Cencora's position as a leading healthcare solutions provider with a pharmaceutical-focused strategy and a purpose-driven culture. He outlines three strategic focus areas that contributed to this success: enhancing leadership in specialty services, improving efficiency and technology across the organization, and maintaining a customer-centric approach. Specifically, Cencora is advancing its specialty leadership by strengthening relationships and services for specialty providers and is extending support to community providers through managed service organizations.

The paragraph discusses Cencora's acquisition of Retina Consultants of America (RCA) to expand its leadership in the retina MSO sector, building on its strategy similar to its investment in OneOncology. The company emphasizes enhancing capabilities and efficiency through advanced technology, collaboration, and digital transformation to improve customer experience and decision-making. Cencora is focused on streamlining operations and optimizing business processes with a customer-centric and innovative approach, aiming to unlock enterprise-wide value and meet customer needs.

The paragraph highlights Cencora's customer-focused approach, emphasizing its innovation in drug development and patient care. Cencora's cross-functional teams collaborate with customers to develop solutions showcased at its inaugural product event, featuring advances in inventory management and therapies. The company's global presence allows it to blend local expertise with a robust infrastructure, catering to biopharma's evolving needs. Cencora aims to enhance its pharmaceutical services, like market access and logistics, to strengthen long-term relationships and support growth, particularly in the European market.

The paragraph details Cencora's positive performance, highlighting the contributions of its global workforce in advancing leadership in specialty areas and improving efficiency and productivity. The company is focused on executing its strategy to drive stakeholder value. James Cleary provides an update on the first quarter of fiscal 2025, reporting strong performance, particularly in the U.S. healthcare solutions segment, with adjusted diluted EPS increasing by 14% to $3.73. The company raised its full-year EPS guidance and achieved consolidated revenue of $81.5 billion, a 13% increase attributed mainly to the U.S. healthcare segment and sales of GLP-1 products. Excluding GLP-1 sales, revenue growth would have been 9%.

The paragraph reports on the financial performance for the quarter, highlighting a 6% increase in consolidated gross profit to $2.5 billion, despite a reduced gross profit margin of 3.11% due to increased sales of low-margin products and decreased sales of COVID-19 vaccines and therapies. Operating expenses rose by 6%, driven by higher distribution and administrative costs, leading to a 7% rise in operating income at $949 million, notably from the U.S. healthcare solutions segment. Net interest expense decreased by 31% to $28 million, and the effective tax rate was 20%, slightly down from the previous year. The diluted share count declined by 3% due to share repurchases. The company is focusing on deleveraging after an acquisition and reported negative adjusted free cash flow of $2.8 billion due to cash usage in operations and year-end timing effects.

In the first quarter, the U.S. healthcare solution segment saw a revenue increase of 14% to $74 billion, driven by strong utilization trends, including a significant rise in GLP-1 sales by $3.2 billion, marking a 53% year-over-year growth. Excluding GLP-1, the revenue growth was 10%. Operating income rose 10% to $767 million, mainly supported by the human health distribution and commercial segments like animal health, despite reduced sales from COVID-19 vaccines and therapies. Internationally, the healthcare solutions segment's revenue increased 6% on a reported basis and 9% on a constant currency basis, aided by higher sales in its European distribution operations. The company expects continued headwinds from diminished COVID-19 vaccine sales in the upcoming quarter.

The paragraph discusses the financial performance and future guidance of an international healthcare solutions company. The company's international healthcare solutions segment reported a slight decrease in operating income on an as-reported basis, but a 3% increase on a constant currency basis. Challenges in the global specialty logistics business due to subdued clinical trial activity were mentioned, with expectations for improvement in fiscal 2025. The company raised its fiscal 2025 adjusted diluted EPS guidance to $15.25-$15.55, reflecting strong performance in the U.S. healthcare solutions segment, and adjusted its consolidated revenue growth expectations to 8%-10%, up from 7%-9%.

The updated guidance indicates an increased revenue growth expectation for the U.S. healthcare solutions segment to 9%-11%, driven by strong organic growth and contributions from RCA. The international segment's revenue growth forecast is lowered to 4%-5% due to updated foreign exchange rates, though on a constant currency basis, it remains at 7%-9%. Consolidated operating income growth is now expected to be higher, at 11.5%-13.5%, with the U.S. segment expecting 14.5%-16.5%, bolstered by RCA and broad-based growth. However, international operating income growth is anticipated to be flat due to currency effects, but approximately 5% on a constant currency basis, reflecting the slower start in fiscal year 2025.

The paragraph outlines updated financial guidance for Cencora, highlighting an expected increase in interest expenses to $290-$310 million due to the RCA acquisition, offset partly by lower net interest expenses from foreign subsidiaries. It anticipates significant interest expenses in the second quarter due to typical cash use seasonality and acquisition costs. The full-year average share count is expected to be under 196 million in fiscal 2025. The second quarter is expected to see the lowest growth in adjusted diluted EPS due to high net interest expenses, COVID-19 vaccine-related challenges in the U.S. healthcare segment, and the strength of the U.S. dollar impacting international income. The company credits its strong performance to the dedication of its team members and remains optimistic about continuing growth and value creation.

In the paragraph, Michael Cherny from Leerink Partners asks a strategic question about the specialty business growth of the company, considering the recent OneOncology investment and RCA developments. CEO Robert Mauch responds by emphasizing the company's strategy focused on the pharmaceutical sector, highlighting the importance of continued innovation. He mentions their efforts to expand the portfolio of services both domestically and internationally to support manufacturers and providers. Mauch concludes by asserting that having a strong customer portfolio sets the company apart from its competitors.

The paragraph discusses the company's focus on its customer portfolio as a key driver of growth, emphasizing the importance of being aligned with market-leading providers and manufacturers. It highlights the company's longstanding investment in a suite of services that support community providers, and asserts confidence in the MSO services as a strategic expansion. A question from Lisa Gill of JP Morgan follows, inquiring about the company's strong revenue growth in the U.S. segment and updated guidance. She asks whether there is expected deceleration due to factors such as GLP-1s, Walgreens store closures, or general conservatism. James Cleary acknowledges Lisa's question concerning U.S. revenue growth.

The paragraph discusses the company's revenue and operating income growth guidance, highlighting a few factors influencing these projections. The U.S. revenue growth guidance has been raised, although it's still lower than the first quarter's growth. Key factors impacting revenue growth include higher growth assumptions for GLP-1s in Q1 compared to the rest of the fiscal year and the conversion of Humira to biosimilars, both of which have significant effects on revenue but minimal impacts on operating income. Additionally, the acquisition of RCA is expected to boost operating income significantly, though it contributes less to revenue growth.

The paragraph discusses Cencora's financial performance, highlighting a significant increase in operating income despite lower revenue growth due to the nature of RCA, which is a high-margin but lower revenue business. The company avoids double-counting product revenue from their specialty business sold to RCA. Overall, Cencora is confident about its guidance. In response to a question from Elizabeth Anderson about the World Courier and pharma services businesses, James Cleary explains that World Courier, their global specialty logistics division, faced challenges due to subdued clinical trial activity. Anderson also inquires about the status of the pharma services demand cycle, noting a stabilization in pharma cuts.

The paragraph discusses the strong performance of a business over the past decade, despite recent market challenges. Improvement is expected in fiscal year 2025 as demand for premium services grows. The management team is focused on growth regions and pipeline development. Robert Mauch emphasizes Cencora's global footprint as crucial for future growth, highlighting the importance of their specialty logistics, consulting, and 3PL services. He notes that their local expertise combined with global infrastructure is valued by pharmaceutical manufacturers, particularly for specialty launches in Europe. Overall, the company is optimistic about its long-term strategy.

The paragraph discusses an ongoing partnership and contract negotiations between the company and Walgreens. Steven Valiquette from Mizuho Securities inquires about any updates regarding these discussions. Robert Mauch emphasizes the company's commitment to working closely with Walgreens to create mutual value and innovation, highlighting Walgreens as a key strategic customer not only in the U.S. but also in the U.K. and through their sourcing relationship with WBAD. The company is actively engaged, bringing in top experts to enhance this partnership, and any potential changes in the contract are expected to be considered in the company's fiscal 2025 guidance.

In the paragraph, Robert Mauch responds to Eric Percher's question about the challenges and motivations in practice management within the MSO (Management Services Organization) business, highlighting their investment with OneOncology. He emphasizes the importance of strong physician leadership in keeping the medical staff engaged and motivated. Additionally, Mauch explains that the value of the MSO model lies in value creation, offering new services such as clinical trial support and analytics that help physicians practice more efficiently and improve patient outcomes.

The paragraph discusses the competitive landscape in the management services organization (MSO) space, particularly in ophthalmology and retina. James Cleary mentions the acquisition of RCA, which has contributed to their operating income growth. Daniel Grosslight from Citi inquires about the competitive environment, noting a competitor's recent acquisition in the ophthalmology-focused MSO space. Robert Mauch responds by expressing confidence in Retina Consultants of America, highlighting its leadership position due to its management team, clinical excellence, and strong clinical research network.

The paragraph discusses Cencora's confidence in their strategic platform, emphasizing the successful growth of OneOncology and their ability to attract physicians and practices. They acknowledge similar strategies by competitors but express satisfaction with their partnerships. When answering questions from Stephen Baxter of Wells Fargo, James Cleary does not provide specific organic guidance but highlights strong U.S. segment performance driven by factors such as RCA, utilization trends, and overcoming COVID-related challenges.

The paragraph discusses the company's performance, specifically highlighting the stronger-than-expected results in the U.S. segment, which exceeded initial guidance ranges. There is also a mention of RCA accretion, with an expectation of $0.35 during the first 12 months of ownership, particularly ramping up in fiscal year 2025 due to business growth and strategic initiatives. The conversation shifts to Charles Rhyee from TD Cowen, who asks about the specialty business related to RCA, particularly in the context of Regeneron's Eylea and Amgen's new product, Pavblu. Robert Mauch responds, highlighting the company's extensive experience in partnering with retina physicians, indicating their understanding of the space.

The paragraph discusses the positive outlook for the market in terms of innovation and the introduction of biosimilars, which are expected to benefit patients, multi-specialty organizations (MSOs), and Cencora. It highlights that biosimilar adoption, particularly in oncology and retina, is progressing more quickly in the Part B space compared to Part D. The emphasis is on maintaining a healthy market with continuous innovation and the availability of biosimilars, allowing physicians to make the best clinical decisions for patients. Allen Lutz from Bank of America inquires about the anticipated new script growth for 2025 versus 2024, considering the strong utilization in U.S. healthcare in 2024, some of which was due to post-COVID dynamics and other factors like GLP-1s and Humira. He also asks if the current guidance reflects a normalization of utilization or any impact from benefit design changes introduced in 2025. James Cleary acknowledges the strong utilization trends observed.

In the paragraph, the speaker discusses strong utilization trends observed in the first quarter and expresses confidence in the company's market performance and its resilience. The company has set a range for both consolidated and U.S. top line growth for fiscal year 2025, with key drivers of this range being various assumptions on utilization trends. George Hill from Deutsche Bank then asks about the value drivers for the company's physician partners, like Cencora, RCA, or OneOncology. Robert Mauch responds that it is difficult to rank these value drivers, as their importance varies across different physician practices and specialties, and notes that the market is dynamic and constantly changing.

The paragraph discusses the evolving needs of physicians and emphasizes the benefits of having a robust suite of MSO services, which help in staying ahead of these needs by working closely with customers to deliver innovative solutions. Erin Wright from Morgan Stanley asks about key therapeutic strengths and animal health trends. James Cleary responds, highlighting oncology as the primary driver of their specialty business, particularly through sales to specialty physician practices and health systems.

The paragraph discusses the company's strategic moves and performance in various sectors. It mentions significant capital deployment in the ophthalmology and retina markets as part of evolving their specialty business. The animal health division had a strong quarter, showing 7% top-line growth, driven by both the companion and production animal markets. The company believes they may be gaining market share and commends the management team. The text then transitions to a Q&A session where Kevin Caliendo from UBS asks about fiscal ’25 guidance, potential customer loss, and the impacts of COVID-related headwinds, specifically Paxlovid, on fiscal 1Q results.

In the paragraph, James Cleary addresses questions about customer losses and COVID-related impacts on their business. He mentions that while some customer losses and gains are anticipated, none are significant enough to highlight, apart from one already mentioned. He explains that exclusive COVID therapy contributions were a minor headwind in the past but no longer affect the fiscal year 2024 forecasts. COVID-19 vaccine contributions have decreased, and there is no significant expected contribution from them in the second quarter of fiscal 2025. Despite this, the company has raised guidance. Eric Coldwell then shifts the focus to World Courier, inquiring about the performance amidst market challenges like subdued clinical trials, the status of other specialty shipments, expectations for clinical trial activity recovery, and the competitive landscape.

In the paragraph, James Cleary and Robert Mauch discuss the performance and prospects of World Courier within the global specialty logistics market. Cleary emphasizes confidence in the cell and gene therapy market opportunities, despite these not yet significantly impacting the bottom line. He mentions that their teams are focused on a promising pipeline that could yield improvements later in the fiscal year. The competitive nature of the market is acknowledged, but Cleary asserts their status as a market leader. Mauch adds that being a premium provider involves ongoing innovation, particularly in temperature monitoring and product tracking within their specialized supply chain.

In the closing remarks of the call, Robert Mauch thanks everyone for joining and expresses gratitude towards the Cencora team for their dedication and expertise, which have contributed to the company's success. He emphasizes the team's role in advancing leadership in specialty areas, improving efficiency and productivity, and maintaining a customer-centric approach. The call is then concluded by the operator.

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