The paragraph describes the introduction to the Third Quarter Fiscal Year 2025 Earnings Conference Call for Cardinal Health, coordinated by George and hosted by Matt Sims, Vice President of Investor Relations. Presenters include CEO Jason Hollar and CFO Aaron Alt. The call includes forward-looking statements with associated risks and uncertainties, as well as non-GAAP financial comments. Jason Hollar then emphasizes the company's strong third-quarter results, showcasing momentum, business strength, and strategic effectiveness in a complex macro environment.

The paragraph discusses Cardinal Health's role in integrating clinical and operational aspects of healthcare by providing comprehensive solutions. The company is highly trusted for its efficient and secure delivery of essential healthcare products and services, adapting to market changes and regulations. While it has a strong U.S. presence, generating most of its revenue domestically, it remains resilient against tariffs and regulatory issues. Cardinal Health has invested significantly in the U.S., enhancing manufacturing and distribution capabilities. The company's quarterly performance was bolstered by strong pharmaceutical utilization and growth in its key business sectors. It continues to focus on increasing patient access, affordability, and innovation in healthcare.

The paragraph highlights the company's financial success across all five operating segments, attributing it to strategic priorities and recent acquisitions, including GI Alliance, Integrated Oncology Network, and Advanced Diabetes Supply Group. It specifically notes strong performance in pharma and other high-margin businesses like at-Home Solutions, Nuclear, and OptiFreight. As a result, the company has raised its fiscal 2025 EPS guidance, anticipating sustainable long-term growth. Additionally, Q3 saw a 21% increase in operating earnings and a 13% rise in EPS, bolstered by the pharma segment and other growth areas, leading to a quarterly earnings per share of $2.35.

The company has raised its full-year EPS guidance to $8.05-$8.15 due to strong Q3 performance. Total company revenue was flat at nearly $55 billion, but increased by 19% when adjusting for a contract expiration, driven by high demand in pharma and growth businesses. The company improved operating leverage, with gross profit rising by 10% and SG&A costs increasing only 4%, or slightly decreasing when accounting for acquisitions. Operating earnings grew by 21%. Interest and other expenses increased to $65 million due to acquisition financing costs. The effective tax rate rose to 22.4% due to non-repeated positive items from last year. Average diluted shares were 240 million, reduced by 2% from share repurchases, leading to a 13% growth in Q3 EPS at $2.35. Pharma segment revenue was flat at $50.4 billion but increased by 20% excluding the contract expiration, with strong growth in brand, specialty, generics, consumer health, and from major customers, partly driven by GLP-1 sales.

In the third quarter, the company experienced growth in new customers and successful onboarding of Publix, contributing to a 14% increase in segment profit to $662 million. This growth was driven by brand and specialty products, MSO platforms, BioPharma Solutions, and a successful generics program, although partially offset by a customer contract expiration. The company's acquisitions of ION and GIA also positively impacted results. The generics program continued to perform well, with strong volume growth and favorable market conditions. The GMPD segment saw a 2% revenue increase to $3.2 billion, driven by volume growth from existing customers, and segment profit rose to $39 million due to cost optimization efforts. Revenue from other businesses rose 13%, and profit growth across all operating segments increased by 22% to $134 million.

The company reported a strong financial position at the end of the quarter, with $3.3 billion in cash and $1.2 billion in adjusted free cash flow year-to-date. They invested $315 million back into the business and repurchased $750 million in shares, including $375 million in accelerated share repurchases, at an average price of $117 per share. They also closed a $2.8 billion majority position in GI Alliance during Q3. Due to strong Q3 results, the company increased its fiscal year '25 EPS guidance to a range of $8.05 to $8.15 and expects adjusted free cash flow to reach $1.5 billion. Interest and other expenses are projected to be between $200 million and $215 million due to better-than-expected cash flows, reducing the need for borrowing. Additionally, they anticipate $75 million in interest and other costs next quarter and $10 million in income from ambulatory surgery center positions. They updated their effective tax rate guidance to 23% to 23.5%. The paragraph ends with a mention of their segment performance on Slide 10.

The company is raising its full-year profit growth guidance for its pharma segment to 11.5%-12.5%, driven by strong demand in core pharma and specialty areas. Although Q4 will incur higher investment costs due to the completion of a Consumer Health Logistics Center and technology investments, $10 billion in new customer revenue for fiscal year '25 has been secured, positioning the company for growth in fiscal year '26. For GMPD, guidance is narrowed to $130 million-$140 million, but profitability is expected to improve due to positive Cardinal Health brand volume trends, cost-saving actions, and a traditionally strong Q4 profit season. The impact of U.S., Mexico, and Canada tariffs is expected to be minimal and offset in future periods.

The company anticipates fiscal year 2025 revenue growth of 17% to 19% and segment profit growth of 16% to 18%, mainly due to stronger organic growth and expected contributions from ADSG in Q4. ADSG is expected to be slightly accretive to EPS despite a one-time acquisition-related inventory impact unique to Q4. As they approach Investor Day on June 12, more clarity on fiscal 2026 and further guidance will be provided. In the pharma sector, growth is expected from their generics program, BioPharma Solutions, and MSO platforms. They are prepared to adapt to changes in the U.S. healthcare ecosystem and do not foresee significant economic impacts from regulatory reviews or drug pricing changes. Additionally, the market's secular trends, competitive positions, and investments are expected to drive organic growth. The integration of ADSG with at-Home Solutions is expected to be beneficial, and actions are being taken to mitigate tariff impacts in GMPD.

The paragraph highlights the company's commitment to improving the financial profile of GMPD despite uncertainties related to tariffs. Operational improvements are expected to maintain profit levels in fiscal '26, with robust cash flow generation anticipated after certain contract expirations. The company is committed to internal investments, debt reduction, shareholder returns, and strategic acquisitions. They foresee resilience and growth in their major business segments, projecting double-digit EPS growth for the next year. The team remains focused on operational execution and long-term growth, with an upcoming Investor Day planned for June 12. Jason Hollar notes excitement over earnings growth in all operating segments and significant growth in key areas, acknowledging further work is needed with GMPD amidst an uncertain economic environment.

The paragraph highlights the positive third-quarter performance in Pharmaceutical and Specialty Solutions, driven by strong operational execution and customer-focused strategies. Key achievements include successful onboarding of Publix, high service levels, and a critical partnership with Red Oak for product access and cost control. Specialty care is central to their growth strategy, with recent acquisitions by GI Alliance expanding into urology. They observe strategic success in community-based physician practices and report solid growth in GMPD due to improvement plans and cost streamlining. Cardinal Health branded products and a new long-term distribution agreement with a health system contributed to the strong performance. Lastly, there is anticipation of further details on tariffs.

The paragraph discusses the efforts of a company, likely in the healthcare sector, to mitigate the impact of tariffs on their Global Medical Products and Devices (GMPD) segment. While most of their business remains unaffected, they are proactively minimizing the burden on customers by increasing U.S. manufacturing, diversifying suppliers, and employing advanced strategies like AI for tariff planning. Despite these efforts, they still expect substantial gross tariff costs by fiscal '26, but aim to offset these through additional operational measures and price adjustments. The company is determined to maintain GMPD's financial viability while preventing market shortages or supply disruptions.

The paragraph highlights strong growth and future potential across various business segments. In Nuclear and Precision Health Solutions, over 30% growth in Theranostics is noted, with a focus on oncology and urology products like Illuccix and Pluvicto. There is excitement about new therapeutic developments for Alzheimer's. The company has partnered with GE Healthcare to distribute Flyrcado, which aids coronary artery disease diagnosis. The At-Home Solutions segment is expanding, with investments in automation and the integration of ADSG, aiming for profitable growth in the diabetes care market. OptiFreight Logistics shows strong performance, with increasing customer engagement on the platform.

In the paragraph, the company wraps up its discussion on strong quarterly results driven by robust performance across its operating segments, highlighting the clear strategic direction and inherent business strength. The company expresses confidence in maintaining momentum throughout the fiscal year 2025, assured of its resilience and strategic execution to serve customers and create long-term value. The conversation transitions to a Q&A session, with Lisa Gill from JPMorgan asking about the factors driving strong brand and specialty sales growth, and if recent changes under the IRA's Part D are impacting these trends. Jason Hollar responds, noting that while some impact from the out-of-pocket maximum reduction might exist, the overall growth is broad-based with multiple factors contributing.

The paragraph discusses the strong performance of a company's pharma segment, highlighting broad-based growth across different business categories, including generics, branded products, and especially Specialty distribution, which has seen sustained mid-teens growth. The BioPharma Solutions business also contributed to profits despite its smaller size. The company benefited from organic and inorganic growth, including new customers and the addition of MSOs ION and GIA. This quarter marked the first full quarter of $10 billion in new customer acquisitions, contributing to a 20% volume revenue growth, driven by various factors such as GLP-1s, which accounted for 7% of that growth.

The paragraph discusses the pharmaceutical industry's resilience to macroeconomic challenges. Aaron Alt states they aren't providing a specific guidance yet but expect positive performance in the generics and specialty sectors. When Allen Lutz questions if consumer weakness or tariff concerns are affecting prescriptions, Jason Hollar responds that they haven't observed any significant downturns. Even during major events like the Great Recession, pharmaceutical demand was stable. He notes this industry benefits from favorable secular trends and doesn't generally experience significant volatility due to minor economic events.

The paragraph is a transcript from a discussion involving representatives from Cardinal Health, specifically addressing questions about their Cardinal brand's revenue and profit margins. They mention that approximately $4 billion of their GMPD revenue comes from the Cardinal Health brand, which has higher margins compared to national brands. Although they see volume growth, specific profit margins are not disclosed. The discussion also touches on efforts to pursue exemptions under the USMCA and other protocols to mitigate tariffs, utilizing new tools to achieve this.

The paragraph discusses how Cardinal Health is addressing the financial impact of tariffs, specifically relating to its Cardinal brand and national brand. Jason Hollar explains that of the remaining $200 million to $300 million tariff impact, most will be mitigated through operational actions and pricing adjustments, with plans already in place. For the national brand, the tariff cost is mostly a pass-through to customers, as it operates on a fee-for-service model. Consequently, the pricing impact is primarily on the Cardinal Health side. The paragraph concludes with a transition to the next question from Michael Cherny, who seeks further clarification on the tariff impact for fiscal year '26.

The paragraph discusses the impact of tariffs on GMPD and the business strategy moving forward. Jason Hollar mentions that most of the impact will come from tariffs. He outlines the company's plans for 2025 to 2026, emphasizing continued growth for Cardinal Health, driven by industry trends and improvements in their product mix, alongside ongoing cost reductions, including headcount cuts in the third quarter. However, the benefits will be somewhat offset by the tariff impact of $200 million to $300 million that cannot be passed on through pricing. The text concludes with Kevin Caliendo from UBS redirecting the conversation to the potential impact of pharma tariffs on the company's supply chain.

The paragraph discusses the stability and security of the business model of a pharmaceutical distributor, highlighting that despite changes in drug pricing or tariffs, the value and function they provide remain constant. Jason Hollar expresses confidence in the company's contracts and business model, emphasizing that their role in delivering products safely and efficiently is recognized and rewarded by customers. Past instances of price changes, such as with insulin, did not affect their compensation, reinforcing their confidence in their approach. While uncertainties exist about future pricing changes, the company feels assured about maintaining their current model. Additionally, there is a brief mention of wanting to address other business sectors beyond pharma.

The paragraph discusses the company's business structure and recent success in margin expansion within the pharmaceutical sector. It highlights that four out of five business segments, excluding OptiFreight, are performing well, contributing 95% of the segment's profit. The company plans to continue managing customer and patient care aggressively while maintaining strong business models. George Hill from Deutsche Bank questions about margin expansion in pharma, attributing it to various positive and negative drivers like acquisitions, new customers, business growth, and the generics program, offset by client loss and mix change. Aaron Alt responds, acknowledging the team's deliberate efforts to grow gross margin, emphasizing that the specialty parts of their portfolio are experiencing faster growth and yielding higher margins than the core business.

The paragraph discusses the company's strategies for improving gross margins and controlling SG&A expenses, attributing the improvements partly to high-margin revenue streams from MSOs. It is noted that despite acquisitions, SG&A expenses were down when normalized. Additionally, Eric Coldwell inquires about the Nairobi protocol on tariffs, and Aaron Alt responds that the company has existing tariff protections and is exploring further opportunities under the protocol to benefit additional products, as part of their broader portfolio assessment.

In the paragraph, a discussion takes place in which Jason Hollar and Aaron talk about the efforts to identify new opportunities by examining various elements within the business. They've been using a particular approach for a few years to monitor hundreds of product SKUs effectively. Erin Wright from Morgan Stanley then inquires about customer onboarding and how it impacts pharma growth and quarterly progression. Jason Hollar responds by confirming $10 billion in incremental new customers for the year, noting that onboarding started in the second quarter with impacts spread across the third and fourth quarters. They feel confident that the process is on track with their expectations.

The paragraph involves a discussion between Daniel Grosslight and Jason Hollar regarding the impact of GMPD tariffs on supply costs and the strategies to manage them. Grosslight seeks clarity on how price increases will be implemented to offset these tariffs, noting that a large portion of healthcare supply costs are fixed. Hollar responds by stating that the majority of the $200 million to $300 million in tariff costs will be managed through pricing after taking other actions. He emphasizes collaboration with customers to find solutions, highlighting that some products have low margins due to being sourced from low-cost locations like China. About 10% of their products come from China, mainly low-cost or commoditized items, which presents a challenge in resourcing them elsewhere.

The paragraph discusses the financial outlook of a company, with a focus on fiscal '26 and the expectation of double-digit EPS growth despite potential macroeconomic challenges. Charles Rhyee from TD Cowen asks Aaron about the primary drivers for this growth, suggesting that the pharmaceutical segment will be a key contributor, rather than the GMPD segment, which is not expected to be the biggest driver at this point. Aaron responds by noting that the budgeting process for fiscal '25 is ongoing and that the company is preparing for an Investor Day in six weeks.

The paragraph discusses the company's positive outlook for fiscal year 2026, highlighting the expected double-digit EPS growth driven by resilient and dynamic business operations. The text mentions strong performance in the pharmaceutical sector, ongoing demand in three recently disclosed business areas, and beneficial secular tailwinds. It also emphasizes the importance of mergers and acquisitions, noting two recent acquisitions by GIA and the successful integration of ADSG. Overall, the company is optimistic about continued growth across its various business segments.

In the paragraph, the discussion revolves around the impact of tariffs on the company's growth estimates. The speaker highlights that their business is expected to perform consistently with fiscal '25, supported by strong operational execution and the ability to manage the tariff environment. This is contributing to anticipated double-digit EPS growth for the following year, with more details to be shared at an upcoming Investor Day. In the subsequent Q&A, Steve Baxter from Wells Fargo asks about the assumptions regarding tariff levels, particularly for China and the rest of the world, and how changes in tariffs might affect pricing. Jason Hollar responds by stating that their estimates are based on current tariff understanding and that they have processes in place to manage changes, but acknowledges the complexity involved in predicting future scenarios.

The paragraph discusses the impact of relative tariff rates on product distribution, particularly products outside the United States, which tend to be more commoditized and labor-intensive. While certain products, like syringes, will continue to be imported into the U.S., the company aims to maximize North American production, with one-third of their production now in the U.S. and over 50% in North America, including Mexico. The company maintains a diverse global footprint to navigate tariff challenges, with China being a significant driver of tariff costs. The discussion then shifts to a question by Brian Tanquilut from Jefferies regarding the potential impact of tariffs on pharmaceuticals, questioning if such tariffs would lead to inflation similar to past trends with generic drug inflation.

In the paragraph, Steve Valiquette inquires about potential changes in the company's inventory levels due to possible tariffs in the pharmaceutical or medical segments, asking if higher inventory levels are anticipated. Jason Hollar responds that the company's inventory levels are expected to remain fairly normal, with about an 8% increase aligned with overall business growth. He mentions that the $16 billion inventory represents less than a month's sales, implying that significant escalation in inventory could burden the balance sheet and cash flow.

In the paragraph, Aaron Alt highlights the focus on optimizing cash flow for fiscal 2025 and beyond, with more details to be shared at Investor Day. The operator announces there are no more questions, and then Jason Hollar expresses satisfaction with the company's quarterly performance and strategic progress. He emphasizes the successful integration of new businesses under Cardinal Health, particularly praising the new team members from ADSG, and anticipates these additions will drive long-term growth. The call concludes with the operator thanking participants and ending the conference.

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