Hello, and welcome to the First Quarter Fiscal Year 2025 Cardinal Health, Incorporated Earnings Conference Call. My name is George, and I'll be your coordinator for today's event. Please note, this conference is being recorded, and for the duration of the call, your lines will be in listen-only mode. However, you will have the opportunity to ask questions at the end of the presentation. [Operator Instructions] I'll now hand the call over to your host today, Mr. Matt Sims, Vice President, Investor Relations, to begin today's conference. Please go ahead, sir.

Welcome to this morning's Cardinal Health first quarter fiscal '25 earnings conference call, and thank you for joining us. With me today are Cardinal Health's 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 the 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 statement 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, 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. 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.

Thanks, Matt. Good morning, everyone. Overall, Cardinal Health delivered a terrific start to fiscal '25 with strong operational and financial performance, led by Pharma and Specialty Solutions. The ongoing strength and resiliency of our largest and most significant business was evident, delivering 16% segment profit growth, reflecting the team's advanced preparations and excellent execution in managing through the previously communicated large customer transition. We continue to operate in a stable industry environment with positive utilization trends underpinning our growth. We saw particularly strong and broad-based pharmaceutical demand this quarter across Brand, Specialty, Consumer Health and our Generics program. We are pleased to again support our customers with commercial distribution of the COVID-19 vaccines in preparation for the fall immunization season. And as I alluded to, the team executed our customer transition plans with urgency, realigning operational processes to address inefficiencies, facilitate the ongoing growth of the business, and support new customer implementations. In GMPD, while the Q1 financial results were below our expectations due to some unanticipated health and welfare costs that Aaron will cover in detail, our team continues to make progress against the GMPD Improvement Plan, which is unchanged, and take actions to enhance our supply chain resiliency. We're confident in our plans to accelerate the performance of the GMPD business over the next two years, while also continuing our near-term value-creation focus, as we outlined last quarter. Across our Other businesses, Nuclear, at-Home and OptiFreight, we continue to be encouraged by the strong demand and underlying performance we are seeing as these businesses continue to expand and benefit from positive industry trends. In summary, we're pleased to be in a position to raise our enterprise guidance for fiscal '25 after the first quarter. Our business is strong and we're confident as we look ahead. With that, let me turn it over to Aaron to review our results and updated guidance in more detail.

Thanks, Jason, and good morning. Q1 delivered an excellent start to Cardinal Health's fiscal 2025 with outstanding results from the Pharma segment, accompanied by solid operational performance from GMPD and the businesses included in Other. As an enterprise, we grew operating earnings by 12% and EPS by 9%, despite the recent customer transition. At the same time, the team adeptly managed through and anticipated negative working capital unwind, over-delivering on our Q1 cash flow expectations and enabling us to continue to both invest in the business and execute on an early accelerated share repurchase program. With the solid start to the year, I am delighted to share the headline that we are raising our EPS guidance to an EPS range of $7.75 to $7.90, and raising our adjusted free cash flow outlook for fiscal '25 to a range of $1 billion to $1.5 billion. More on that shortly. Let's review the results, starting with Slide 4. Total company revenue decreased 4% to $52 billion, better than we expected. Adjusting for the customer transition, total company revenue increased 15% versus the prior year, reflecting our strong organic revenue growth across the rest of our business. We also started to successfully onboard the first of the new customers that make up the over $10 billion of incremental revenue in Pharma, that we've referenced in our guidance for the year. Total company gross margin increased 9%, driven by positive trends in both Brands and Generics in the Pharma segment. While we tightly controlled discretionary spending during the quarter, on the face of our financials, SG&A grew by $91 million or 8% versus prior year. Approximately half of this increase was driven by incremental health and welfare employee costs. This included substantially higher employee plan utilization costs, both numbers of claims and cost per…

Thanks, Aaron. The strong first quarter results build upon the momentum we've established for the past couple of years by ruthlessly prioritizing simplification and core operational execution to serve our customers and their patients with essential products and industry-leading service. They are also a testament to the actions we've taken to solidify our core foundation and increase our exposure to higher growth and higher margin areas. In Pharma and Specialty Solutions, we've been consistently focused on execution in the core and expanding in Specialty. This quarter, we made further progress on both fronts. We delivered strong operational performance across our distribution network. During the quarter, we achieved multi-year highs in productivity and our service levels reached their highest level in over a year. A key part of our ability to maximize service delivery for customers is our Generics program. Red Oak continues to effectively execute its dual mandate, managing both cost and available supply, which supports the positive volume growth and performance that we've seen and continue to expect. On the business's commercial front, we've seen successful renewals and extensions of key customers in a couple of recent customer onboardings that have gone smoothly due to our team's continual customer focus. In Specialty, we've seen strong continued momentum, both downstream and upstream. We're thrilled to have reached an agreement to acquire Integrated Oncology Networks, as we announced in September. Together, Cardinal Health and ION will continue to push forward in our joint mission to improve cancer care in underserved communities. We will drive innovation through the Navista and Specialty Networks platforms to offer community oncologists, who seek to remain independent, a suite of clinical and economic offerings to improve patient care and enhance practice performance. Integrated Oncology Network adds immediate scale to our offering. Across its 10-state footprint, ION's more…

Thank you very much, Mr. Hollar. [Operator Instructions] Today's first question will be coming from Lisa Gill calling from JPMorgan. Please go ahead.

Hi. Thanks very much, and good morning. I just really wanted to focus on the drug distribution side of your business, which had really great results. Just a few questions. First, when I think about the vaccine, thank you for calling out the revenue component, Jason or Aaron, can you talk about the margin? Is that materially better? Or is there something else that was driving the margin improvement when we think about the quarter? And then, secondly, when you called out the revenue improvement around Specialty, what we've heard from some of the managed care companies is that changes in IRA is potentially driving incremental volumes, especially around Specialty drugs and those changes will increase as we think about calendar 2025. So, I'm just curious as to how you're thinking about volumes there, margins there? So, just overall my two questions, and a single question would just really be around that segment, first being how to think about the vaccine and contribution to the margin? And then secondly, how do we think about what's happening on the Specialty side? Thanks so much.

Yeah. Thanks, Lisa. And I'm glad you asked that question first, because that's, I think, very much the highlight of this quarter is what's driving the Pharma segment. We gave a lot of color in the script, but let me go a little bit deeper and just put some additional commentary to -- behind it. It was a strong quarter for the Pharma segment and you referenced a couple of the key components and I'll get into those, but let me just kind of back up and talk about the key drivers overall, because what you're going to hear from me is, there's not any one thing in particular that drove this success this quarter. I'll bucket it into three key buckets. First of all, and I think it's the essence of your question is, we did see very strong and very broad demand utilization across various customers, across various products, classes of trade, really all corners of the Pharma business was strong from utilization perspective. Again, whether we're talking about Brand or in Consumer Health or Generics, you call out Specialty, within Specialty, we saw strength in distribution as well as Biopharma Services -- Solutions. And so, we have, across that spectrum, some really good strength. Specifically with COVID, yes, the volume was stronger this quarter, because the FDA approval, of course, was about a month earlier than last year, so September 11th last year, middle to late August this year. So, we had -- the peak of COVID volumes clearly was in Q1 this year, it was clearly in October and Q2 of last year. So that is a difference. However, I would highlight that the actual contribution to year-over-year earnings for the Pharma segment was a small tailwind, a slight tailwind associated with COVID, so higher and…

Next question, please.

Yes, sir. The next question will be coming from Michael Cherny of Leerink Partners. Please go ahead.

Good morning. Thanks for taking the question. Maybe I'll try a similar approach to Lisa. One question with a couple of pieces tied into it. I just want to bridge the gap on the 300-basis-point uptick in Pharma guidance for the year. Is there any way -- I mean, Jason, I heard you talk a lot about utilization improvements, but any way you can give us a sense of what were the biggest drivers that led to the full year improvement? And specifically within there, you mentioned the COVID headwind being modest year-over-year. I just want to make sure it's the same level modest? And then, anything you can say on GLP-1 economics, whether that played any role in the guidance uptick or not? Thank you.

Great. Good morning. Happy to talk and provide some perspective on the updates to guidance for Pharma. And of course, starting where Jason left off, we are really pleased with the Q1 performance, leading to the raised for a guide to actually to our long-term target of 4% to 6% in profit growth for the year. It's really driven by the strength and the resiliency of the business in Q1 that we see continuing as we carry forward. Now part of this is just execution. You heard Jason referenced the strong broad-based demand, right? That certainly assists in the raise to our guidance. It's also the case that, as we walked into Q1, we were very focused on how are we going to execute as part of the customer transition. And the good news is that we managed -- the team managed that very well, both from an income statement perspective and from a working capital perspective. The impact that we were anticipating in Q1 was offset by significant simplification. We got more done there than we had anticipated, especially networks contributed, the new customers, you heard me say we've started to onboard those as well. And so, the pieces are really coming together, helping to give us more confidence then as we carry forward through the year as well how the offset of that business will continue. Now, our guidance assumes consistent market dynamics in our Generics portfolio. We saw strength in Q1 in Generics and we anticipate those consistent market dynamics are continuing. Our guidance also continues to see increased contributions from Brand and Specialty Products. I won't repeat what Jason just had to say about that category. COVID-19, we did guide at the start of the year, and indeed, our guidance continues that it will be a…

Next question, please.

Our next question is from Erin Wright of Morgan Stanley. Please go ahead.

Great. Thanks. Yes, Pharma was strong, but I do want to ask on medical here. So, how do we think about the quarterly progression in medical at this point for the balance of the year? And then, how are you thinking about kind of just underlying demand trends, excluding some of those dynamics that you were talking about in your prepared remarks, but just underlying utilization across that medical segment? Thank you.

Appreciate the question. Let me offer some perspective on both the quarter and the year as we carry forward. I want to start with the headline that we are still in the fight to hit the $175 million. That was our original guide for the year. And it is absolutely the case that we continue to make progress against the GMPD Improvement Plan and our fiscal '26 target of $300 million, which is unchanged notwithstanding the results in Q1. We did update our guide for the year to be $140 million to $175 million, primarily reflecting some unanticipated health and wellness costs. And just a little bit more context on that, at the enterprise level, that was around $45 million. I think I called out about half of the $91 million increase in overall SG&A. About a-third of that was an error by our actuaries tied to in prior years. The rest was tied to a notable increase in the number of claims as well as a notable increase in the cost per claim at an unusual level for us. That's really what was driving the Q1 performance. We were otherwise quite pleased with the GMPD progress against the plan, the tenacity they showed, and continued to find additional opportunities to help drive the plan. Now, the health and wellness challenges, we aren't anticipating they'll be at the same level in Q1, certainly given the breakdown I just gave you. They will modestly carry into Q2, but the team continues to accelerate as we knew they would, as we planned they would, against the execution of the GMPD Improvement Plan for fiscal '25. And we are seeing increased contributions from the plan initiatives. The mitigation of the supply chain cost inflation is well within progress, right? Significant year-over-year growth from the fiscal '24 inflation mitigation that we've already experienced. We are anticipating the Cardinal Health Brand revenue growth will continue following the 3% fiscal '24 revenue growth there. And the team has proven very tenacious in finding additional ways to simplify and cost optimize their business as we carry forward. From a cadence perspective, the cadence for our guide remains unchanged from our prior guidance. We have always said the plan -- the GMPD Improvement Plan will be back-half weighted, and indeed that continues. There's no change to the overall seasonality of the business from what we've described previously, but we are expecting sequential improvement quarter-over-quarter as we push ahead.

The only thing I would add is, there's an element of utilization, I think, in your question, Erin. You certainly didn't see the same level of strength on the medical side that we have seen on Pharma products. But with that said, it's fairly consistent utilization than what we've seen more recently, historically in the last year or two. So, we're not seeing big changes there, which to me is partly positive just given you think about all the macro factors and the hurricanes and, of course, the disruptions with saline, that we're not seeing big changes. Some smaller health systems we do see there being some deferral or cancellation of some procedures, but overall we've not seen wide aspects throughout the industry on that. So, cautiously optimistic that we as well as our customers are doing a fantastic job of managing through some disruptions that at this point we don't see materially impacting underlying utilization.

Next question, please.

Yes, sir. The next question will be coming from Eric Percher of Nephron Research. Please go ahead. Your line is open.

Thank you. A question on Pharma. We heard some commentary from manufacturers of GLP-1s on inventory fluctuation and I'd expect that the DSA agreements do not allow you to build inventory and Pharma has pretty good visibility. So, can we check that assumption? And then, relative to GL1 -- GLP-1 inventory, have you been able to optimize as growth stabilizes and was that at all a factor in improving cash flow?

Yeah. So, I'm aware of some comments on GLP-1 inventory. Obviously, can't speak for the broader industry. For us, specifically, we manage this very closely. You can imagine that there's a lot of volatility in terms of strong demand, supply that does not meet that demand. So, we're managing it at a very detailed manual level. And we have seen very static levels of inventory, relatively low levels of inventory that have not fluctuated much at all over the last several quarters, relatively low levels of inventory, certainly. But it is our practice, our priority to get this product in the hands of our customers, and ultimately to patients as quickly as possible. So no, we have not been changing our levels of inventory in any meaningful way whatsoever. And as it relates to our -- the impact on our underlying financials, it is 5% of that 16% Q1 revenue growth. So, it was certainly meaningful to our top-line. And still that implies strong growth ex that GLP-1 impact. But as we've always said, it is not a meaningful driver of our earnings and that continues to be the case and is not a significant driver of the financial results other than revenue for this particular quarter. And given the inventory is now fluctuating, is also not a significant driver of our cash flow.

Next question, please.

The next question will be coming from Allen Lutz of Bank of America. Please go ahead.

Good morning, and thanks for taking the question. One for Aaron. The gross margin, really nice improvement year-over-year. Obviously, you're getting some type of benefit there from losing a low-margin customer, but is there any way to frame the puts and takes on the gross margin line excluding that contract change? Thanks.

Actually, I'm going to take that one first. I know you give it to Aaron. I'll let him talk after me, but I'm the one that made a lot of statements on this before Aaron arrived and after he arrived. So, I did not -- when gross margin rates were lower year-over-year, I always highlighted that's not how we manage our business. We manage our business on gross margin dollars. And so, I'm not going to take credit for gross margin rate improvements when we lose a low-margin large customer. So, I appreciate the fact that we like the direction of those metrics and, all things being equal, I would love to have higher margin rates, especially if revenues are growing higher, but in a business like this that has negative working capital, very slim overall margins. What's important is how we manage the balance between our SG&A and our gross margin. And that's -- this is another great example of at this point quarter that regardless of the gross margin rate, we managed gross margin dollars higher than our SG&A increase and that's what keeps this model working the way it is and that's what we're going to continue to be focused on. We'll celebrate the margin rate increases, which are largely driven by the cost reductions and the mix benefits and having more higher-margin customers, fewer lower-margin customers, but it's not a model change, and that's the key thing I want to get across. And I just realized I probably took all your talking points, Aaron. Anything to add?

I thought that was incredibly well said, Jason.

Okay. Thank you.

Next question, please.

We will now move to Kevin Caliendo of UBS. Please go ahead.

Thanks. I appreciate you taking my question or questions. So, I just want to make sure there's been no necessarily any change in GLP-1 economics going forward at all. That's not driving in any way the change in guidance for the full year. And two, sort of secondarily, one of the infusion companies who reported this week suggested that STELARA pricing, brand pricing was going to get cut come 1/1/25 when biosimilars came. And I'm just wondering, I know part of that's infusion, part of that is subcu, but I'm wondering if a brand company lowers price to sort of a lower level, how does that impact you? Does this potentially impact you in any way? Can you just talk through the economics of how that would work and potentially impact you, if at all? Thanks.

Sure. Yeah. No, the GLP-1 economics, I think I basically answered that one before, so I don't think there's much else to add there. It's not a key part of the change. Again, I highlighted that broad strength and I didn't even mention GLP specifically when I was talking about the key drivers there. Again, we love innovation. We think that's great for the industry. It's great for us, it benefits -- we like the volume, it helps allow us to be even more efficient and things of that nature. But it's not something that specifically drove the underlying strength that we saw in all those other areas that I highlighted. So, it's a component, but it's definitely not the driver. In terms of the STELARA comment, this is not new when it comes to price changes that we see in our industry, the model continues to work in the way that makes sense for us. We basically operate on a fixed fee basis for our service. And that concept was recently tested yet again with insulin and those dramatic price reductions that we saw at that point. And not only us, but our peers, you didn't hear us talking a lot about that type of flow through. So, we continue to believe that we are by far the best alternative to delivering these products safely, securely and efficiently in the marketplace. And when the price levels change, the dollar fee we get for those prices from -- to stock and support on the manufacturer side is unchanged. We provide the exact same service and expect to get the exact same financial compensation for that. So, we continue to expect that model to continue to evolve. And whether you're talking about, again, insulin or STELARA, you also have all the IRA products that will happen in phases over, well, the future. And each of those cases, we would expect that model to continue to hold given how we have structured that today and how we'll continue to evolve with it.

Next question, please.

Our next question will be coming from Eric Coldwell of Baird. Please go ahead.

Thanks very much. Good morning, and congrats on the good performance here. I had a couple, just quick ones on GMPD. I just want to confirm that profit in the segment would have more than doubled, it looks like, if not for the unexpected increase in health and wellness costs. And just so I guess a confirmation on that. And then, is it possible to size the incremental manufacturing costs as you build out the syringe capacity in the US? And also talk about what you're seeing with international costs across other products? We're hearing some suppliers might be raising their costs as we're seeing some of these China tariff knock-ons and then some of the other limitations to China product coming into the US market for other reasons. So, I guess, a multi-fold question around GMPD, but anything you could help us size what -- if there is such a thing as underlying profit growth, ex health and wellness and ex the increase in manufacturing cost would be helpful. Thanks.

I appreciate the questions. A couple of quick responses. First, your math is, no doubt, correct. Where if you add the $17 million headwind from health and wellness to the $8 million delivery, that would put you at mid-$20-million-s profit delivery on an operating basis for the business, ex that one adjustment. And then broadly the quantification or the estimation, if you will, of the manufacturing costs, it was a similar dollar impact to the health and wellness impact in Q1.

Yeah. And on your last part of your question related to costs, you're referencing products coming out of China, you're really getting at the tariffs that are going to go into place here beginning in January and then rolling out later. So we -- let me make a broad statement about it that I think is consistent with how to think about it in the short term. We have a very diversified supply base, but it's -- given it's diversified, it's not entirely in the US. We've highlighted about half of our Cardinal Health Brand products come from North America, which does include a decent amount coming out of Mexico as well. But we use some degree out of China, less than 10% sourced out of China. We don't manufacture anything in China, but we use Southeast Asia. We use Latin America quite a bit as well. And like I mentioned, US and Mexico. So we have a very diverse supply base that has served us fairly well. We had challenges, of course, during COVID when perhaps too much was in Asia and we continue to migrate that. But when you add tariffs on top of it, that is something that will raise costs, there's no doubt about that. It will mean that we will take it from the economically optimal location to one that's less optimal and that will raise costs not only for us but throughout the industry. And you know our margins, you know the margins in this space that -- if there's a 10% across the board type of tariff that will have to flow through in some way. We will do everything we can to keep that from flowing through entirely to our customers, but there will be some impacts that will have to be absorbed. So, your commentary around some data points that we're already seeing it for these very short lists of products, namely syringes and PPE that's occurring here in the near term, I think is representative of that. Those are products that are largely sourced out of Southeast Asia and especially into China. And you are seeing some pricing changes that are coming through the marketplace anecdotally. And we think that makes sense, because the low-cost alternative is being impacted with a higher cost and that will have to flow through the supply base. Of course, we're working on solutions to minimize that impact, but I think it's something that should be expected that there will be price increases.

Next question.

We'll now go to George Hill of Deutsche Bank. Please go ahead.

Yeah. Good morning, guys. Thanks for taking the question, and I hope you'll forgive the joke, which is I have just one question but in 27 parts. But actually a lot of the questions that I'm getting this morning from investors focus on the Pharma OP outperformance in the quarter. And Aaron or Jason, I was wondering if you guys would either just maybe attribute kind of vaccine versus it sounds like GLP-1s weren't much versus generics and other. And you guys called out the Generics program, where we've seen kind of an increase in some generic drug prices and we've seen an increase in generic drug shortages, which we both tend to think of as being able to contribute to Pharma margins. So, again just like outperformance kind of vaccines versus other, and would just kind of love your -- hear your commentary on what's happening in the generic drug market as it relates to pricing and shortages.

Yeah. I can kind of force rank. I mean, what we put into our comments and what's in the presentation, you can see that our Brand and Specialty Products together are the greatest drivers. Within that, both Brand and Specialty were good drivers. Again, I'll say it again, the vaccines were a slight year-over-year increase. I think we quantified before last year that it was about $25 million of profit in the quarter. It was a little bit higher than that, but it's not the driver of it. Generics was notable. It's not as large as Brand and Specialty, but it was also a driver of it. And that's why I answered the question the way I did is that, we're seeing strength in utilization across the board and we had strong operational and cost performance as well. That was a nice tailwind, more simple operating environment, of course, this particular quarter. Even though we had a lot of change, we managed to do that very well. But that's the best I can do, given -- and again you can do the math with the revenue growth highlights. It was pretty good revenue as well with 16% ex the customer transition, 5 percentage points of that being GLP-1. So, still quite strong kind of core revenue growth, which translates into all those categories I referenced.

So, one thing I would add is, we did -- as we usually do, we called out the fact that Generics program had consistent market dynamics, which you should really take as the sign that we saw good volumes there, because there's nothing extraordinary happening on the buyer. So, we managed these two sides together.

Exactly.

Next question, please.

Next question will be coming from Stephanie Davis calling from Barclays. Please go ahead.

Hey, guys. Congrats on the quarter, and thanks for taking my question. I've got one that kind of dovetails what Eric asked. I was hoping to hear how you're thinking about the puts and takes of the potential election outcome, since you could have some easing M&A risk for Pharma, there's potential tariff risk in GMPD, just kind of your broader thoughts there would be helpful. Thank you.

Sure. Well, I think the first thing I would think about is, the good news is, I think most people in DC believe that affordable access to healthcare is really important. And when you've heard me talk about any of these topics, I talk about we love affordability, we love transparency, we love access, because ultimately that drives the utilization for the right products to solve those patients' needs, which just helps us be an even better provider to those that ultimately provide those services to the patients. So, I don't see that at the highest level. There is a difference in wanting what's best for the patient. Of course, there's different ways to get there. You've heard my commentary already today about tariffs being something that could impact how prices flow through to the industry. And we see that our customers are already under a lot of reimbursement pressure and that's something that's certainly top of mind for us. But at the end of the day, there's a lot more not known about how that would flow through and how medical and pharma products would be included. That creates just some level of uncertainty with that. But ultimately in doing what's best for the patient is something that I think will always be the North Star. And we feel that we're very well positioned to work with either party, whether we're talking about the President or either of the other elements of Congress. So, we're in a good spot and we have a lot of momentum going into that and we don't foresee that changing in the near, medium or long term.

Next question, please.

We'll now go to Elizabeth Anderson of Evercore ISI. Please go ahead, ma'am.

Hey, guys, thanks so much for the question. Can you talk about the -- some of the simplification efforts? I think, I mean, obviously this has been a longer term trend for you guys. Where are we in that? How much of it was obviously driven by the contract change this quarter? But do we think about sort of the rest of the year and beyond to help us maybe think through that a little bit more? And then just one follow up on the Nuclear supply shortage timeline. Like, how do you see that evolving across the rest of the year in terms of like the potential timeline for that? If any kind of parameters you could help put on that would be helpful. Thank you.

Yeah. Thanks. As it relates to simplification, it's not any one particular business. This is very much a core part of our broader strategy. It has absolutely served us well and it's a bit cliched, but it is absolutely a journey and not a destination. So, I think that there's probably more opportunity relative to the size of the business for GMPD than there is for Pharma. But even within Pharma, this quarter I think highlighted that we can do some things I'm not sure we fully understood. So, there's going to be an ongoing journey here to continue to challenge ourselves and continue to find additional ways to be even more efficient. Throughout our whole enterprise, we don't use a ton of automation in all aspects of our business. We are absolutely testing and learning in different parts of the company that as we learn from that we introduced in other parts. So, I think, there's a lot of opportunity there within GMPD, whether we're talking about our distribution network or manufacturing. Manufacturing especially is always an area that's always going to have opportunity through automation, through new and improved processes. One little anecdote with this, it shows up in the financial numbers, all the efficiencies. We have had this last quarter fantastic safety metrics, something we don't often talk about, because it's not directly related to financials, but it's really important to our team and it just shows that our underlying processes are working incredibly well, much, much better than we have historically, which is driving improvements throughout the process. We've talked quite a bit about the investments we're making in at-Home. I referenced in some of my comments that we have best on record metrics this quarter, all the way from quality to service to efficiency to…

Just to put a pin in that, we have not changed our guidance for the full year for the other segments as a result of it. This was a timing or a cadence observation only.

Next question, please.

Yes, sir. Our next question is from Daniel Grosslight calling from Citi. Please go ahead.

Hey, guys. Thanks for taking the question, and congrats on the quarter. Just a question on GMPD, and really you mentioned the loss of a couple regions in the VA program. I was curious if, more broadly speaking, you're seeing an increase in the competitive intensity within this segment, specifically as one of your competitors is rumored to be going public soon? Thanks.

Yeah. My comments here will be the same as they've been in the past. It's a competitive, it's stable environment. That VA business you're talking about was relatively low margin, quite low Cardinal Brand products attached to it. So, it's something that we would have liked to have kept it, but at the same time there's not as much value associated with that as with other customers. So, I don't see that that's anything different than what we see within this space, just normal type of customer rotation.

Next question, please.

Yes, sir. The next question will be from Charles Rhyee of TD Cowen. Please go ahead, sir.

Yeah. Thanks for squeezing me in here. Just maybe a couple of quick clarifications. Jason, you kind of made a comment, I think maybe it's related to hurricanes about some deferrals and cancellations of procedures. Are you saying just those are just hurricane related and has distribution kind of -- everything kind of picked back up since? And then, also related to the healthcare high utilization costs, is that -- what are your assumptions for the level of utilization going forward? And is that already embedded into the guide? Thanks.

Yeah. So, to be clear, when I was talking about the hurricanes that was -- it was GMPD, and what I indicated was we're not seeing anything meaningful at all for that, that both us and our customers are managing it quite well. Utilization is -- what I was highlighting is that utilization is not as strong as on the Pharma side, but I wouldn't say that's because GMPD is weak. I would just say that because Pharma has been stronger. Which I think leads into the second part of your question, which is that we're guiding for a normal utilization type of environment. So, it would be more consistent with, as you heard from Aaron, our long-term guidance. That's basically effectively what -- when you normalize for the COVID timing and things of that nature, what we're guiding for in Qs two to four is much more normalized type of earnings growth, which would be consistent with a normalized level of utilization.

Next question, please.

Thank you, sir. Our last question today will be coming from Stephen Baxter calling from Wells Fargo. Please go ahead, sir. Your line is open.

Hi. Thanks. Just one last kind of cleanup one on the Pharma guidance. So, appreciate all the comments that the strength is broad based and there's some differences in cadence to keep in here. I guess when we think about the $16 million raise on the EBIT line, you're very clear that it's not driven by COVID. Do we think about this as largely just being the Q1 underlying favorability in the business, or should we think about this as the annualization of the favorability that you saw in the first quarter, assuming that strength is largely going to continue into the balance of the year? Thanks.

Yeah. And so, it depends on which pieces we're talking about. For the three elements that I talked about in terms of what's driving the growth of the business, the first element I highlighted was the underlying broad volume growth. And I highlighted that would be -- for our Qs two to four would be more normalized levels of growth. I also highlighted part of this quarter's favorability was favorable mix that some quarters as positive, some as negative, some as neutral. This particular quarter was more favorable. So that's the type of thing that normally does not continue one direction or the other. And then, of course, our ongoing cost reductions is the smaller of the pieces, but still relevant in all this. So, it's the combination of all that. But again, our guidance here anticipates a more normalized level. Except for that COVID piece will, certainly with pretty high confidence, we've seen COVID vaccines peak and come down now. We track this very, very tightly. It will be quite a modest impact headwind in the second quarter that's baked into this. But ex that, we expect more normalized levels of performance.

Great.

Thank you very much. As we have no further questions, Mr. Hollar, I'd like to turn the call back over to you for any additional or closing remarks. Thank you.

Yeah. Just thanks again for joining us this morning. Again, an excellent start to the year, showing our broad strength, resiliency, and momentum of our broad business, especially our largest, most significant Pharma business. We're pleased to be in a position to raise our guidance after only the first quarter and looking forward to continuing to give you more updates throughout the year. With that, thank you, and have a great day.

Thank you. That will conclude today's conference. Thank you for your attendance. We wish you a very good day. Have a good day, and goodbye.