Hello, everyone, and welcome to today's Cencora Q4 Full Year 2024 Earnings Call. My name is Drew, and I'll be the operator today. During today's call, there will be a Q&A session. [Operator Instructions] I'll now hand over to our first speaker, Bennett Murphy. Please go ahead when you're ready.

Thank you. Good morning, good afternoon, and thank you all for joining us for this conference call to discuss Cencora's fiscal 2024 fourth quarter and full year results. I am Bennett Murphy, Senior Vice President, Head of Investor Relations and Treasury. Joining me today are Bob Mauch, President and CEO; and Laz Krikorian, Senior Vice President and Chief Accounting Officer. On today's call, we will be discussing non-GAAP financial measures. Reconciliations of these measures to GAAP are provided in today's press release, which is available on our website at investor.cencora.com. We have also posted a slide presentation to accompany today's press release on our investor website. During this conference call, we will make forward-looking statements about our business and financial expectations on an adjusted non-GAAP basis, including but not limited to, EPS, operating income, and income taxes. Forward-looking statements are based on management's current expectations and are subject to uncertainty and change. For a discussion of key risks and assumptions, we refer you to today's press release and our SEC filings, including our most recent 10-K. Cencora assumes no obligation to update any forward-looking statements, and this call cannot be rebroadcast without the expressed permission of the company. You will have an opportunity to ask questions after today's remarks by management. We ask that you limit your questions to one per participant in order for us to get to as many participants as possible within the hour. With that, I will turn the call over to Bob.

Thank you, Bennett. Hi, everyone, and thank you for joining Cencora's fiscal 2024 fourth quarter earnings call. Before we get started today, I'd like to let everyone know that our CFO, Jim Cleary, has been under the weather for the past few days, after successfully and impressively completing the New York City Marathon. Jim is unable to join the call today, but he was part of preparing today's remarks, which will be presented by our Chief Accounting Officer, Laz Krikorian. We wish Jim a speedy recovery and I know he is looking forward to engaging with everyone in the coming weeks. It's a pleasure to be speaking with you today for the first time since assuming the role of President and CEO of this incredible company to discuss the strong results our global enterprises delivered this year, including growing our adjusted earnings by 15%. I'm honored to take the helm of a purpose-driven, growth-oriented business with an unparalleled portfolio of customers ranging from pharmaceutical companies to healthcare providers across continents. I'm focused on continuing to execute our strategy while amplifying the things within our culture that have made us successful. In fiscal 2024, Cencora continued to benefit from the strength of our customer relationships, the capabilities of our business, our international footprint, and the collective expertise of our team members. This year, we made important progress by investing in our core distribution infrastructure, deepening strategic partnerships, leveraging data and analytics, and continuing to build on our strength in specialty. Specialty has been a key differentiator for Cencora for decades and specialty pharmaceuticals are now everywhere across our business, an important part of almost every customer relationship. As we engage with customers, they are focused on specialty products and how Cencora can help them. This is true for physicians, health systems,…

Thanks, Bob. Good morning and good afternoon, everyone. It's an honor and a privilege to fill in today as Jim continues to recover. We all know Jim, so we all know he is listening to the call right now and I will try my best to do him proud. Before I turn to a review of our fourth quarter and full fiscal year results, as a reminder, my remarks will focus on our adjusted non-GAAP financial results unless otherwise stated. For a detailed discussion of our GAAP results, please refer to our earnings press release and presentation. Throughout fiscal 2024, Cencora has demonstrated our ability to capitalize on the opportunities presented to us by our pharmaceutical-centric strategy, long-lasting customer relationships and robust solutions. And the fourth quarter was a continuation of our momentum as we finished the year strong. Driven by the strength of our business and execution of our team members, we delivered adjusted diluted EPS of $3.34 in the fourth quarter, representing a 17% increase compared to the prior year quarter and full fiscal year 2024 adjusted diluted EPS of $13.76, a 15% increase compared to the prior fiscal year. Turning now to an in-depth review of our fourth quarter results compared to the prior year quarter. Consolidated revenue was $79.1 billion, up 15%, driven by growth in both reportable segments as the US Healthcare Solutions segment continued to see strong script utilization and the International Healthcare Solutions segment benefited from growth at our European and Canadian businesses. Now moving to gross profit. Consolidated gross profit was $2.5 billion, up 7% due to gross profit growth in the US Healthcare Solutions segment. Consolidated gross profit margin was 3.1%, a decrease of 24 basis points compared to the prior year quarter due to higher growth in our US Healthcare…

[Operator Instructions] Our first question today comes from Lisa Gill from JPMorgan. Your line is now open. Please go ahead.

Thanks very much. Good morning, Bob, congratulations. I talked to -- I listened to you talk a little bit about your strategy. You talked about the incredible foundation built on the strategy, the strength of the strategy of the company. Obviously, we're waking up today, we have a new President going into 2025. Maybe just spend a couple of minutes talking about how you think about maybe the first year as CEO of the company, anything changing from your perspective now that we do have a new President and it looks like it will be a Congress that will most likely be Republican. So any changes there would be kind of my question and really just trying to understand how you're thinking about that. And then just secondly, I really just want to understand if we're seeing any changes from the volume changes in IRA. So, you talked about strong results in the quarter around volumes, and just curious if you guys are seeing anything from that perspective.

Hey, Lisa, thank you very much for the question and the kind words. Yeah, I'll start with, just the first 30 days or so in this new role have been absolutely amazing. I want to start with a -- just a sincere thank you to the Cencora Board of Directors for having the trust in me to take on this role. And as you mentioned and as I mentioned in our prepared remarks is, we are an incredibly strong enterprise and company. And what we're going to do is continue to execute. And you see in our results through 2024, the execution of both our operational strength, as well as our strategic execution, and that leads to the announcement of RCA today. So, as I've talked about and I want to be clear here today is our strategy does not need to change and we will continue to execute upon that. We're well positioned and we think our focus areas are the right ones. However, that doesn't mean, status quo or complacency and there's a lot of work to do. It's a dynamic market. And so, we are doing things in terms of amplifying strengths that we've already had. And I mentioned, we're working on our talent all the time in the enterprise leadership team, we've elevated our commercial leaders to make sure that we have the voice of the customer at the table all the time. We've added new leaders in our technical and IT area, as well as strategy and M&A. And we'll continue to work on enhancing our talent as we continue to execute. I think as it relates to policy in general, I think we have a long history of working through multiple administrations and Congresses and different views on healthcare and pharma. And as we always said, and I feel very confident about this now is we'll be at the table, we'll be working with anyone who's in charge of health policy in the United States and on a global basis, and we'll make sure that we're there to be a supportive partner and that whatever comes our way will be manageable and will help our customers, pharma customers and provider customers navigate through that. Thank you for the question.

Our next question comes from Michael Cherny from Leerink Partners. Your line is now open. Please go ahead.

Good morning. Congrats on the quarter. And, Bob, echoing Lisa's comments, welcome to your new role. I know you're obviously a long-timer here, but congrats on the transition. Maybe if I could just dive in, I guess, two-part question come together. First of all, I know you highlighted a number of the headwinds you have this year from a year-over-year basis as you think about the COVID comp. Is the loss of the customer contemplated specifically in guidance, whether they leave or not? Just trying to get to the baseline growth, which definitely seems stronger than the 5% to 6.5% on underlying basis. And along those lines, when thinking about specialty in particular, given your market leadership there, how do you think about the moving pieces across the market with regards to specialty inclusive of expectations for biosimilars, the impact we're seeing from changing benefit design with IRA? Curious how that all factors into your expectations across the US Healthcare segments relative to the specialty contribution. Thanks so much.

Sure, Michael. Thanks. This is Bennett, and I'll take that. So as we look at 2025, we're expecting that the US Healthcare Solutions segment operating income will continue to benefit from the pharmaceutical utilization trends that we've seen growth in key markets, including specialty as you call out, which helps to give us a really strong base moving into 2025 or 2024. And more than offsetting COVID-related headwind, as Lazarus talked about, including the potential loss of an oncology customer, which is factored into our 2025 expectations. What I would say, and you didn't necessarily specifically ask it, but I would say is that, we were guiding without that headwind from vaccines. The top-end of our US Healthcare Solutions operating income guidance range would be 8%. So as I said, I'll say that again, just to be clear, without the headwind from commercial COVID vaccines, the top-end of our US Healthcare Solutions segment operating income range would be 8% instead of that 6.5%. Next question, please.

Our next question comes from Elizabeth Anderson from Evercore ISI. Your line is now open. Please proceed.

Hi, guys. Thanks so much for the question. And, Bob, congrats again on your first quarter as official -- officially. And maybe could you talk a little bit more about RCA and sort of how you think about sort of your MSO capabilities more strongly? It's obviously an area that you've been investing in and maybe gets a little bit less like air time than some of your other businesses. So maybe talk about that and what is their leverageable from other strategy you -- strategies you currently have and sort of capabilities, that would be a little bit helpful to hear more about that. Thank you.

Yeah. Thanks, Elizabeth. Thank you for the warm welcome and happy to discuss such an important part of our strategy going forward. So yeah, we're very interested in the MSO space. And the reason is at least two-fold, but I'll give you two. One is, it's clearly in line with our support and interested in being in the forefront of the specialty pharma market, right? So where those products, the innovation of those products are coming to market, we expect to be helpful and involved across our entire business. So across the entire portfolio of customers and geographies. When you bring it to the specialty physicians, the MSOs are really in line with what we have done at Cencora over decades. So if you think about how we operate, we have in many cases built capabilities to support community providers. And MSOs are an excellent way to support community [physicians] (ph). We do it in other segments, and I'll use Good Neighbor Pharmacy as an example. It's not an MSO, but it certainly is a large suite of services that supports a community provider. So it's right in line with our strategy in terms of specialty focus, but it's also something that's very consistent with what we've done over a long period of time in terms of investing in solutions that support those community providers. And as I said in the prepared remarks, it's not getting easier for community providers and specialty providers at all. So the need for a large at-scale support system through the MSO and through Cencora's ownership of the MSOs, we think, is the best chance of making sure that, that very cost effective site of care is there for patients when they need it.

Our next question comes from George Hill from Deutsche Bank. Your line is now open. Please go ahead.

Yeah, good morning, guys, and Bob, welcome to the call. I'm going to get kind of way out, like, look a little further out thinking about the acquisition today and your guys' presence in oncology. And Bob, as you kind of look forward to like the impact of the IRA changes and the impact it could have on Part B drug costs and the profitability of practices that dispense a lot of drugs. I guess, is it too early to think about that because there's still the opportunity for legislative change or kind of how are you guys thinking about how you support those practices given the headwinds that could come from IRA? And again, I recognize I'm talking about something that's two years away, maybe two years plus, but kind of would love any preliminary thoughts on that.

Yeah, George, thanks. Thanks for the welcome and thank you for the excellent question. So I would say it's not too early to think about that. So we have been thinking about IRA and modeling a wide range of scenarios of impact for IRA in Part B. And I'll jump to the end of that as we feel that in -- across all those scenarios, that is something that will be manageable for the providers and therefore manageable for Cencora. Again, as you say, we don't really know what the impact will be in Part B and Part D, we're seeing that impact is really in reimbursement and not in list price. So it remains to be seen, but we do think about it. We have a team -- teams of people who are always focused on these things. And as we look forward, not only with the RCA acquisition, but also our relationship with OneOncology and other customers that this is something that through innovation in the long run that this will be something that's not necessarily negative for the practices.

Our next question comes from Eric Percher from Nephron Research. Please go ahead.

Thank you. Again, congrats to Bob. And I want to get a bit more specific on the specialty trend. I think we're hearing from payers that they're seeing a 3Q uptick and some of it is attributed to Part D. We also heard about commercial and seeing in specialty pharmacy. My question is, are you seeing an uptick in Q3 versus first half where you're serving specialty pharmacies, we tend to think of that as lower margin specialty. And then you called out strength in specialty distribution, a higher margin piece with providers and health systems. You've called that out in Q1 and Q2. Is there an acceleration you saw in 3Q or is that simply continuation of the trend?

No, I would say, and once again, this is Bennett and of course, I appreciate using calendar quarters in your question, but I'll refer to fiscal quarters in my answer in that the fourth quarter we saw similar trends as we saw throughout fiscal '24, and honestly for the past several years. So we've had the specialty market, particularly for physicians and health systems, has been a key component of a -- key driver of our growth for a while. It's a really important segment. It's a part of the market where we play a really important role and add a lot of value. But no, we are not representing this as a deviation. It's a continuation of the good trends that we've seen for a while. Thank you, Eric.

Our next question comes from Daniel Grosslight from Citi. Your line is now open. Please go ahead. Daniel, your line is now open. Please go ahead. We're getting no audio from Daniel. So, I'll move on to the next question from Stephanie Davis from Barclays. Please proceed.

Hey, guys, thanks for taking my question. And Bob, official congratulations on taking the seat. I wanted to dig in a little bit more on the RCA transaction as it's a sizable move into other ologies outside of kind of your core onc focus. So with that in mind, can you walk us through your specialty roadmap, any other verticals to watch or any opportunities on the checklist such as RCA's clinical trial strength that you're hoping to kind of shore up? Thank you.

Hi, Stephanie, thank you for the question and for the congratulations. Yeah. So when we look at specialty expansion beyond oncology, we're looking for a couple of things. We're looking for continued growth and innovation in that market and also the Part B components that are there that we can support. So the obvious one for Cencora is oncology, and that's where we've been for a very long time. And I'll also note we've been a leader in Retina for a very long time. But I'll come back to that. But then you saw that we added urology as part of OneOncology. So we do have a view and a strategic approach to where we would look at other specialties that that would fit. And certainly, Retina is one. And again, we have a long history, a leading role in the retina specialty distribution space. We have a real belief in the continued growth and innovation in that market. RCA is best-in-class. They are world-class clinicians, world-class researchers. And we feel really good about the decision to expand our investment in Retina.

Our next question comes from Kevin Caliendo from UBS. Your line is now open. Please go ahead.

Thanks for taking my question. And, Bob, again, congrats. I want to take this a little bit further on the RCA stuff because there's been a lot of oncology deals done recently. It feels like there isn't maybe as much opportunity there. You are already a leader in retina, as you said. Is this a stepping stone? Is ophthalmology going to be the next sort of roll-up for you? Like, how big is the opportunity here relative to what was the opportunity in oncology? And is there anything to maybe read through in terms of expectations around biosimilars in this space or any other, like, is there analysis done where you're looking at the growth of the market or the drug opportunity in that market evolving favorably for you is also a reason to get into this?

Yeah. Thanks, Kevin, for the excellent question. Yeah, when it -- as it relates to RCA, what we've said in the prepared remarks, and I'll just repeat now, is RCA is the market leader here. So we're investing in a platform in Retina that we expect to continue to grow. They will grow by adding additional physicians and they will grow. Through the second part of your question, is we do have a strong thesis on the strength of the pharmaceutical pipeline in Retina and that includes biosimilars coming to market, but also, new innovation that will be coming that will help improve patient outcomes. And again, this is where the clinical excellence of RCA is really important and also the clinical research capabilities that they have because RCA is not only treating the end patient at a very large scale, but they're also a very key player in making sure that the clinical trials are done and that the patients have access to those trials and therefore getting those newer products to market.

Our next question today comes from Eric Coldwell from Baird. Your line is now open. Please go ahead.

Thanks very much. Well, I had a bunch of RCA questions too, but I'll try to make those brief. Just quickly on ophthalmology, specialty products or maybe the category overall, you're half of one of the leading manufacturers' distribution volume. Is that a similar share across the entire market? Are you half of the specialty market in ophthalmology?

Yeah. So as Bob said, we are a leader in that space and that we've the part of the market that we've been in for a long time and we feel really good about not only our position and the fact that we have really know RCA quite well because they've been a customer for some time. And as Bob said, they're a leader in the space. And just to repeat, it's a market that while I know that there's been a lot of focus on oncology, but for Cencora, retina and ophthalmology have been a key driver of growth along the way as well.

Our next question comes from Erin Wright from Morgan Stanley. Your line is now open. Please go ahead.

Thanks. Could you speak a little bit to World Courier? Just give an update on fundamental demand trends across that business and customer base. And then, yeah, going back to sort of a little bit of an RCA question or related is on how do you balance investments in terms of an MSO type of investment versus a more direct relationship with like biopharma and life sciences partners -- partnerships? I know it's all kind of intertwined but curious kind of how you think about that. And then just one quick one on just customer relationships. Just your guidance for the year, you addressed COVID and FCS, but, you recently renewed your Express Scripts Cigna contract. How would you characterize the relationship there and any sort of changes in as well as your relationship with Walgreens? Thanks.

Sure. So you rattled off a couple there and I'm going to try and make sure that we hit them all. I'll start with the Express Scripts one. No change there. A continuation of a good relationship with them. World Courier, that market continues to have some softness stemming from clinical trial development. But that being said, still it's a good growing business and you saw that in the quarter. I'll stop and push -- hand it over to Bob to talk a little bit about the Walgreens relationship.

Yeah, happy to. And, Erin, I'll probably touch on the broader kind of biopharma focus there for a second here because it leads on to the World Courier. I'll emphasize the point that Bennett made. World Courier is a terrific business, a leading business, and it leads in clinical trial logistics. So to the extent that, clinical trial volumes continue to be down, even though they're beginning to grow, they're still down significantly from a peak in 2021. We feel great about the business. And as I said in the prepared remarks, we're very well positioned as that market comes back both in World Courier and PharmaLex. Walgreens is a critically important strategic partner to us. We've had a long productive history together, which continues and we -- as we've said for a long time and continues now, we spend a lot of time with the Walgreens team. I would say continuously. And during that time, we're talking about what are things that we can do together to drive our businesses forward, how can we create more efficiency, what are new programs that we can develop together that are helpful to both companies. So we're very engaged in that. We're committed to making sure that for Walgreens and for all of our customers, one of the things that I tried to be intentional about saying is that, our intention is to really understand the strategies of our customers and then align the resources of Cencora to support those strategies. And so that's true for Walgreens and our other customers as well.

And [indiscernible] you did write off a bunch there. So I want to go back to one you asked about this versus biopharma services. I think if you go back and look at our past disclosures and past discussions on the strategy and our strategic focus, we've always talked about looking for ways to build on our strength in specialty and to add to our services and solutions for manufacturers. And that was clearly exemplified by our OneOncology investment and also our acquisition of PharmaLex, which remains a key long-term asset for the business. And I would say that RCA really hits on both of those and that certainly it helps build on our leadership in specialty, but it also helps build on our value proposition to pharma, given the clinical research work that they do.

Our next question comes from Allen Lutz from Bank of America. Your line is now open. Please proceed.

Good morning, and thanks for taking the questions. There was a really nice revenue acceleration quarter-over-quarter. And Bennett, you mentioned that it didn't seem like that was coming from specialty accelerating. So I guess the assumption that we have here is that that's mostly driven by GLP-1s. But is there anything outside of that piece that's worth calling out around that sequential acceleration of top line growth in the US Healthcare business? Thanks.

Yeah. Hi, Allen. This is Laz Krikorian. So we definitely talked about GLP-1s. We continue to see strong growth in the GLP-1 class as sales of those products in the quarter increased 55% year-over-year and 14% on a sequential basis. With respect to specialty products and distribution, we continue to see strong growth rates there as well, and they certainly were continuing to drive our top line growth.

Our next question comes from Charles Rhyee from TD Cowen. Your line is now open. Please go ahead.

Yeah. Thanks for taking the question. Kind of an RCA question, but maybe more broadly about the MSO strategy. Obviously, Senator Warren had written a letter kind of expressing some concerns about distributors owning group practices or owning these MSOs. Can you talk about sort of your thoughts on that and your response? And then secondly, maybe what is the real benefit to owning the MSOs for you beyond just at the distribution? Is it really just a services business that you want to provide for physicians? Maybe just expand on sort of that aspect of it. Thank you.

Yeah, thanks. This is Bob. I'll take that. Good questions. First of all, I'll start with we have utmost respect for the process that any governmental agency will go through to look at this and any senators who want to weigh in, we're happy to participate and be helpful there. As always, that's our orientation to these. To your question specifically, though is, we view the MSO model as a way to really support community providers. And as I said earlier, that's core to what we've done over decades. The community providers are generally a cost-effective -- a more cost-effective side of care. They're also in many cases more accessible to patients. So we believe our ownership and participation in the MSO space at the end of the day enhances patient access, enhances cost effectiveness of healthcare, and allows Cencora to continue to support these very important providers.

That concludes our Q&A session for today. I'll now hand back over to Bob Mauch for closing remarks. Thank you.

Thank you very much. Thanks all for the excellent questions and for the kind welcome. Again, I'm honored to be in this position. It's an incredibly strong company with an amazing culture, an incredible portfolio of customers, services, and geographies. We're very well positioned and we're going to continue to execute both operationally and strategically. So thank you all very much for your time.

Thank you all for your participation on today's call. That concludes the call. You may now disconnect your line.