Cardinal Health Q2 2024 Earnings Report

Cardinal Health EPS Results

• Actual EPS: $1.82
• Consensus EPS: $1.56
• Beat/Miss: Beat by +$0.26
• One Year Ago EPS: $1.32

Cardinal Health Revenue Results

• Actual Revenue: $57.45 billion
• Expected Revenue: $57.02 billion
• Beat/Miss: Beat by +$428.42 million
• YoY Revenue Growth: +11.60%

Cardinal Health Announcement Details

• Quarter: Q2 2024
• Date: 2/1/2024
• Time: Before Market Opens
• Conference Call Date: Thursday, February 1, 2024
• Conference Call Time: 8:30AM ET

Cardinal Health (NYSE:CAH) is a multinational healthcare services and products company headquartered in Dublin, Ohio. Tracing its roots to the early 1970s, the company has grown into a major provider of supply chain and distribution services for the healthcare sector. Cardinal Health operates across a range of service lines that support hospitals, health systems, pharmacies, physician offices and clinical laboratories.

The company's core activities include the wholesale distribution of branded and generic pharmaceuticals, the supply and distribution of medical-surgical products, and the provision of logistics and inventory management solutions. Cardinal Health also offers specialty services for pharmacies and health systems, including medication management, nuclear pharmacy services, clinical product offerings and solutions designed to improve operational efficiency. Its product portfolio spans consumables such as gloves and surgical supplies to capital equipment, diagnostic and laboratory products, and software-enabled supply chain services.

Cardinal Health serves customers across the United States and in international markets, delivering products and services through an extensive distribution network and logistics infrastructure. The company supports a broad set of healthcare stakeholders — from independent and chain pharmacies to large health systems and manufacturers — and emphasizes integrated supply chain solutions, regulatory compliance and operational support. Cardinal Health is managed by an executive leadership team and governed by a board of directors focused on delivering healthcare supply chain services and innovation for its clients.

Cardinal Health Q2 2024 Earnings Call Transcript

Key Takeaways

• Cardinal Health raised its fiscal 2024 EPS guidance to $7.20–$7.35 and increased its adjusted free cash flow outlook after reporting 38% EPS growth and $1 billion in Q2 adjusted free cash flow.
• The Pharma segment delivered 12% revenue and segment profit growth, driven by strong generics program performance and COVID-19 vaccine distribution demand, while the Medical segment posted its first revenue growth in over two years despite some one-time headwinds.
• The company took approximately $20 million of non-recurring adjustments in Q2, leading to a revised Medical segment profit outlook of ~$380 million for fiscal 2024, though core mitigation of supply-chain inflation and Cardinal Health brand volume gains remain on track.
• Cardinal Health agreed to acquire Specialty Networks, adding analytics and GPO capabilities for over 11,500 providers in urology, gastroenterology and rheumatology and expects the deal to be accretive 12 months after closing.
• Through disciplined capital allocation, the company returned $1 billion to shareholders year-to-date—$750 million in share repurchases and dividends—while ending Q2 with $4.6 billion in cash, benefiting from higher interest rates.

Presentation

[Operator]

Good day, and welcome to today's second quarter fiscal year 2024 Cardinal Health earnings conference call. This meeting is being recorded. At this time, I'd like to hand the call over to Matt Sims, Vice President of Investor Relations. Please go ahead, sir.

[Matt Sims, VP of Investor Relations at Cardinal Health]

Welcome to this morning's Cardinal Health second quarter fiscal 2024 earnings conference call, and thank you for joining us. With me today are Cardinal Health CEO, Jason Hollar, and our CFO, Aaron Alt. You can find this morning's press release and investor presentation on the Investor Relations section of our website at ir.cardinalhealth.com. Before I turn the call over to Jason, since we will be making forward-looking statements today, let me remind you that the matters addressed in the statement are subject to risks and uncertainties that could cause 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 they are specifically called out as GAAP.

[Matt Sims, VP of Investor Relations at Cardinal Health]

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.

[Jason Hollar, CEO at Cardinal Health]

Good morning, everyone. In the last few weeks, we've made several notable announcements regarding our company's continued progress, including yesterday's news on our agreement to acquire Specialty Networks, which will further our specialty growth strategy and create value for specialty providers, manufacturers, and patients in exciting new ways. And as we highlighted at a recent industry conference, we're continuing to take actions to become a simplified and more focused company, with further progress achieved on our ongoing business and portfolio review and our updated enterprise operating and segment reporting structure, which will be reflected in our financial reporting beginning next quarter. We plan to go further into our recent updates with you today, but first, let me begin with a few brief comments on our results. In Q2, we delivered strong profit growth in both segments, demonstrating continued operating momentum and execution against our strategic priorities.

[Jason Hollar, CEO at Cardinal Health]

Pharma again delivered strong performance. Overall, the business is performing consistent with our expectations, and we're pleased to reiterate our outlook for 7%-9% segment profit growth in fiscal 2024. We've seen ongoing stability in macro trends, including in our generics program and continued broad-based strength in overall pharmaceutical demand. Our specialty distribution business also continued to see strong demand, including with COVID-19 vaccines in the first part of the quarter. Turning to medical, Q2 segment profit was consistent with Q1, despite some non-recurring adjustments in the second quarter, which we've reflected in our updated fiscal 2024 outlook for the former medical segment. We're encouraged by the underlying improvements in operating performance, reflecting further progress with our Medical Improvement Plan efforts focused on our global medical products and distribution business.

[Jason Hollar, CEO at Cardinal Health]

Notably, we saw a change in trend in revenue growth for the Medical segment in the second quarter. Along with continued growth from at-Home Solutions, we're seeing the effects of our five-point plan to grow Cardinal Health brand volumes yield positive results. As we continue to optimize not only the performance of our businesses, but also the financial strength of the broader enterprise, we're generating robust cash flow and seeing meaningful benefits below the operating line. As a result of our first half performance and increased confidence as we look ahead, we're pleased to raise our fiscal 2024 EPS guidance and our outlook for adjusted free cash flow. Of course, our customers remain at the center of everything we do, and our team continues to prioritize core operational execution to best serve them and their patients with essential products and services as we drive our company forward.

[Jason Hollar, CEO at Cardinal Health]

Now let me turn over to Aaron to review our results and updated guidance in more detail.

[Aaron Alt, CFO at Cardinal Health]

Thanks, Jason, and good morning. Before we begin, let me remind you that our Q2 segment commentary will be according to our former segment structure, pharma and medical. Let's start with total company results for the second quarter. Q2 delivered another strong quarter across the enterprise, with EPS of $1.82, growth of 38%, which included operating earnings growth of 20%. We also delivered strong cash flow and ended the quarter with $4.6 billion of cash, even following incremental share repurchase activity in the quarter. As seen on slide 4, total company revenue increased 12% to $57.4 billion, reflecting growth in both the pharma and medical segments. We drove operating leverage for the enterprise despite incremental investments in the business and higher costs to support sales growth.

[Aaron Alt, CFO at Cardinal Health]

Gross margin increased 11% to $1.8 billion, driven by both segments, and consolidated SG&A increased 8% to $1.3 billion. With the strong profit growth in both segments, we delivered operating earnings of $562 million, 20% higher than a year ago. Moving below the line, Interest and Other decreased by $26 million to $8 million in income due to increased interest income on cash and equivalents from higher cash balances and higher rates. As we've noted, our debt is largely fixed rate, resulting in a net benefit from rising interest rates in the near term. Additionally, Q2 Interest and Other benefited from nearly $10 million in income from the quarterly revaluation of our company's deferred compensation plan investments, which, as a reminder, has a matching offset above the line.

[Aaron Alt, CFO at Cardinal Health]

Our second quarter effective tax rate of 21.3% was 1.7 percentage points lower than a year ago and better than we anticipated due to positive discrete items in the period. Q2 average diluted shares outstanding were 246 million, 6% lower than a year ago, due to share repurchases in each of the last four quarters. And as I mentioned earlier, the net result for Q2 was EPS of $1.82, reflecting growth of 38%. Let's turn to the pharma segment on slide 5. Second quarter revenue increased 12% to $53.5 billion, driven by brand and specialty pharmaceutical sales growth from existing customers. We saw strong pharmaceutical demand across product categories: brand, specialty, consumer health, and generics, and from our largest customers.

[Aaron Alt, CFO at Cardinal Health]

We also continued to see robust demand for GLP-1 medications, which provided a revenue tailwind in the quarter. Segment profit increased 12% to $518 million in the second quarter, driven by positive generics program performance and a higher contribution from brand and specialty products, including distribution of COVID-19 vaccines. Our positive generics program performance continued to reflect volume growth and consistent market dynamics. With respect to COVID-19 vaccines, we saw the strength in demand from September for the fall immunization season carry into October, before peaking mid-month and trending to a much lower run rate as we exited the second quarter. The Q2 increase in segment profit includes a partial offset from higher costs to support sales growth, driven by increased pharmaceutical volumes. Turning to the medical segment on slide 6.

[Aaron Alt, CFO at Cardinal Health]

Second quarter revenue increased 3% to $3.9 billion, which, as Jason alluded to, reflects quarterly revenue growth for the Medical segment for the first time in over two years. This increase was driven by growth in both at-Home Solutions and Global Medical Products and Distribution, with the GMPD growth primarily related to higher Cardinal Health brand volumes. Medical delivered segment profit of $71 million, a $54 million year-over-year increase, driven by an improvement in net inflationary impacts, including our mitigation initiatives. Consistent with the expectations communicated a few weeks ago, segment profit was generally consistent with Q1, despite some non-recurring adjustments in the quarter. We continue to be encouraged by the underlying performance of the business, which through the first two quarters of the year, has tracked consistent with our original plans. Now turning to the balance sheet.

[Aaron Alt, CFO at Cardinal Health]

We generated robust adjusted free cash flow of $1 billion in Q2, bringing our year-to-date adjusted free cash flow to $2 billion. And as I noted earlier, end of the quarter was $4.6 billion of cash on hand. We remain focused on doing what we said we would, deploying capital according to our disciplined capital allocation framework. Thus far, through the first half of fiscal 2024, we've continued to invest against our highest priorities, including investing back into the businesses to drive organic growth with over $200 million in year-to-date CapEx. In the first half, we have returned $1 billion total to shareholders, which includes our quarterly dividend payments and $750 million in year-to-date share repurchases. These share repurchases are in excess of our committed baseline repurchases of $500 million.

[Aaron Alt, CFO at Cardinal Health]

In January, we made certain opioid settlement prepayments of $238 million at a pre-negotiated discount, which is expected to result in a GAAP-only gain of approximately $100 million in the third quarter. Now for our updated fiscal 2024 guidance on slide 8, beginning with the enterprise. With our strong first half performance and positive outlook, we are again raising our fiscal 2024 EPS guidance. Our new range of $7.20-$7.35 reflects a 45-cent increase at the bottom end and a 35-cent increase at the top end from our Q1 guidance range, and a midpoint, which is 26% above our fiscal 2023 EPS results. We are encouraged by the operating performance of our businesses and our strong cash flow generation, which is certainly contributing to the improvements below the line.

[Aaron Alt, CFO at Cardinal Health]

Interest and other is reduced to a range of $50 million-$65 million, which primarily reflects increased interest income from higher than anticipated cash balances. We expect lower average cash balances in the second half of the year, due in part to the seasonal timing of anticipated cash flows. We are evaluating opportunities to refinance our upcoming 2024 debt maturities in the back half of the year. We are lowering the top end of our effective tax rate guidance to a new range of 23%-24% to reflect the positive discrete items we've seen in the first half of the year. We also are lowering our shares outlook to approximately 247 million, which reflects the $250 million accelerated share repurchase program we completed in Q2.

[Aaron Alt, CFO at Cardinal Health]

No additional share repurchases are assumed in our updated guidance for fiscal year 2024. Now turning to the fiscal 2024 outlook for our segments. While we will be transitioning to our new segment structure reporting beginning in Q3, let me start with our former segments as a comparison point for the updated structure. No changes to the outlook for the former pharma segment. We are reiterating the 10%-12% revenue growth and 7%-9% segment profit growth. For the former medical segment, the fiscal 2024 outlook is updated to approximately $380 million of segment profit to reflect the net impact of Q2 non-recurring adjustments. Outside of these, our overall operational expectations are consistent with delivering the prior $400 million in segment profit for the year.

[Aaron Alt, CFO at Cardinal Health]

As well as the corresponding prior expectation of $650 million in segment profit for fiscal year 2026. We have consistently highlighted the back half weighting of the medical guidance, driven by progress within GMPD on Cardinal Health brand volume growth, the cumulative impact of inflation mitigation, and some business-specific seasonality. Our expectations there continue. For example, with inflation mitigation, we have strong visibility to overall cost improvements in the second half of the year, driven by reductions we've observed in international freight, which is a reminder reflected in our income statement on a two- to three-quarter delay. And as we exit January, the mitigation initiatives necessary to achieve our year-end target are now largely in place. Now, as seen on slide 10, let me comment on how this fiscal year 2024 guidance translates to our updated segment structure.

[Aaron Alt, CFO at Cardinal Health]

To go along with the preliminary recast fiscal 2023 actuals and long-term targets we provided a few weeks back, our new structure went into effect January first. So beginning in Q3, we will report results and provide drivers according to the new segment structure, Pharmaceutical and Specialty Solutions and GMPD, and separate from these two segments, Nuclear, At-Home, and OptiFreight aggregated in Other. At that time, we also plan to provide a recast of the results for fiscals 2022 to 2024 on the new segmentation. Beginning with the Pharmaceutical and Specialty Solutions segment, the guidance ranges are consistent with the former pharma segment, even excluding our higher growth nuclear business. We expect 10%-12% revenue growth and 7%-9% segment profit outlook for fiscal 2024, and a 4%-6% segment profit growth CAGR over the long term.

[Aaron Alt, CFO at Cardinal Health]

Turning to GMPD, where we remain encouraged by the improvements in this business. Through the execution of the Medical Improvement Plan initiatives, we expect to drive GMPD from an operating loss of approximately $165 million in fiscal 2023, to operating income of approximately $65 million in fiscal 2024. From the fiscal 2023 low point, this $230 million year-over-year improvement would position us roughly halfway towards our fiscal 2026 target of approximately $300 million of segment profit. Finally, we expect the businesses included in Other, at-Home Solutions, Nuclear and Precision Health Solutions, and OptiFreight Logistics, to collectively deliver 6%-8% segment profit growth in fiscal year 2024.

[Aaron Alt, CFO at Cardinal Health]

The difference between this fiscal 2024 growth rate and the long-term CAGR of 8%-10% for fiscal 2024-2026 reflects the portion of the Q2 non-recurring adjustments within at-Home Solutions, with the remainder residing in GMPD. Before I close, a couple of comments on our recently announced acquisition. We've noted that the specialty category has been our highest priority for potential M&A, and a primary consideration for our opportunistic capital deployment as part of our disciplined capital allocation framework. Given our financial flexibility and strong presence in the other 60% of the specialty market in therapeutic areas outside of oncology, we have evaluated a range of potential acquisition candidates to further accelerate our specialty strategy. We are thrilled to reach an agreement for Specialty Networks to become a part of the Cardinal Health family.

[Aaron Alt, CFO at Cardinal Health]

Jason will elaborate on the strategic aspects of the deal, but we plan to include the expected financial impacts of the transaction in our guidance upon closing, which of course, is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals. For general modeling purposes, we expect the deal to be accretive 12 months following close. So to wrap up, tremendous progress in the first half of the year, with exciting value creation opportunities still in front of us. We are confident in our plans and grateful for the efforts of our team, who continue to drive our ongoing initiatives and prioritize the needs of our customers. With that, I will turn it back over to Jason.

[Jason Hollar, CEO at Cardinal Health]

Thanks, Aaron. Now for some additional perspective on our strategic priorities, beginning with priority number one and building upon the growth of Pharma and Specialty Solutions, our largest and most significant business. Though this segment structure has slightly changed, our focus on executing in the core remains. We're building upon our strong foundation while investing to accelerate growth and specialty, both downstream and upstream. We believe that this new segment structure further enables those efforts by enhancing management focus, leveraging the connectivity between pharmaceutical distribution and specialty, and positioning the business for long-term growth and investment. More on that front shortly. A key component of our strong core foundation is our generics program, anchored by Red Oak, which continues to do an excellent job fulfilling its dual mandate: managing both cost and supply.

[Jason Hollar, CEO at Cardinal Health]

Red Oak leverages proprietary analytical tools and their deep industry expertise to help maximize service delivery for customers. We're continuing to invest in our business to provide customer-focused solutions and evolve our commercial engagement strategies to prioritize addressing the complex challenges our customers face every day. For example, at Investor Day, we highlighted our first-to-market, clinically integrated supply chain, the Cardinal Health InteLogix platform. This innovative solution leverages artificial intelligence and machine learning through the Palantir Foundry platform to help providers reduce costs, optimize drug inventories, and generate actionable insights to simplify and streamline medication supply. We've continued to develop our offerings, such as the Contract Optimizer tool, which drives savings and value through contract compliance, cost controls, and product alternatives like brand to generics, blood plasma, and more. Key health system customers are already benefiting from these capabilities, and we see opportunities for further future expansion.

[Jason Hollar, CEO at Cardinal Health]

Shifting to specialty, where we have also been investing to expand our offering into complementary areas. The acquisition of Specialty Networks is exciting to us on a number of fronts. This is a business with which we were already very familiar, given the long-standing partnership to service their members through our specialty distribution. Specialty Networks is a technology-enabled, multi-specialty group purchasing and practice enhancement organization serving 11,500 total providers today, including more than 7,000 physicians across 1,200 independent urology, gastroenterology, and rheumatology practices. We see their service capabilities as accelerating our efforts in critical ways. First, further extending our reach, expertise, and offerings in key therapeutic areas to provide increased clinical and economic value for specialty providers. Specialty Networks is a leader in specialty practice management, research, and technologies that support physicians in lowering costs, operating more efficiently, and delivering best-in-class care to their patients.

[Jason Hollar, CEO at Cardinal Health]

For example, the company provides solutions that improve clinical and economic outcomes to over 3,000 urologists through its leading UroGPO. Second, creating a platform for our expansion across specialty therapeutic areas. The company's PPS Analytics solution is a subscription-based advanced technology platform that utilizes artificial intelligence, such as continuous learning algorithms and natural language processing, to analyze data from electronic medical records, practice management, imaging and dispensing systems, and transform it into actionable insights for providers and other stakeholders. We see this complementing our suite of clinical, practice management, and distribution solutions to specialty practices nationwide. Specialty Networks' experience and capabilities in clinical engagement are robust, which also accelerates our upstream data and research opportunities with biopharma manufacturers. Third, enhancing the capabilities of our specialty business, including supporting the ongoing build of the Navista Network.

[Jason Hollar, CEO at Cardinal Health]

Specialty Networks has a deep understanding of independent physician practices, and we see capabilities and expertise that will accelerate our ongoing development of the Navista Network, which is focused on supporting the clinical and operational needs of independent community oncologists. In summary, this transaction enhances our specialty strategy by providing new capabilities that strengthen the link between our downstream and upstream services, enabling us to create further value for customers, manufacturer partners, and patients. Turning to priority number two in the GMPD business, where we're executing the Medical Improvement Plan. While the business and portfolio review of GMPD continues, the team continues to prioritize and make significant progress in turning around the operational performance of this business. As Aaron indicated, with our expectation that the business returns to profitability in fiscal 2024.

[Jason Hollar, CEO at Cardinal Health]

The number one priority remains mitigating supply chain inflation, where we remain on track to address the impact by the time we exit fiscal 2024. As of Q2, we're approximately 75% to target. On the cost side, while overall still elevated, we've seen lower international freight costs reflected in our results, as anticipated, and we have strong line of sight to continued improvement in the second half of the fiscal year. We've continued to make progress with our mitigation initiatives and commercial contracting efforts and are continually taking additional actions to offset elevated inflation, such as through sourcing initiatives. As Aaron indicated, the work we've accomplished to date provides increased confidence in achieving our fiscal year-end target, as overall cost improvements continue to reflect in our second-half results. We're continuing to invest in the resiliency of our supply chain and our manufacturing and distribution capacity.

[Jason Hollar, CEO at Cardinal Health]

We have opened three new distribution centers in the past year, adding capacity for growth while featuring state-of-the-art automation technology to streamline operations. For example, our new Greater Toronto Area DC expands capacity to serve Cardinal Health Canada customers while leveraging autonomous mobile robots to increase picking and packing accuracy and drive efficiencies. We are also continuing to invest in new product innovation and portfolio expansion in key categories, in alignment with our disciplined portfolio management approach. As a result of our team's collective efforts, we're seeing our five-point plan to grow Cardinal Health brand volume result in improvements in our leading indicators, and most importantly, strong customer retention and product volume growth. Finally, we continue to drive simplification and optimize our cost structure by exiting non-core product lines, rationalizing our network, and streamlining our international footprint.

[Jason Hollar, CEO at Cardinal Health]

We believe our new structure will further enable our Medical Improvement Plan efforts as we continue to execute the plan and deliver value for customers. Now, priority number three: accelerating growth in key areas. We are excited about the strong demand we are seeing in our at-Home Solutions and OptiFreight businesses, and our recent determination to further invest in and develop these businesses for long-term value creation as part of our portfolio. In at-Home Solutions, we continue to focus on enabling and supporting comfortable, home-based care for patients with acute and chronic conditions. To support the growing demand for home healthcare, we're investing to expand the capacity of our network, the breadth of our offering, and in new technology to drive operating efficiencies. We recently announced plans for a new distribution center to be built in Texas, with increased capacity, advanced automation technology, and robotics within the facility.

[Jason Hollar, CEO at Cardinal Health]

Our previously announced 350,000 sq ft facility being built in South Carolina is on track to open this calendar year. In OptiFreight Logistics, we're continuing to invest in digital tools to enable healthcare supply chain leaders to better manage their shipping spend and support the core volume growth in our business. We've launched new offerings to give our customers more supply chain visibility, and we are receiving great feedback. For example, we now have more than 1,000 healthcare providers leveraging our TotalVue Insights platform to gain valuable insights on their operations. In Nuclear and Precision Health Solutions, we're continuing to see above-market growth in both our core business and theranostics, as we're a premier partner of choice due to our strong core foundation and differentiation with pharmaceutical manufacturers looking for commercialization success of their future radiopharmaceutical portfolios.

[Jason Hollar, CEO at Cardinal Health]

For example, in Theranostics, prostate cancer radiodiagnostics are important tools for healthcare providers to assess and properly treat the disease. We saw meaningful year-over-year revenue growth in the first half of fiscal 2024 from the ramp-up in demand of these diagnostics. From a pipeline perspective, we're investing to expand our Center for Theranostics Advancement, with demand from pharmaceutical manufacturer partners currently oversubscribed. We're investing to expand the capabilities and resiliency of our PET manufacturing network to enable portfolio diversification and accommodate growth from the increasing demand for PET agents. This is driven by trends such as an aging population, cancer prevalence, emerging Alzheimer's therapy availability and reimbursement, and increasing clinical trial needs. Finally, priority number 4: maximizing shareholder value creation. We're continuing to maximize shareholder value creation through our improved operational performance, robust cash flow, and responsible allocation of capital.

[Jason Hollar, CEO at Cardinal Health]

As Aaron noted, our robust cash flow generation is not only driving benefits below the operating line, it is enabling our opportunistic capital deployment, with additional share repurchases in the quarter beyond our baseline plan and our ability to pursue value-creating M&A in specialty. We remain well positioned with financial flexibility to continue opportunistically evaluating disciplined M&A, not only in specialty, but in our other growth areas and potential additional share repurchases. With our recent conclusions on our business and portfolio review, we do not have further updates to share today, but plan to keep you apprised of our progress. To close, we had a strong first half of the year and are excited about the many initiatives underway to build upon our momentum.

[Jason Hollar, CEO at Cardinal Health]

I would like to thank our highly engaged and talented team for driving our progress and prioritizing our customers as we fulfill our critical role as healthcare's most trusted partner. With that, we will take your questions.

[Operator]

Thank you very much, sir. Ladies and gentlemen, as a reminder, if you have any questions, please press star one on your telephone keypad. Our very first question is going to be coming from Stephanie Davis calling for Barclays. Please go ahead.

[Stephanie Davis, Managing Director of Healthcare Technology and Distribution at Barclays]

Hey, guys. Thank you for taking my questions, and congrats on the continued progress. Jason, you already shared a lot of color around the acquisition, but I was hoping you could dig in just a little bit further on Specialty Networks' mix and capabilities, just given the higher margin nature of both GPO and analytics solutions. And then just following up, given the pipeline that you mentioned, I was hoping you could share some thoughts on hurdle rates for future deals, as that becomes a bigger part of the story. Thank you.

[Jason Hollar, CEO at Cardinal Health]

Okay, great. Thanks. Good morning, Stephanie. Yeah, we're really excited about Specialty Networks, and I love how you asked the question, Stephanie, because it's... There's a lot that goes into this business, and we love all of it. Whether it's the GPO or the analytics and technology behind it, specifically, PPS Analytics is something we thought was really special, not just in terms of how this team has created this capability for their original primary business of urology, but then how they've expanded it into other therapeutic areas. And we felt we could learn from that further and use that technology across potentially other therapeutic areas beyond the three that they're in today. So that was really exciting to us and it, and it's certainly a key part of the value.

[Jason Hollar, CEO at Cardinal Health]

We definitely attributed good value to that technology and where we believe that can go. Not only was that good for our business, but importantly, we see that technology as really solving a lot of customer both provider and manufacturer challenges, and ultimately giving a much better solutions to the end patient. It's a win-win across the industry and one that plugs in nicely to our strategy and to be throughout the specialty space. We feel great about that, and I certainly don't want to miss that we are also through this transaction acquiring a fantastic leadership team that will plug in very nicely to our own existing team. It's cultures that I think will work very well together.

[Jason Hollar, CEO at Cardinal Health]

And we've had a fantastic, very quick process. We've known Specialty Networks for quite a while, but from the point that we started talking about a possible tie-up, we went from the beginning to the end, of course, doing a deep and thorough diligence, but nonetheless, knowing the business well so that we could quickly understand the value for us. As it relates to your second question on hurdle rates, I'm not sure exactly which part of the business you're referring to, but generally speaking, you know, I think no matter what part of our business we're talking about, it's a competitive but stable type of environment, and so I'm not normally going to go deeper into that anyways.

[Jason Hollar, CEO at Cardinal Health]

But generally, you know, speaking, we're not really calling out anything from an overall market perspective today. You know, regardless of what business we're talking about, utilization continues to be quite good and predictable. So we're in a nice environment for ongoing growth, both organically as well as then able to look opportunistically at transactions like this.

[Aaron Alt, CFO at Cardinal Health]

Probably worth noting that it is a profitable business today, and as Jason highlighted, we do intend to invest in the business early on to expand the scope of what they are doing across not only their own initiatives, but our initiatives within specialty as well.

[Operator]

Thank you much, sir. Ladies and gentlemen, our next question is going to be coming from Lisa Gill, calling from JP Morgan. Please go ahead.

[Lisa Gill, Managing Director at J.P. Morgan]

Thanks very much for taking my question, and good morning. Just really wanted to ask two things, Jason. One, on the strategic side, as we think about your core medical business, one, do you still feel a commitment to that business going forward? And then secondly, as we think about the shift and the new reporting structure, it does look like you're taking down the margin on the core business. Is there something that's either changing in the timeline of the turnaround? Is there something else that's shifting competitively or incremental costs? If you could just help us to understand that. Thanks so much.

[Jason Hollar, CEO at Cardinal Health]

Sure, Lisa. Very clear here. No, there's no change in our commitment to this business. It has been there from the very beginning and continues to be. As I highlighted from the first moment when we talked about medical, in the context of the business portfolio review, our number one priority has always been and continues to be, turning the business around. Everything that we are working on has been in service of, first of all, the five-point plan to drive, Cardinal Health brand volumes, to mitigate inflation, and drive additional value through simplification and cost reductions. That message and the progress we've made is entirely consistent with that. The core operational performance of the business is exactly how we've laid it out.

[Jason Hollar, CEO at Cardinal Health]

So the only update that we've had today in recognition of some of those nonrecurring items. But the plan and the fiscal year 2026 aggregate targets that we're going after are absolutely unchanged to this resegmentation. We did have to bucket the Medical Improvement Plan into the various buckets because we did have the growth businesses that are a component of that, but that was just moving the pieces. The pieces are absolutely unchanged, and the overall aggregate profitability in that long-term plan is absolutely unchanged, and our commitment is absolutely unchanged to this business. And I'm really excited about the progress that the team is making in service of all those goals.

[Matt Sims, VP of Investor Relations at Cardinal Health]

Next question, please.

[Operator]

Thank you much, sir.

[Operator]

Thank you much, sir. Our next question will be coming from Elizabeth Anderson, calling from Evercore ISI. Please go ahead, your line is open.

[Elizabeth Anderson, Senior Managing Director at Evercore ISI]

Hi, guys. Thanks so much for the question. I have two sort of maybe more financial questions going forward. Can you talk to us about sort of the interest expense? Obviously, you had a pretty big step down. Just wanted to understand that in terms of that and your sort of ongoing thoughts on the capital structure. And can you also kind of talk about why the free cash flow improvement? That was nice to see that step up in the quarter as well, in terms of the guidance.

[Aaron Alt, CFO at Cardinal Health]

Sure. Happy to offer some perspective. We're quite pleased with the below-the-line results, of course, you know, for the quarter. I'm going to start with the fact that, as we announced, we ended the quarter with $4.6 billion of cash on hand. And of course, that's driven by the strong cash generation, which was the end part of your question. If you think back to our Investor Day, we had highlighted that further optimization of our cash flow position was something we were focused on doing, and the team has delivered against those efforts, you know, internally and generated strong cash flow in the first half, you know, for the business, thus the balance.

[Aaron Alt, CFO at Cardinal Health]

Of course, the knock-on consequence of that is when we have more cash on hand, particularly in the higher interest rate environment, which we've been operating, we'll get a higher return, right? And we have indeed benefited from a greater rate of return on the larger cash balances, you know, that we've had in place. It's also the case that there is some geography within our statement because deferred comp was a positive, you know, for us below the line. It's an offsetting negative above the line, you know, in the quarter as well, and so it's really the aggregation of those three things or those several things which led to the results for the quarter.

[Aaron Alt, CFO at Cardinal Health]

Now, you asked about the financing as well, and I should be, I should be clear on, on a couple of things as we think about our models going forward. You know, we do have maturities coming in June and November. We're assessing what our opportunities are there. Nothing to announce today in that respect, but we will address that, you know, as we carry forward. It is also the case that our cash balances fluctuate seasonally in the back half as well, and so we wouldn't expect the high balance to remain where it is, just given the seasonal demands, you know, on the business.

[Matt Sims, VP of Investor Relations at Cardinal Health]

Next question, please.

[Operator]

Yes, sir. Our next question is coming from Mr. Eric Percher of Nephron Research. Please go ahead.

[Eric Percher, Founding Partner, Senior Research Analyst, Pharma Supply Chain & Digital Health at Nephron Research]

Thank you. On the medical side, it's hard to see through the one-time items. So I want to ask what you can give us on the nature of those one-time items, what the trajectory looked like, excluding one-timers in the quarter, and, you know, any views on the exit trajectory for the year and kind of going from $140 million first half to the $240 million second half, how you're pacing relative to that?

[Aaron Alt, CFO at Cardinal Health]

Yeah, thank you. We were really encouraged by the underlying performance in Q2 of the medical business. You know, just to restate the results, you know, the Q2 results were consistent with the expectations we communicated several weeks ago at the JP Morgan conference, and generally consistent with, you know, Q1, despite some of those adjustments that we took in the quarter. I want to emphasize that as you move away from the adjustments that we took, the underlying elements of the Medical Improvement Plan, they're on track, right? You heard some of my prepared remarks relative to our progress against the mitigation of inflation and how our cost structure is building. The benefits of each actions we've taken will benefit our cost structure in the back half of the year.

[Aaron Alt, CFO at Cardinal Health]

You heard us announce that we had revenue growth for the first time in, you know, two years in the quarter as well, and we were pleased with the Cardinal Health brand growth that comes with that. And the team continues to execute against the simplification initiatives that have been a core part of the Medical Improvement Plan all along. So I'm going to go back to where I started, which is we were quite pleased with the operational performance, you know, in the quarter. I also want to point out that from a guidance perspective. While we updated the guidance for the year to reflect the relative impact of the non-recurring adjustments, that was the only change of the guidance to reflect that which is behind us, not that which is ahead.

[Aaron Alt, CFO at Cardinal Health]

If you think through how we have guided medical for the year all along, there's always been a very back-half focused trajectory for our guidance here for the year, and that remains unchanged, along with how pleased we are with the core operational performance.

[Jason Hollar, CEO at Cardinal Health]

Yeah, and if I could just add, you know, when you think about that first half, second half cadence and why we still anticipate the same step up in the second half versus the first half, there's a couple of key points. First of all, inflation mitigation. This is one where it's a significant part of that, combined with Cardinal Health brand volume growth, which I'll get to in a moment. But on the inflation mitigation, you know, there's, of course, two elements. There's a cost side, and then there's a price side. In both cases, we have very good line of sight.

[Jason Hollar, CEO at Cardinal Health]

On the cost side, as we've talked, really for quite a while now, it's been the international freight, and that, while we have a little bit of noise with the Red Sea, it is largely as anticipated. So and that cost is already on our balance sheet and is rolling through as expected, especially given our volumes have been as expected. So we have a very high line of sight and confidence the cost is going to continue to step down in the second half of the year. And then on the pricing side, as we talked before, there's always the contract roll, rolling, roll-through that we then update the pricing on. We do have, you know, a little bit more at the beginning of the calendar year of some of those price adjustments.

[Jason Hollar, CEO at Cardinal Health]

So January being behind us, we have really good line of sight to the pricing side as well. So there's some, some time now for the next couple of quarters needed to get that to roll through our, our, income statement, but the actions now are largely behind us as it relates to inflation mitigation. We've always had confidence we would get to this stage, but we're now at this stage and have even more confidence, actually seeing it start to come through in the second half of the year. Now, the other component is the Cardinal Health brand volume. You know, part of that's going to be market driven and the market volume, that utilization continues to be quite good.

[Jason Hollar, CEO at Cardinal Health]

What was exciting about the second quarter is seeing that further inflection and actually participating in that market growth, really for the first time at the extent of what the market is growing. So that gives us much greater confidence that we'll continue to see that growth and that step up as we get over the course of the year. But there's some variables like the market itself that will always be an impact here, good or bad, that we'll continue to monitor and track. So those are the key points that I can get us from the first half to the second half.

[Matt Sims, VP of Investor Relations at Cardinal Health]

Eric, it's probably worth offering one additional point of perspective. We're not reporting on the new segment structure, you know, this quarter. That will follow in Q3, but we can offer the observation that the GMPD core part of the medical business has operated at near breakeven levels in the first half of fiscal 2024. And I offer you that in contrast with where they were from a fiscal 2023 perspective and where we're going from an overall guidance perspective. We view that as a key sign of positive progress.

[Operator]

Thank you very much, gentlemen. Stefan, Operator. Our next question is going to be coming from Erin Wright of Morgan Stanley. Please go ahead.

[Erin Wright, Senior Equity Research Analyst, Healthcare Services at Morgan Stanley]

Great, thanks. On the drug pricing front, you do continue to mention generics as a key driver. Are you still seeing that easing deflationary dynamics that others have noted too? And how material is that for you? And also, how sustainable is it? You know, what are some of the key drivers that you're looking at there, and how are you thinking about that for the balance of the year as well, as we think about the quarterly cadence here for that U.S. pharma or for the pharma segment, particularly with the COVID dynamics, too? Thanks.

[Jason Hollar, CEO at Cardinal Health]

Appreciate the question. One of the things we called out in commenting on the strong quarter that our pharma business had was that, the continued consistent market dynamics within the generic space, matched with volume, strong volume, was a reason for-- one of the reasons for success during the business. We often talk about the, two sides of the equation being in balance, and indeed, that's what we continue to see within our generic, business. And that is indeed a core component of our guidance for the pharma, you know, as we carry forward. One last reminder, I do want to remind that last quarter, we actually took our pharma guidance up from a profit perspective, to 7%-9%. Thank you.

[Operator]

Thank you, sir. We'll now move to Allen Lutz, calling from Bank of America. Please go ahead.

[Allen Lutz, Senior Equity Research Analyst, Healthcare Technology & Distribution at Bank of America]

Good morning, and thanks for taking the question. Can you talk about growth of SG&A in the quarter? You flagged incremental investments in the business and higher selling costs. Can you unpack exactly what those expenses are? And then how should we think about SG&A growth, for the remainder of the year? Thanks.

[Aaron Alt, CFO at Cardinal Health]

Happy to offer some perspective. We were pleased in the quarter to actually achieve operating leverage, with gross profit growing faster than SG&A. SG&A did grow. Of course, volume also grew, and so the primary component of our increase in cost was tied to the variable cost of serving, you know, higher volumes. It is also the case, though, that as Jason has highlighted in his strategic remarks, we are investing against our business, and some of the SG&A growth was purposeful relative to the investments we're making in places like, you know, the Navista and other elements of our, you know, growth plans. But I will end with the fact that we are very focused on SG&A as a whole, and the team continues to look for further opportunities, as we have in prior years, to optimize our cost structure.

[Operator]

Thank you once, sir. We'll now move to Kevin Caliendo of UBS. Please go ahead.

[Kevin Caliendo, Managing Director at UBS]

... Thanks. Thanks for taking my question. I have two. Can you give us an update on the progress of the United contract renewal, timing, any updates you have there? And just to follow up on that SG&A question, were there purposeful investments made, when you saw sort of upside from interest and other things in SG&A in the quarter? I'm just trying to quantify how much was in the original plan versus maybe how much was incremental, given some of the upside that you saw below the line.

[Jason Hollar, CEO at Cardinal Health]

Yeah, sure. I'll touch on both points here. There's no updates with the Optum contract. It goes through this fiscal year, and as I've, you know, highlighted before, they are a great customer of ours, longstanding customer, one that brings a lot of innovation to healthcare and one that we've worked very hard over the years to attempt to exceed their expectations, and we think we're doing a great job of that. We'd love to keep working with them, of course. Now, I do get a lot of questions around the order of magnitude of this, and I'm not gonna go into details, but just a couple of points, you know, given the number of questions I've received is...

[Jason Hollar, CEO at Cardinal Health]

We have disclosed in the past, and I think it comes through in every K, just the order of magnitude. So last year they were over a $30 billion customer of ours, and I see a lot of people attempting to try to model out impacts and things of that nature. And just a couple of things that I'm not sure is real clear about the scope of business we have with them today. It is the majority of the revenue we have with them is through our base PD business, and a lot of that is mail order volume. So what you have here are the typical markers of a large customer, PD, majority, and mail order.

[Jason Hollar, CEO at Cardinal Health]

So those are all, you know, markers of lower than average margin type of business. And so, we do have other business with them, of course, too, because they are very large, and have a lot of breadth into various parts of the industry. But for us, those tend to be a little bit of the overweight of how we support them. As it relates to the SG&A, the only thing I would say is, no, it's not like that. What we do is we look at the capabilities and the necessities needed, both short-term and long-term. Short-term is gonna be on volume and making sure we can support our customers in getting that strong volume growth across the enterprise in place.

[Jason Hollar, CEO at Cardinal Health]

We are then looking to balance that with longer-term investments, whether it's the Navista Network we've called out before as investments, but we also have others that we went through during Investor Day, and have had a number of updates even today. Within our at-home business, we have three new facilities that we're bringing online over the course of the next year or two. Within the medical distribution, three facilities I talked about today, we have on the pharma side, the consumer health new logistics center. So, and I also made some comments around some of the IT capabilities within pharma, some of the e-commerce and InteLogix capability.

[Jason Hollar, CEO at Cardinal Health]

So we are investing where it makes sense, efficiently, very well aligned to our strategy, and these are not investments that you can just turn on and off. So it's something that we're going to invest as appropriate, but only what we have to do as well. We wanna take away waste and invest it where there's growth, is the key objective. For those working on their models, it's probably worth pointing out that, with respect to, the Q2 profitability in the business, it was the case that last year we called out, unusual strength in the overall pharma demand, particularly from large customers, as well as a very strong cough, cold, and flu season. So as you're looking at your comparisons, keep that in mind.

[Kevin Caliendo, Managing Director at UBS]

Thank you, sir.

[Operator]

Ladies and gentlemen, if your question has been answered, you may remove yourself from the queue by pressing star two. We'll now move to Mr. George Hill of Deutsche Bank. Please go ahead.

[George Hill, Managing Director and Equity Research Analyst at Deutsche Bank]

Yeah. Good morning, Jason, and forgive me if I kind of missed this, or if you guys talked through this already. But as it relates to the planned restatement of the other segment, it looks like the growth in the near term is coming in, but term, kind of the long-term targets, and we just kind of wonder if you could address kind of, or disaggregate in which segments—which subsegments you're seeing the softness relative to the long-term expectations for the balance of the year or this year, versus what you think kind of accelerates coming out and kind of closes the gap in the longer term guidance.

[Jason Hollar, CEO at Cardinal Health]

The businesses that report through other for us, going forward will be our at-home business, our nuclear and precision health business, and our OptiFreight business. Those are what we have traditionally called our growth businesses as part of other segments. And, indeed, over the long term, we expect them, the CAGR on their, on their collective growth to be 8%-10%. The disconnect you're referencing, which is the 6%-8% in fiscal 2024, is only driven by, the non-recurring, the impact of the non-recurring adjustments from Q2 on, the at-home business that we referenced a couple of weeks ago as we talked about our expectations for Q2. Each of the businesses contribute to the revenue and profit growth, you know, for other, and for us as we carry forward.

[Jason Hollar, CEO at Cardinal Health]

In our earlier disclosures, I think you can get pretty close. We disclosed the revenue of, of the individual pieces, and indeed, we've talked about nuclear, nuclear doubling its profit, off of its fiscal 2021 baseline, by fiscal 2026 as well, I believe. And so you can... You're able to get to that component of other, through that.

[George Hill, Managing Director and Equity Research Analyst at Deutsche Bank]

Thanks.

[Matt Sims, VP of Investor Relations at Cardinal Health]

Next question, please.

[Operator]

Yes, sir. We'll now take Steven Baxter of Wells Fargo. Please go ahead, sir.

[Stephen Baxter, Managing Director and Senior Equity Research Analyst of Healthcare Services at Wells Fargo]

Yeah. Hi, good morning. Thanks, sir. The question, just a couple of quick ones. On COVID vaccines in the commercial channel, I think last quarter you kind of indicated or implied that the contribution was around $25 million. I was hoping you could update us. on what the performance was this quarter, and whether you're factoring anything in for the balance of the year. And, and then just to try one more time on the non-recurring medical adjustments, can you just tell us on the $20 million, like, what does that actually represent in terms of the underlying accounting or business activity? Thank you.

[Jason Hollar, CEO at Cardinal Health]

Yeah. So, for the vaccines, let me just kind of walk through the last couple of quarters, and that will give you a flavor of, you know, the benefits and, you know, the trends and such. So when we talked last quarter, you know, we had highlighted in Q1, with the FDA approval, at the beginning of September, you know, we were stage two, you know, hit the ground running, and we had fairly significant volume in that first quarter. But as anticipated, we indicated at that point that we would expect it to peak within Q2, and so we expected higher volume, higher contribution in Q2 versus Q1, and that was because we saw October as the largest month within that season.

[Jason Hollar, CEO at Cardinal Health]

And then, as expected, we saw that wind down over the course of November and December. Still seeing some level of volume in Q3, but I would expect it to be quite insignificant compared to what we saw in Q1 and then Q2. You know, overall, I think the key message is that this is consistent with our expectations. As Aaron highlighted in his comments already, you know, we had multiple drivers of growth for the pharma segment in the second quarter. It was strength with the generics program. Within brand, it was COVID driving that component, and then we had these investments and primarily the cost to serve, a partial offset to those other two drivers.

[Jason Hollar, CEO at Cardinal Health]

So overall, feel good about the overall health of the business and the contribution of COVID within it. Aaron, any comments from the-

[Matt Sims, VP of Investor Relations at Cardinal Health]

Yeah, with respect to the non-recurring adjustments, we previewed this back at the JP Morgan conference when we updated our commentary around the medical business. And our comment then is our comment now, which is, as we have continued to dig deep across the portfolio, we've taken a decision to take some non-recurring adjustments, which the majority of which hit the at-home business, which now reports or will report as part of other in Q3, as well as a component hitting the WaveMark business, which is part of, you know, which is part of the new GMPD business.

[Matt Sims, VP of Investor Relations at Cardinal Health]

So, if you read through the update to our guidance for the year, where we moved from approximately 400 to approximately 380, driven by the impact of the non-recurring adjustments, you can reach your own conclusions as to the relative quantification and the distribution, given those comments. Thanks.

[Operator]

Thank you much, sir. Our next question is coming from Charles Rhyee of TD Cowen. Please go ahead.

[Charles Rhyee, Managing Director at TD Cowen]

Yeah, thanks for taking the question. Just wanted to follow up on Allen's question there on the vaccine impact. I understand you're saying that it kind of you expected it to peak in the December quarter. Would you say that the contribution, though, from vaccine was higher than in the first quarter, given that you had still three months of overall? And if we look at that, you know, relative to what you had expected, the higher cost that you incurred, did you use that to, you know, fund those kind of investments? Just wanted to get a sense on relative contribution.

[Jason Hollar, CEO at Cardinal Health]

Yeah, as I highlighted, October was the peak month, and since we only had a partial September, it is clearly higher in Q2 than in Q1. We did have, you know, November and December contributions as well, but it really tailed off by the time we got to the end of the quarter, and that's why you would expect there to be very little. It was just typical for vaccines in general, so there's nothing we're seeing there. And again, I think the way you asked the question around the funding of investments, I'll just go back to my prior answer to that question. There were costs associated with the vaccine rollout. As you can imagine, that's a lot of volume to ramp up for really 2 months' worth of support.

[Jason Hollar, CEO at Cardinal Health]

Our team did a fantastic job working with the manufacturers and our customers, to play that role when we were not involved in the vaccine distribution before for COVID. So I feel very good about our role, and we did have to incur costs associated with the ramp-up and ramp-down in such a short period of time, but that was not necessarily used as currency to fund other programs. Those programs are important strategically and all very consistent with the plans and the actions and the forecasts we've laid out here. So there's no changes as it relates to how we're approaching these, both short-term requirements as well as long-term investments.

[Matt Sims, VP of Investor Relations at Cardinal Health]

Probably worth emphasizing that Jason's point is that September and October were the high points for, you know, COVID for us, from a distribution perspective, quickly tailing off thereafter.

[Charles Rhyee, Managing Director at TD Cowen]

Thank you much-

[Matt Sims, VP of Investor Relations at Cardinal Health]

Next question, please.

[Operator]

Thank you, gentlemen. Our last question today will be coming from Mr. Daniel Grosslight of Citi. Please go ahead, sir.

[Daniel Grosslight, Senior Research Analyst of Healthcare Technology at Citi]

Hi, guys. Thanks for taking the question. I wanna just go back quickly to the medical profitability question and confirm one thing. That $20 million one-time item, that was wholly kind of concentrated this quarter. So without that, the medical profitability would have been around $90 million. And then on your commentary around shipping rates coming down and benefiting you and the volatility in the Red Sea, if you look at, you know, the China to West Coast shipping rates, they have spiked materially in January. So I'm wondering how I guess a couple of things there.

[Daniel Grosslight, Senior Research Analyst of Healthcare Technology at Citi]

One, how that may kind of roll through your contracts, and then given that you capitalize those costs and then expense it over 2-3 quarters post those costs being capitalized, how that might impact the cadence of your Medical Improvement Plan in fiscal 2025? Thank you.

[Jason Hollar, CEO at Cardinal Health]

So the first half of that, question, you are thinking about things correctly. I'll go back and emphasize, we were really pleased with the operational performance, of the business, and given that we've adjusted our yearly guidance just to, reflect the impact of the non-recurring adjustments in Q2, your conclusion on the math, would be reasonable. Yeah, on the second component, you are correct that shipping rates have spiked. I think the word used was materially, and, how, how I would characterize it is, yes, that's, that's accurate, but substantially less materially than where they were in the past. So the order of magnitude we're talking about is vastly smaller. It is, it's also something that we do not believe that that will be the permanent level.

[Jason Hollar, CEO at Cardinal Health]

Yes, we have more flexibility in our contracts, and that will continue to be a lever and a component that we'll be evaluating, determining on whether, you know, how permanent these are or not. I would also say that our maturity, our capability within this space has substantially improved as well, as we've invested in the underlying processes and procedures to manage through these types of this type of volatility. So, you know, overall, we feel very good about where we stand. And generally, don't see this being as a material item, but we'll continue to watch it closely.

[Operator]

Thank you very much, sir. Ladies and gentlemen, that will conclude today's Q&A session. I turn the call back over to Mr. Jason Hollar for any additional closing remarks. Thank you.

[Jason Hollar, CEO at Cardinal Health]

Yeah, thanks, everyone, for joining us this morning. We're clearly excited about the momentum that we have in our business. Both the shorter term operational elements that we've talked a lot about today, but also about the longer term strategy. With the announcement of Specialty Networks this week, it just highlights that we're looking and acting both short term and long term, and are really excited about the opportunities still in front of us. So thanks again for joining us today, and have a great day.

[Operator]

Thank you very much, sir. Ladies and gentlemen, that will conclude today's conference. We thank you for your attendance. You may now disconnect.

Participants

Executives

• Aaron Alt, CFO
• Jason Hollar, CEO
• Matt Sims, VP of Investor Relations

Analysts

• Allen Lutz, Senior Equity Research Analyst, Healthcare Technology & Distribution at Bank of America
• Charles Rhyee, Managing Director at TD Cowen
• Daniel Grosslight, Senior Research Analyst of Healthcare Technology at Citi
• Elizabeth Anderson, Senior Managing Director at Evercore ISI
• Eric Percher, Founding Partner, Senior Research Analyst, Pharma Supply Chain & Digital Health at Nephron Research
• Erin Wright, Senior Equity Research Analyst, Healthcare Services at Morgan Stanley
• George Hill, Managing Director and Equity Research Analyst at Deutsche Bank
• Kevin Caliendo, Managing Director at UBS
• Lisa Gill, Managing Director at J.P. Morgan
• Stephanie Davis, Managing Director of Healthcare Technology and Distribution at Barclays
• Stephen Baxter, Managing Director and Senior Equity Research Analyst of Healthcare Services at Wells Fargo