James F. Cleary
Executive Vice President and Chief Financial Officer at Cencora
Thanks, Steve. Good morning and good afternoon, everyone. Reflecting on fiscal 2022, I am proud of the strong execution and performance by our teams as we advanced our company commercially and strategically, playing our central role in connecting pharma manufacturers with providers and patients as a leading healthcare solutions provider. Throughout the year, our teams navigated exceptionally well through a complex environment to ensure the delivery of crucial medications and services around the globe. Before I turn to our results, as a reminder, my remarks today will focus on our adjusted non-GAAP financial results unless otherwise stated. Growth rates and comparisons are made against the prior year September quarter and fiscal year. For a detailed discussion of our GAAP results, please refer to our earnings press release. Beginning with our fourth quarter results. We finished the quarter with adjusted diluted EPS of $2.60, an increase of 8.8%, which was driven by strong performance in our U.S. Healthcare Solutions segment. Our consolidated revenue was $61.2 billion, up approximately 4%, driven by growth in our U.S. healthcare solutions segment, offsetting weaker sales in the International healthcare solutions segment as a result of foreign currency translation pressure due to the historically strong dollar. Consolidated gross profit was $2.1 billion, up 5% due to growth in the U.S. healthcare solutions segment. Consolidated gross profit margin expanded by four basis points in the quarter to 3.44% driven by growth in the U.S. healthcare solutions segment.
Consolidated operating income was $741 million, up 7% compared to the prior year quarter. This growth was driven by a strong performance in the U.S. healthcare solutions segment, more than offsetting the decline in the International healthcare solutions segment, which I will discuss in more detail when I review segment level performance. Moving now to our net interest expense and effective tax rate for the fourth quarter. Net interest expense was $52 million, down 5.6% as a result of higher interest income. Our effective income tax rate was 19.8% compared to 20.3% in the prior year quarter. Our diluted share count was 210 million shares, a 0.4% decrease compared to the fourth quarter of fiscal 2021, driven by opportunistic share repurchases in the second half of our fiscal year. This completes the review of our consolidated results. Now I'll turn to our segment results for the fourth quarter. U.S. healthcare solutions segment revenue was $54.8 billion up 5% for the quarter as we continue to see broad-based solid performance and utilization trends across our portfolio. Revenue growth was impacted by lower sales of commercial COVID-19 treatments that have traditional commercial revenue associated with them, unlike the government-owned products that contributed more meaningfully to operating income in both the quarter and full fiscal year 2022. U.S. Healthcare Solutions segment operating income increased by 14% to $578 million. In the quarter, our specialty physician services business delivered strong growth across specialty classes. We also continue to benefit from strong biosimilar utilization in both specialty physician practices and health systems.
Operating income margin increased by nine basis points to 1.06% due to the distribution of COVID-19 treatments and growth in specialty physician services. Also, again, as a reminder, in the fourth quarter of fiscal 2021, we had elevated operating expenses as we made investments in our talent and growth initiatives. This impacts the year-over-year comparison for the segment in the quarter as we benefited from lapping those prior year expenses. I will now turn to our international healthcare solutions segment. In the quarter, international healthcare solutions revenue was $6.4 billion down 3% on a reported basis. International healthcare solutions operating income was $163 million down 13% on an as-reported basis driven by the impact of foreign currency translation and the divestiture of Profarma Specialty, which occurred in June 2022 and contributed $6 million in operating income during the fourth quarter of fiscal 2021. When looking at the segment on a constant currency basis, we believe the underlying business fundamentals are solid. In the quarter, we continued to have strong performances at World Courier, and Alliance Healthcare continued to execute well as we navigate inflation in the local economies. While the strong dollar continues to be a headwind on an as-reported basis, our teams throughout the segment have delivered good operational performance with solid trends across the businesses. As we look to 2023, we are excited to continue our progress on integrating Alliance Healthcare and to expand our global pharmaceutical solutions platform with the previously announced pending acquisition of PharmaLex.
That concludes our fiscal fourth quarter discussion. Now I will turn to a discussion of our full year fiscal 2022 results. Our consolidated revenue was $239 billion up 12% driven by growth in both segments and benefiting from the full year contribution of Alliance Healthcare. Excluding Alliance Healthcare, our consolidated revenue was up 5%. As we have indicated throughout the year, we had lower revenue recognized from COVID-19 treatment in the United States due to much of the volume associated with COVID treatments this year being associated with government-owned emergency use authorization treatments. In the prior year fiscal 2021, we had approximately $3.7 billion of sales related to COVID-19 treatments versus $1.7 billion in fiscal 2022. Consolidated operating income grew 20% to $3.2 billion driven by the full year contribution of Alliance Healthcare and solid performance across our portfolio, including sales to specialty physician practices. From a segment perspective, U.S. Healthcare Solutions had operating income growth of 9%, while international healthcare solutions operating income grew 81% year-over-year to $706 million. In fiscal 2022, we had $0.72 of contribution related to COVID treatment, test kits and vaccine distribution with $0.62 in the U.S. Healthcare Solutions segment and $0.10 in the international healthcare solutions segment.
Turning now to interest expense. In fiscal 2022, net interest expense was $211 million, an increase of 21% as a result of debt related to the Alliance Healthcare acquisition. In fiscal 2022, we repaid $1.1 billion of debt and expect to repay the remaining $675 million in short-term Alliance Healthcare-related debt by March 2023, delivering on our commitment to the rating agencies to repay 2/3 of the debt related to the Alliance Healthcare acquisition. While we project that our total corporate debt will be lower in 2023, we expect our interest expense to increase somewhat in fiscal 2023 due to local country-level subsidiary borrowings at higher interest rates. Regarding taxes, our adjusted effective tax rate for fiscal 2022 was 20.6% compared to 21.3% in fiscal 2021, as we began to realize tax synergies related to the Alliance Healthcare acquisition. Turning now to EPS. Our full year adjusted diluted EPS grew 19% to $11.03, driven by the incremental 8-month contribution from Alliance Healthcare and solid growth across our businesses. Adjusted free cash flow for the year was $3 billion, and we ended the year with a cash balance of $3.4 billion. As a result of our better-than-expected cash flow generation and our strong balance sheet, we opportunistically returned capital to shareholders through the repurchase of $500 million in shares in the back half of the fiscal year during a time of equity market fluctuations. After these repurchases, we have approximately $900 million remaining on our current share repurchase authorization. That completes the review of our fiscal 2022 results.
I will now discuss our fiscal 2023 guidance expectations. As a reminder, we do not provide forward-looking guidance on a GAAP basis. So the following metrics are provided on an adjusted non-GAAP basis. I will also provide certain guidance metrics on a constant currency basis. We have also provided a detailed overview of guidance metrics on slides nine and 10 of our earnings presentation. Starting with revenue. We expect consolidated revenue to grow in the 5% to 7% range on a reported basis and in the 6% to 8% range on a constant currency basis. On a segment level, we expect U.S. healthcare solutions revenue to grow in the 6% to 8% range and international health care solutions, on a reported basis, we expect revenue to decline in the 1% to 5% range. On a constant currency basis, we expect the international segment's revenue to grow in the 8% to 12% range. Moving to operating income. We expect consolidated operating income to grow in the 0% to 3% range or 3% to 6% on a constant currency basis. Excluding COVID contributions, we expect consolidated operating income growth to be in the 3% to 5% range or 6% to 8% on a constant currency basis. On a segment level, we expect U.S. healthcare solutions' operating income growth to be in the 2% to 4% range. As we've called out throughout the year, in fiscal 2022, we had a significant tailwind related to the work we did to distribute COVID-19 treatments across the U.S. In the fourth quarter, the COVID treatment contribution came in slightly stronger than expected, bringing our total COVID treatment contribution for the segment to $0.62 for the year.
In our fiscal 2023 guidance, we have embedded approximately $0.30 of contribution in the U.S. segment related to COVID treatment distribution. Excluding the contributions from COVID-related operating income, we expect U.S. segment operating income growth to be in the 5% to 7% range in fiscal 2023, generally in line with the long-term guidance we introduced at our Investor Day in June. Turning now to our International healthcare solutions segment fiscal 2023 operating income guidance. We expect international healthcare solutions segment operating income to decline in the 3% to 7% range on an as-reported basis or 5% to 9% growth on a constant currency basis. In fiscal 2022, the international segment had a $0.10 contribution related to COVID vaccine and test kit distribution. In fiscal 2023, we expect a few cents of contribution from COVID-related business in the segment. On an ex-COVID as-reported basis, we expect the international healthcare solutions segment operating income decline to be in the 1% to 5% range or operating income growth of 7% to 11% on a constant currency basis. As you turn to your models, there are a few items impacting the international segment from fiscal 2022 to fiscal 2023. First, we completed the sale of Profarma Specialty in June which represented 2% of segment operating income in fiscal 2022. Second, the historically strong dollar created pressure in the segment during fiscal 2022, largely in the second half of the fiscal year.
While FX pressure impacts the translation of income for our business, there are some elements of our business that mitigate FX risks, including that we operate and source in the local countries where we generate sales. While we expect an FX headwind in 2023 over 2022 using rates as of late October, the impact is fully reflected in our 2023 guidance and would largely be front-half weighted as the dollar did not significantly strengthen until the back half of fiscal 2022. Third, as we said in the September announcement of our intent to acquire PharmaLex we anticipate closing the acquisition by March and expect the business to contribute approximately $0.15 in the last seven months of our fiscal year. Our teams are making good progress and are on track to close the acquisition on schedule. The acquisition is accretive and adds to our higher-margin, higher-growth pharma manufacturer services platform for long-term value creation. Despite FX and inflationary pressures, our International Healthcare Solutions segment has delivered solid operational performance in the businesses and the segment, our core component of our strategic vision. With our distribution, scale and portfolio of manufactured services, we're uniquely positioned to support pharmaceutical innovation and access across our footprint. Moving on to tax rate and share count. We expect our tax rate to be approximately 20% to 21% for fiscal 2023.
We expect that our share count will be approximately 207 million to 209 million shares as we will continue to opportunistically repurchase shares in fiscal 2023. Given these expectations, we are guiding for adjusted diluted EPS to be in the range of $11.30 to $11.60 on an as-reported basis, reflecting year-over-year growth of 2% to 5% or 4% to 7% on a constant currency basis. Excluding both the COVID-19 contribution of $0.72 in fiscal '22 and the expectation for approximately $0.30 to $0.35 of contribution in fiscal 2023, EPS growth would be in the 7% to 9% range or 9% to 11% on a constant currency basis. There are still many variables that make it difficult to predict the timing and realization of COVID treatment contribution. While this is our current estimate of COVID treatment contribution, we will continue to review trends over the coming months and make adjustments to our expectations as necessary. Turning now to capital expenditures and cash flow expectations. capex is expected to be approximately $500 million as we continue to invest to advance our business and support future growth opportunities. For adjusted free cash flow, we expect adjusted free cash flow to be approximately $2 billion. Since the opioid settlement agreement has been agreed to and annual payments are now predictable, the cash payments associated with the settlement are now included in our adjusted free cash flow guidance, which is the driver of lower adjusted free cash flow guidance in fiscal 2023 relative to fiscal 2022.
As a reminder, in fiscal 2022, we made two payments related to the settlement both at 2021 and the 2022 payments that totaled approximately $775 million. Before I make my closing remarks, while we do not provide guidance on a quarterly basis, I would like to provide some color on our quarterly cadence as you turn to your models. First, the dollar did not substantially strengthen until the second half of our fiscal year 2022. As a result, in fiscal 2023, we expect to see a more significant FX related headwind in the first half. Second, in fiscal 2022, inflationary pressures in the business were largely in the last seven to eight months of the year, resulting in a tougher comparison for the first quarter of fiscal 2023 as we continue to carry those higher costs sequentially. While we feel very good about our growth rates in our full year fiscal 2023 guidance, these two factors create a tougher comparison in the first half of our fiscal year, particularly in the first quarter. To conclude, fiscal 2022 was a successful year for AmerisourceBergen, as our purpose-driven team members delivered exceptional execution and performance. We entered fiscal 2023 with strong momentum, and our increasingly united teams are creating differentiated value for our customers, partners and the patients they serve. We are well positioned to continue to drive value for our stakeholders by continuing to leverage our commercial strengths to create efficiency, investing in innovation to enhance our capabilities and deploying capital thoughtfully and strategically.
With that, I'll now turn the call over to the operator to open the line for questions. Operator?
