Cencora (COR) Q4 2025 Earnings Call Transcript

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DATE

Nov. 5, 2025 at 8:30 a.m. ET

CALL PARTICIPANTS

President and Chief Executive Officer — Robert P. Mauch

Executive Vice President and Chief Financial Officer — James F. Cleary

Senior Vice President, Investor Relations and Enterprise Productivity — Bennett S. Murphy

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RISKS

Cleary stated, "Our effective tax rate in the fourth quarter was 20.6% compared to 20.3% in the prior year quarter," indicating a higher tax burden.

Cleary reported a "$724 million goodwill impairment related to Pharmalex," and attributed the charge to "persistent demand challenges, which resulted in the business falling below our original expectations and declining year over year."

Cleary noted, "we will have a headwind related to this loss for 2026," with the net impact described as a net headwind of 1% is expected for the U.S. Healthcare Solutions segment (adjusted non-GAAP) in fiscal 2026.

Cleary advised, "other operating income decline in the range of 1% to 4%," referencing forecasted contraction for the 'other' segment in fiscal 2026.

TAKEAWAYS

Adjusted Diluted EPS -- Adjusted diluted EPS was $3.84, an increase of 15% year-over-year, primarily driven by performance in the U.S. Healthcare Solutions segment.

Consolidated Revenue -- Consolidated revenue was $83.7 billion, up 6% (adjusted non-GAAP), mainly due to continued volume growth in both primary segments.

GLP-1 Product Contribution -- U.S. Healthcare sales of $876 million, representing a 10% year-over-year increase and contributing 50 basis points to segment revenue growth (non-GAAP); GLP-1s contributed 40 basis points to consolidated revenue growth (non-GAAP).

Consolidated Gross Profit -- Consolidated gross profit was $2.9 billion, up 18% for consolidated gross profit (non-GAAP), with gross profit margin of 3.47%, up 37 basis points year-over-year; RCA acquisition cited as a material driver.

Consolidated Operating Income -- Consolidated operating income was $1 billion, up 20%; U.S. Healthcare Solutions segment adjusted operating income rose 25% to $872 million, with a 13% increase excluding RCA contribution.

International Healthcare Solutions Segment -- Revenue was $7.9 billion, up 8% as-reported; operating income was $151 million, down 2% as-reported, reflecting pressure in global consulting service businesses.

Net Interest Expense -- Net interest expense was $78 million, rising by $57 million year-over-year, linked to debt financing for the RCA acquisition; $700 million of a $1.5 billion term loan was repaid by year-end.

Free Cash Flow -- Adjusted free cash flow was $3 billion, with a year-end cash balance of $4.4 billion.

Capital Return to Shareholders -- Dividends and share repurchases totaled nearly $900 million; the Board authorized a 9% increase in the quarterly dividend.

Strategic Alternatives and Reporting Changes -- MWI Animal Health, Pro Pharma (Brazil), legacy U.S. Consulting hub services, and components of Pharmalex are grouped as "other" ahead of potential divestitures and will be reported independently from 2026 for greater transparency.

Fiscal 2026 Adjusted EPS Guidance -- Adjusted non-GAAP diluted EPS guidance for fiscal 2026 is $17.45 to $17.75, representing projected growth of 9% to 11%.

Revenue Growth Guidance (2026) -- Consolidated revenue expected to grow 5%-7%; U.S. Healthcare Solutions revenue growth of 5%-7%; International Healthcare Solutions revenue growth of 6%-8%; "Other" segment revenue growth of 0%-4%.

Operating Income Guidance (2026) -- Consolidated adjusted operating income growth projected at 8%-10%; U.S. Healthcare Solutions at 9%-11%; International Healthcare Solutions operating income growth of 5%-8%; contraction of 1%-4% for "other."

Long-term Adjusted Operating Income Growth Target -- Raised to 6%-9% from 5%-8%; Adjusted EPS long-term CAGR guidance was raised to 9%-13% (non-GAAP), M&A and share buybacks are expected to contribute 3%-4% to long-term EPS growth.

Capital Expenditure Guidance (2026) -- Reflecting an elevated investment in infrastructure and IT to support supply chain and digital initiatives.

MSO Platform Strategy -- Enhancement and integration of RCA and progression toward full ownership of OneOncology identified as strategic priorities, with cross-platform capability-building planned.

$1 Billion Distribution Network Investment -- Announced $1 billion in supply chain capital commitments through 2030, including a second national distribution center and expanded specialty cold chain capacity.

SUMMARY

Management underscored a disciplined realignment of the business portfolio by shifting non-strategic assets—including MWI Animal Health, Pro Pharma (Brazil), legacy U.S. hub services, and distinct Pharmalex components—into an "other" category, with explicit plans to explore strategic alternatives for these operations. This reporting change will take effect in fiscal 2026 (period ending Sept. 30, 2026). Significant resource allocation to the specialty segment, highlighted by the acquisition and ongoing integration of Retina Consultants of America and a pathway to full ownership of OneOncology, is central to Cencora (NYSE:COR)'s long-term growth approach. The Board approved a 9% increase in the quarterly dividend, in line with the updated long-term adjusted diluted EPS growth guidance. Management indicated that capital expenditures will be elevated in fiscal 2026, focusing on core infrastructure and digital transformation to address increasing specialty market complexity. The executive team raised both the long-term adjusted non-GAAP operating income and adjusted non-GAAP EPS growth targets to 6%-9% and 9%-13%, respectively, citing robust U.S. Healthcare Solutions performance, sustained specialty demand, and expanded service offerings as key drivers.

Mauch confirmed, "we are evaluating strategic alternatives" for businesses placed in "other," clarifying no immediate operational concerns but a stronger focus on strategic alignment.

Cleary stated, "All of the businesses in 'other' are profitable," but some are expected to experience a profit decline in fiscal 2026 (non-GAAP).

The loss of a major oncology customer "was fully reflected in our results in 2025," according to James F. Cleary, with Cleary projecting a continued headwind through 2026, although segment growth is expected to accelerate in Q4 fiscal 2026 as the impact is lapped.

Cleary specified that MWI Animal Health accounted for nearly 70% of the "other" segment revenue based on fiscal 2025 results, and Pro Pharma accounts for about one quarter, based on fiscal 2025 results.

The company anticipates further value capture in specialty by consolidating MSO platforms to leverage shared expertise in clinical trials and back-office efficiencies.

INDUSTRY GLOSSARY

MSO (Management Services Organization): An entity providing business, administrative, and operational support to physician practice groups, enabling economies of scale and specialized service offerings in areas such as revenue cycle, clinical trials, and regulatory compliance.

GLP-1: A class of glucagon-like peptide-1 receptor agonists used in diabetes and obesity care; significant as a high-growth specialty pharmaceutical product category.

3PL (Third-Party Logistics): Outsourced logistics provider offering warehousing, specialty distribution, and transportation services for pharmaceutical products, critical for specialty product channels.

Full Conference Call Transcript

Bennett S. Murphy: Thank you. Good morning, good afternoon, and thank you for joining us for this conference call to discuss Cencora, Inc.'s fiscal 2025 fourth quarter and full year results. I am Bennett S. Murphy, Senior Vice President, Investor Relations and Enterprise Productivity. Joining me today are Robert P. Mauch, President and CEO, and James F. Cleary, Executive Vice President and CFO. 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.zencor.com. We have also posted a slide presentation to accompany today's press release on our investor website.

This conference call will discuss 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-Q. Cencora, Inc. assumes no obligation to update any forward-looking statements, and this call cannot be rebroadcast without the express 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.

Robert P. Mauch: Thank you, Bennett. Hi, everyone, and thank you for joining Cencora, Inc.'s fiscal 2025 fourth quarter earnings call. I will begin today by expressing my gratitude to our team members who power our results, advance our strategy, and lead with purpose. In fiscal 2025, Cencora, Inc. achieved strong financial performance with adjusted operating income and adjusted diluted EPS growth of 16%. Driven by our strategic positioning in Specialty, thoughtful investments to enhance our solutions in fast-growing areas of the market, and continued strong pharmaceutical utilization trends. The results our team members deliver demonstrate the unique value we provide to our leading customers, both pharma manufacturers and providers, as an end-to-end healthcare services company.

As a reflection of our confidence in continued market growth, the strength and positioning of our business, our successful investments in key growth areas like specialty, and conviction in our continued execution, we are pleased to be raising our long-term guidance for adjusted operating income growth to 6% to 9% and our adjusted EPS growth to 9% to 13%. During the year, we made considerable progress in strengthening our role as a leading healthcare services provider. Through our disciplined focus, our strategy going forward centers on three growth priorities: leading with market leaders, enhancing patient access to pharmaceuticals, and strengthening our position in specialty, as well as four strategic drivers enabling our execution. First, prioritizing growth-oriented investments.

We are committed to advancing our leadership in the healthcare industry, which requires us to invest significantly both organically and inorganically in the areas that will strengthen our strategic positioning and drive long-term value. Second, improving the customer experience by leveraging advanced data analytics and technologies. We are enhancing how we utilize technology and analytics to expand our services and solutions while also generating actionable insights to inform our industry partners. Third, driving a best-in-class talent experience. Our people are our most important asset. At Cencora, Inc., we are committed to empowering our talent with the skills and experiences they need to build meaningful careers as our industry and work continue to evolve.

And fourth, identifying ongoing process and capability improvements. We are focused on enhancing our productivity, becoming even more integrated and efficient in serving the dynamic pharmaceutical supply chain. Today, I want to highlight the intersection of strengthening our position in specialty and how we are strategically prioritizing growth-oriented investments. I will begin with how Cencora, Inc. is prioritizing growth-oriented investments to fuel our long-term growth. Cencora, Inc. is making investments that align with our pharmaceutical-centric strategy and elevate our offering. We regularly evaluate our portfolio to ensure we are focusing on areas that advance our long-term vision. As announced this morning, we undertook a thorough review of our portfolio as part of our approach to prioritize growth-oriented investments.

This review led us to sharpen our focus for the businesses included in both our U.S. and International Healthcare Solutions segments. We identified specific areas of the business that do not align as closely with our strategy going forward. Specifically, our animal health business, MWI, our legacy U.S. hub services, our equity investment in Pro Pharma in Brazil, and certain components of Pharmalex. As a result, we are evaluating strategic alternatives for these businesses and are grouping them as "other" in our financial reporting to provide additional transparency for our investors.

By evaluating alternatives for these businesses, we will identify the right long-term partners to help the businesses within "other" capitalize on the strength of their offerings while we focus on executing against Cencora, Inc.'s strategy in our remaining businesses. We believe this prioritization will allow us to effectively deploy resources against our growth priorities. For example, strengthening our position in specialty. The acquisition of Retina Consultants of America, RCA, is a recent investment that reflects our commitment to strengthening our leadership in specialty. Since the acquisition closed earlier this year, RCA has continued to demonstrate the unique value the platform provides for physicians, while our joint teams have been identifying areas where we can augment the RCA value proposition.

The MSO relationship is key for providers. With RCA now a part of Cencora, Inc., and our pathway to full ownership of OneOncology, we are excited about our ability to drive growth while contributing positively to patient outcomes by increasing time physicians can spend with patients, enhancing access to innovative treatments through renowned research capabilities, and informing best practices in community-based care. We are also prioritizing internal investments. In order to continue to lead with market leaders, Cencora, Inc. is expanding and enhancing our supply chain infrastructure to support our customers' continued growth and innovation.

This morning, we were proud to announce significant investments totaling $1 billion through 2030 to amplify our distribution network, including opening a second national distribution center and expanding our existing specialty distribution capacity. These investments will allow us to better support our customers with additional cold chain storage as the specialty market grows. This commitment builds on our track record of successful investments to expand our infrastructure and will enhance the resiliency and efficiency of our supply chain to ensure we are well-positioned to handle the rising demand and complexity of pharmaceutical treatments. We are confident we have the right culture and strategy to ensure we continuously strengthen our business to support growth.

I will now turn the call to Jim to discuss our fourth quarter and fiscal 2025 results, fiscal 2026 guidance, and Cencora, Inc.'s updated long-term guidance. Jim?

James F. Cleary: Thanks, Bob. Good morning and good afternoon, everyone. Before I turn to a review of our fourth quarter and full year fiscal 2025 results, as a reminder, my remarks today 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. Fiscal 2025 was a pivotal year for Cencora, Inc., as we took decisive steps to advance our strategy guided by our strategic priorities and growth drivers and delivered impressive results due to our team members who remain committed to our customers and patients.

To reflect our strong execution, intentional positioning in, and prioritization of growth-oriented areas and positive core fundamentals, we are pleased to be raising our long-term guidance for adjusted diluted EPS and operating income, which I will discuss in more detail following a review of our results. Turning now to our fourth quarter results. We completed the quarter with adjusted diluted EPS of $3.84, an increase of 15%, driven by strong performance in our U.S. Healthcare Solutions segment. Consolidated revenue was $83.7 billion, up 6%, driven by growth in both reportable segments, primarily due to continued volume growth.

In the quarter, GLP-1s were a less meaningful contributor to revenue growth than in recent quarters and represented a 40 basis points contribution to our consolidated revenue growth. Moving to gross profit, consolidated gross profit was $2.9 billion, up 18%, largely driven by gross profit growth in the U.S. Healthcare Solutions segment. Consolidated gross profit margin was 3.47%, an increase of 37 basis points, primarily due to the gross profit contribution from our acquisition of Retina Consultants of America. Consolidated operating expenses were $1.9 billion, up 18%, primarily due to the RCA acquisition and in support of our overall revenue growth. Turning now to operating income. Consolidated operating income was $1 billion, up 20% compared to the prior year quarter.

The increase in operating income was driven by continued strong growth in our U.S. Healthcare segment, which I will discuss in more detail when reviewing segment level results. Moving now to our net interest expense. Net interest expense was $78 million, an increase of $57 million, primarily due to the $3.3 billion in debt raised to finance a portion of the RCA acquisition. In September, we repaid $500 million of our existing term loan. As a result, we have now already repaid $700 million of the $1.5 billion three-year term loan, which was issued in January as part of the RCA financing. Moving to effective tax rate.

Our effective tax rate in the fourth quarter was 20.6% compared to 20.3% in the prior year quarter. Finally, our diluted share count was 195.3 million shares, a 1% decrease compared to the prior year fourth quarter, primarily driven by opportunistic share repurchases completed earlier this fiscal year. This completes the review of our consolidated results. Now I will review our segment results for the fourth quarter. U.S. Healthcare Solutions segment revenue was $75.8 billion, up approximately 6% versus the prior year quarter, as we continued to benefit from strong utilization trends. Sales of GLP-1 products increased $876 million, or 10% year over year, representing a 50 basis point contribution to segment revenue growth.

As a reminder, we indicated on our third quarter earnings call the moderation in U.S. Healthcare Solutions segment revenue growth was expected and then was reflected in Street consensus. Turning now to operating income. U.S. Healthcare Solutions segment operating income increased by 25% to $872 million due to growth across our distribution businesses and the contribution from RCA. During the quarter, we continued to see good volumes in specialty across health systems and physician practices, as our partnerships with leaders in both channels drove solid growth, more than offsetting the previously disclosed loss of an oncology customer that occurred in June due to its acquisition by a peer. Turning now to International Healthcare Solutions segment.

In the quarter, International Healthcare Solutions segment revenue was $7.9 billion, an increase of 8% on an as-reported basis and an increase of 6% on a constant currency basis, primarily driven by revenue growth in our European distribution business. International Healthcare Solutions segment operating income was $151 million, a 2% decrease on an as-reported basis and a 6% decrease on a constant currency basis, primarily driven by continued pressure in our global consulting service businesses, partially offset by growth in all other business units in the segment. In our European distribution business, we saw continued strong demand for our 3PL services, which includes logistics for specialty products, and signed a number of new contracts.

Additionally, during the quarter, we were encouraged to see a rebound in our global specialty logistics business, where shipment volumes returned to growth. Before turning to our full year fiscal 2025 results, I would like to take a moment to discuss our GAAP operating income results in the fourth quarter. It includes a $724 million goodwill impairment related to Pharmalex, as noted in our press release. Pharmalex has continued to experience persistent demand challenges, which resulted in the business falling below our original expectations and declining year over year. We have taken steps to better position Pharmalex for long-term success.

As part of the strategic review Bob mentioned in his remarks, we have made the decision to simplify Pharmalex's business and will now only be focused on three main areas where we are better positioned: pharmacovigilance, market access, and regulatory affairs. We are evaluating strategic alternatives for Pharmalex's other service verticals. That concludes the discussion of our fiscal fourth quarter financials. I will turn to a discussion of our full year fiscal 2025 results compared to the prior year, beginning with revenue. Our consolidated revenue was $321.3 billion, up 9%, driven by U.S. Healthcare Solutions segment growth of 10% and International Healthcare Solutions segment growth of 6%.

Consolidated operating income was $4.2 billion, an increase of 16%, driven by growth in the U.S. Healthcare Solutions segment, where we continue to benefit from volume growth, particularly growth in specialty and three quarters of contribution from the RCA acquisition. Including the discussion of our full year fiscal 2025 results, during the year, we generated $3 billion of adjusted free cash flow and ended the year with a cash balance of $4.4 billion. During the year, in addition to investing in our business through capital expenditures and furthering our strategy through M&A, we continued to prioritize returning capital to our shareholders through dividends and share repurchases that totaled close to $900 million.

This morning, we were pleased to announce our twenty-first consecutive annual dividend increase, with our Board of Directors approving a 9% increase to our quarterly dividend, once again aligning our dividend growth rate to the low end of our long-term guidance for adjusted diluted EPS growth. This completes the review of our full fiscal year results. Before I turn to a discussion of our fiscal 2026 guidance and updates to our long-term guidance, I will take a moment to discuss our updated financial reporting structure that Bob mentioned in his remarks. Beginning in 2026, in addition to our two reportable segments, U.S.

Healthcare Solutions and International Healthcare Solutions, we will begin reporting certain businesses that we are exploring strategic alternatives for under "other." Through this increased transparency, we hope to provide our investors with additional visibility into the strength of our go-forward business performance and trajectory as we prioritize growth-oriented businesses aligned with our strategy. As Bob mentioned, "other" includes MWI Animal Health, our equity stake in Pro Pharma, legacy U.S. Consulting hub services, and components of Pharmalex. We are committed to finding the right strategic fit for each of these businesses to drive mutual success and value for all our stakeholders.

For recast comparable segment results for fiscal 2024 and fiscal 2025, I would refer you to our investor website and Form 8-Ks we furnished this morning. Turning now to discuss our fiscal 2026 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. We have also provided a detailed overview of guidance on slides eleven and twelve of our earnings presentation, including constant currency guidance for our International Healthcare Solutions segment. Starting with EPS, we expect adjusted diluted EPS to be in the range of $17.45 to $17.75, representing growth of 9% to 11%.

Now I will provide some details on the items contributing to this EPS growth. Beginning with revenue, we expect consolidated revenue growth to be in the range of 5% to 7%, reflecting U.S. Healthcare Solutions revenue growth in the range of 5% to 7%, International Healthcare Solutions revenue growth in the range of 6% to 8%, and other revenue growth in the range of 0% to 4%. Turning to operating income. We expect consolidated operating income growth to be in the range of 8% to 10%, reflecting U.S.

Healthcare Solutions operating income growth in the range of 9% to 11%, International Healthcare Solutions operating income growth in the range of 5% to 8%, and other operating income decline in the range of 1% to 4%. Before turning to our additional guidance assumptions, given our updated reporting structure, I wanted to provide some additional context on the makeup of "other" to assist in your modeling. First, MWI Animal Health represents nearly 70% of "other's" revenue based on fiscal 2025 results. In the fourth quarter, the business continued its strong performance and ended fiscal 2025 with full-year revenue growth of 6%.

Second, Pro Pharma, a standalone pharmaceutical distribution business in Brazil, represents about a quarter of revenue in "other" based on fiscal 2025 results. As a reminder, given the nature of the equity stake we hold in Pro Pharma, we consolidate its financials and eliminate a portion of net income not attributable to Cencora, Inc. through our non-controlling interest line. Now moving to interest expense, we expect our interest expense to be in the range of $315 million to $335 million. As a reminder, we issued a majority of the debt related to the RCA acquisition in December 2024, with the acquisition closing in January 2025.

As a result, our interest expense will be higher in fiscal 2026 due to the incremental quarter of higher interest expense. Turning to income taxes, we expect our effective tax rate to be in the range of 20% to 21% for fiscal 2026. Moving now to share count, we expect that our full-year average share count will be approximately 194 million shares for fiscal 2026. This contemplates approximately $1 billion in share repurchase over the course of the fiscal year. Regarding our capital expenditure expectations, in fiscal 2026, we expect capital expenditures to be approximately $900 million.

While the CapEx dollar spend is elevated relative to recent years, as a percentage of gross profit, it aligns with historical periods when we have made significant investments in our infrastructure. In addition to the U.S. supply chain infrastructure investments Bob mentioned, we will be making IT investments to support our digital transformation. As it relates to free cash flow, we expect adjusted free cash flow to be approximately $3 billion for fiscal 2026. Before I conclude my remarks and provide an update on our long-term guidance, while we do not provide guidance on a quarterly basis, there are a few things to keep in mind on our quarterly operating income cadence as you review your models.

First, as we have discussed, in June, we lost an oncology customer following its acquisition by a peer. This impact was fully reflected in our results in 2025. However, we will have a headwind related to this loss for 2026. As you update your quarterly models to reflect the fiscal 2026 guidance, we would expect growth to pick up in the fourth quarter of our fiscal year as we begin to lap this customer loss. Second, we completed the RCA acquisition at the beginning of 2025 and will begin to lap the inclusion of RCA in our results. The loss of the oncology customer and incremental quarter of contribution from RCA represent a net headwind of 1% for our U.S.

Healthcare Solutions segment in fiscal 2026. To conclude, Cencora, Inc. has clearly delivered strong performance over the years as our pharmaceutical-centric strategy and positioning in specialty have allowed us to capitalize on positive industry trends driven by our team members' focus and execution. In recognition of this performance track record and underlying industry fundamentals, including continued innovation and demographic trends, we are pleased to be raising our long-term adjusted operating income growth guidance to a range of 6% to 9% from our prior range of 5% to 8%. This is driven by our increased expectations for our U.S.

Healthcare Solutions segment, where we are now calling for adjusted operating income growth of 6% to 9%, up from our previous range of 5% to 8%. Powered by our strong positioning in specialty and our efforts to augment our solutions offerings to our customers. With our long-term EPS contribution from M&A and share repurchase unchanged at 3% to 4%, we feel we are strongly positioned to grow EPS over the long term in the range of 9% to 13%. Before we open the line for questions, I will turn the call back to Bob for his closing remarks. Bob?

Robert P. Mauch: Thank you, Jim. Fiscal 2025 was a pivotal year for Cencora, Inc. as we strengthened our leadership in specialty through the acquisition of RCA and took key steps to sharpen our focus and execution alignment with our strategy. It is our obligation as a healthcare company to continue to champion innovation and efficiency. We are focused on driving continued strong growth for our enterprise by leveraging our robust infrastructure, differentiated capabilities, and continued investment in specialty, including our MSO platform. Cencora, Inc.'s growth priorities are clear as we are leading with market leaders, enhancing patient access to pharmaceuticals, and relentlessly strengthening our position in specialty. Once again, I want to thank the Cencora, Inc. team members.

It is due to their disciplined execution and commitment to our purpose that Jim and I are able to report strong results and guidance. As we look ahead, we are positioning ourselves for long-term growth and value creation. Informed by our strategic drivers and growth priorities, and guided by our purpose, we are united in our responsibility to create healthier futures. With that, we will turn the call over to the operator for Q&A. Operator?

Lucy: Thank you. The first question comes from Lisa Christine Gill of JPMorgan. Your line is now open. Please go ahead.

Lisa Christine Gill: Thanks very much. And thank you for all the detail. When I think about the business, Bob, and I look at how well you have done the last few years, and we appreciate you updating the long-term guidance. Can you maybe just spend a minute strategically how you view the business? You are now taking some of these businesses, putting them into "other." I would assume looking at potentially selling them as you talked about or partnering with others. So how do I think about, one, your strategic priorities going forward? You talk a lot about specialty. You are clearly a leader there. Two, like the MSO business, should we expect that you will do incremental acquisitions there?

So just if you could spend a couple of minutes from a strategic standpoint as we think about 2026 and beyond.

Robert P. Mauch: Yeah. Hi, Lisa. Thank you very much for the question. Yeah. I think what you see in our actions and what we are discussing today is our attempt to be very focused in our strategic execution. So when you think about what is in the U.S. Internet U.S. Solutions segment and International Solutions segment, we feel we are better positioned now to make sure that we are dedicating resources, allocating capital, both human and financial capital, to make sure that we are investing in the areas that best align with our strategy going forward. It does not mean that the businesses that we have identified through our strategic review are bad businesses or troubled in some way.

We are just being disciplined and focused in making sure that we can focus on where we have been really clear about where we are going to continue to differentiate ourselves. And Lisa, you mentioned the MSOs, and I think that is a really good example of as we have the successful acquisition of RCA, which is going really well, and the pathway to full ownership of OneOncology, we want to make sure that we are able to continue to invest in those businesses and that we have our management team focused. We have our financial focus there. And the result of that really is allowing the MSO value proposition to be most evident.

And that value proposition is really making care easier for patients and making care easier for physicians. And you know, that is what we want to do, as you know, over a long period of time. We have focused resources in multiple areas actually to support providers, to support small businesses within healthcare. And what you are seeing here today is just us being disciplined and focused and making sure that as we go forward, we have our capital deployment very broadly well defined, but also specifically on our growth areas, and you know, specialty is certainly top of mind, and then the MSO platforms within specialty are something that we will continue to invest in.

James F. Cleary: Lisa, one thing that I will add there is as we look at our performance in the fourth quarter and our performance in fiscal year 2025, one of the things that we benefited from was the strength of the results in RCA and the organic growth there and the inorganic growth there also. And then we are seeing the same things from our investment in OneOncology, which really reinforces the strategy that you were asking about and Bob was talking about.

And so on top of the strong organic growth, OneOncology has continued to grow inorganically, and this has positively contributed to our distribution and GPO business, and our sales to OneOncology are a really good example when we talk about the strength of our sales to physician practices. And so we have been very excited about RCA and what it adds to the business and also excited about OneOncology and the pathway to full ownership and what we can do with full ownership across our MSO platform alongside RCA, which is what Bob, you know, was talking about and you were about with respect to our strategy.

Lisa Christine Gill: Thank you.

Lucy: The next question comes from Elizabeth Hammell Anderson of Evercore ISI. Your line is now open. Please go ahead.

Elizabeth Hammell Anderson: Hey guys, thanks so much for the question. Maybe to double click on what you were just talking about, Jim, in response to Lisa's question. You know, as you have owned RCA for, you know, almost a year and, you know, OneOncology, what are the next steps in the evolution of the MSO platform? What, I guess, maybe in your allusion to what you were just talking about in terms of things you cannot do while it is not consolidated, that would be sort of helpful to hear and just kind of increment learnings as we are lapping the first year of contribution. Thank you.

Robert P. Mauch: Yep. Hey, Elizabeth. It is Bob. I will take the first pass at that. You know, when you think about at some point when we can bring things together, there are very real capabilities and strengths within each of the MSO platforms that we are going to be able to leverage across all of Cencora, Inc.'s MSO platform. And if you think about clinical trial expertise, you know, that is something that can be shared across both retina and oncology. There is a very real opportunity for that we are excited about.

And then there are, you know, some back-office activities like revenue cycle management that, you know, we will also be able to leverage across the MSO that will, again, make the ability for these physicians to provide care without having to worry about the back-office activities as much and also, you know, provide the highest level of care through the clinical trial access is something that we are really excited about. So the next phase is, you know, really looking at the things that we will be able to do together across the platforms. And that is where we will be focused next.

James F. Cleary: And, you know, one thing that I will add there, Elizabeth, is that, you know, when Bob was talking about this strength of RCA with clinical trial sites, from a financial standpoint, that is one of the things at RCA that has really exceeded our expectations during the first year from a financial standpoint, but also in the way it has helped attract fellows out of training to RCA, which is one of the key things that has been benefiting the inorganic growth there is the opportunity for fellows out of training to practice and also be involved in the clinical trials. Thank you for the question.

Lucy: Thank you. The next question comes from Michael Aaron Cherny of Leerink Partners. Your line is now open. Please go ahead.

Michael Aaron Cherny: Good morning. Thanks for taking the question. Maybe if we can just hone in on the U.S. AOI performance in the quarter. Usually, we are not used to distributors putting up mid-20% plus EBIT growth on a two-quarter basis. Obviously, RCA, as we all know, is in there. Lost FCS this quarter. As you think about the durability of growth there against the backdrop of your new LRP, what is driving that level of magnitude of growth, and how durable do you feel like the drivers behind that are appropriately embedded in the updated long-range plan? So much.

James F. Cleary: Yes. Thank you very much for the question. And of course, you know, we had exceptional results in the U.S. segment during the fourth quarter. We had adjusted operating income growth of 25%, and I will provide some additional detail for you. If we look at it ex-RCA, it was growth of 13%, and that was in spite of a COVID headwind during the quarter of $15 million and in spite of the headwind from the loss of the oncology customer that was acquired by a peer. And so, you know, in 2025, we saw exceptionally strong growth in the U.S. Healthcare Solutions segment with broad-based performance across the portfolio.

And as we look towards fiscal year 2026, we still see strong performance across the business, but in our guidance, we do not have the same level of outperformance that we have seen recently. One thing that I will add, looking at our guidance for fiscal year 2026, when excluding the additional quarter of RCA, our guidance still contemplates growth within our new long-term guidance range of 6% to 9%, even when considering the oncology customer loss. And so you asked about our long-term guidance also. And our increased U.S.

Healthcare Solutions segment long-term guidance and the increase in our consolidated long-term guidance for adjusted operating income and EPS, it reflects the confidence and the strength of our business and our team's ability to continue executing at a high level. Of course, we do have a lot of confidence in our long-term guidance ranges. Thank you for the question.

Lucy: Thank you. The next question comes from Charles Rhyee of TD Cowen. Your line is now open. Please go ahead.

Charles Rhyee: Thanks for taking the question. Jim, maybe I can just follow-up on what you responded to Mike's question is, obviously, you said 30% growth ex-RCA, but you included the impact of COVID as well as Florida cancer. I mean, you normalize for those, the core growth is actually still quite strong, probably north of 20-something percent by our estimation. I guess maybe when you think about your planning then, it is fair to think that your long-range, you know, your LRP here, that has been obviously increased is, you know, reflecting the potential for, you know, kind of events to occur, you know, now and then into the future. Right?

You know, a peer acquires somebody or, you know, some of those events happen, but fair to think that they are, like, the, you know, ex that the core strength is still quite, you know, above what the LRP at the moment is. Is that a fair understanding of how to interpret the results right now? And then, you know, when we think about the, and just if I could add on the capital deployment of 3% to 4% in your long-term range, does that already contemplate sort of the, you know, that the next step in the OneOncology transaction? Is that already kind of embedded into that? Thanks.

James F. Cleary: Yeah. And so let me address the questions that you asked, and I will start with 2026. And then I will move on to the long-term guidance for both adjusted operating income and EPS. In FY 2026 in the U.S., our guide for adjusted operating income growth is 9% to 11%, but when we take a look at the net headwind that is caused by the extra quarter of RCA, which is a tailwind and offset by the loss of the oncology customer due to the acquisition for kind of the three-quarter impact that has on FY 'twenty-six. That is a net headwind of 1%.

So if we look at it, excluding that net headwind, our guidance in the U.S. for fiscal year 'twenty-six is 10% to 12%. And as we look at our long-term guidance, as I said, we have a lot of confidence in our long-term guidance, and we think we are really well-positioned to continue to drive value for our stakeholders through our core and pharmaceutical distribution and the other services. We are pleased to increase that long-term guidance.

But I think probably one way to address your question is there is the law of large numbers, and we are just, you know, continuing to grow at such a rate that law of large numbers has an impact at some point in time. But having said that, you know, we do have a great deal of confidence and have the strength of our businesses and our ability to execute. And I will also say, you asked about capital deployment.

There is no change in our capital deployment priorities in our long-term guidance, and a lot of our capital deployment is unspoken for because, you know, it is highly likely that, as we have talked about before, that we will acquire the risk of OneOncology, and that is, you know, included in our long-term guidance. Thank you. Appreciate the question.

Charles Rhyee: Thank you.

Lucy: The next question is from Erin Wright of Morgan Stanley. Great, thanks. Can you talk a little bit about the overlap with your core business across some of those other businesses that are now in the other segment? Instance, like MWI, I guess, sounds like it is not really integrated with much of the infrastructure today, but you know, where you see the overlap, it is human generics or otherwise across animal health, can you reconcile with that and how easy it is to separate some of these? And when you took a step back and you looked at your commitment to like World Courier or European wholesale business, how do you think about that?

Any sort of key findings when you were looking at the synergy opportunities across those businesses? Thanks.

James F. Cleary: Sure. I will take the first part of that. And so you asked about MWI and overlap with the rest of the enterprise, and you asked with regard to some of the other businesses and other also. And one thing I will say about MWI, and this applies to the additional businesses and other, is MWI is a great business. But one thing I will say is that it does not provide a competitive advantage to the balance of the enterprise. And by placing it in "other" and starting to explore strategic alternatives, I think we can better position the business for long-term success in its market.

And, you know, the same thing applies to some of the other businesses that we have placed in "other," such as Pharmalex. And these are very good businesses, but businesses that by starting to explore strategic alternatives, can better position them for long-term success.

Robert P. Mauch: Yeah. And, Erin, I will take the second part of your question in terms of, you know, things that are in the business going forward. And specifically, you mentioned World Courier, but I will just hit on a couple of the businesses that are not in "other." So if you think about Alliance Healthcare with a very good foundation in distribution and, importantly, a significant footprint in 3PL, which is where the specialty growth is in Europe. So that is, you know, how we are continuing to stay dedicated to differentiation and specialty.

World Courier is a very strong business over a long period of time with a differentiated footprint and differentiated solutions like cell and gene therapy that we are excited about. And NMR is a business in Canada that has a strong reputation with the pharmaceutical manufacturer community, providing both hub and spoke services within Canada. So just a couple of solutions and a couple of examples of things that we are keeping, you know, within the core business. And I will just mention at the end of that, Erin, as you would expect, you know, the strategic processes, you know, it is an outside-in process. It is we are looking at markets first. We are looking at services.

We are looking at where Cencora, Inc. really has the ability to differentiate and win. So all of that goes into these assessments. But at the end of the day, if you think back to us, you know, following specialty growth in the markets where we can play, I think you will see, I would say human health specialty growth. You will see some rationale in the decisions that we are making.

Lucy: Thank you. The next question comes from Allen Lutz of Bank of America. Your line is now open. Please go ahead.

Allen Lutz: Good morning and thanks for taking the question. Really strong quarter in U.S. Healthcare. I think you talked about 10% to 12% AOI growth in that U.S. Healthcare segment in fiscal 2026. Should we think about the relative growth rate between specialty and generics? I would assume that the specialty growth rate is probably accretive to that 10% to 12%. And then the generic a little dilutive. Is there any way to frame the relative growth rate of the generics business? Is that growing mid-single? Is that growing closer to where the entire business is growing? Any way to frame how the generics business is performing or expected to perform fiscal 2026 and maybe comparatively to 2025? Thank you.

James F. Cleary: Sure. And we do not specifically break out those numbers, but let me talk generally about it. As we talked about for some time, you know, we are benefiting from utilization trends, and we are particularly benefiting from the strength of our sales to specialty physician practices and health systems. So as we look over the longer term, whether we look in the past or going forward, specialty, of course, has been very much accretive to our operating income growth. And over time, we expect that to continue to be the case given the innovation in the specialty markets and given our continued investments in our MSO strategy.

Now I will also say that one of the strengths about Cencora, Inc. is the breadth of our portfolio and the breadth of our offerings. And as we talked about for several years now, we have really rebalanced our contracts so we make a fair return on brand, generic, and specialty. And one other thing I will add with the specialty market is we talked for some time now about the moderation, excuse me, one thing I will add about the generic market is we talk for some time about the moderation of generic deflation, and those trends that we talk about continue to be the case.

And so while specialty is really accretive to our growth, really all parts of the business are good for us. Brand, specialty, and generic. Thank you for the question.

Robert P. Mauch: Thank you.

Lucy: Next question comes from Eric R. Percher of Nephron Research.

Eric R. Percher: Thank you. I would like to pivot to the international business. And if I am reading the recast correct, it looks like the businesses that you are pulling out of the segment maybe have a little bit better growth than the negative 10% in fiscal year 2025. So your perspective on what is enabling the pivot to 5% to 8% growth in 'twenty-six and enables the long-term guide at that level?

James F. Cleary: Yeah. And so, let me first talk about, you know, the guidance and, of course, our long-term guide that we have for international is 5% to 8%, and the long and the, and that is our guidance also for the upcoming fiscal year. And then the guidance for the upcoming fiscal year for "other" is a decline of minus 1% to minus 4%. And just a quick comment as I talk about that minus 1% to minus 4% in "other" for our guide this year. We are expecting profit growth in MWI and Pro Pharma, so it is the balance of the businesses and other that we expect to decline.

So let me kind of go on to the key part of your question, which is our confidence in the long-term guide for international of 5% to 8%. If we look at the most recent quarter, the decline in international was due to Pharmalex. And as I said in my prepared remarks, all of the other businesses in international grew profits in the fourth quarter. And we really saw a rebound in our global specialty logistics business, World Courier, which had been the underperformer along with Pharmalex this past few quarters that rebounded in the fourth quarter. And had revenue growth and profit growth during the fourth quarter.

And so if we look at our long-term guidance or our fiscal year 'twenty-six guidance for the International segment, it contemplates and assumes the international segment returns to growth in '26. And then we have, you know, confidence because we are starting to see benefit from the market demand rebounding for our global specialty logistics business. And we also have some easier comparisons in a more tailored portfolio, moving some of the Pharmalex assets into "other." Then we have some, you know, core businesses there, which have been performing well, such as Alliance, and then parts of that business which are performing particularly well, and that is 3PL.

And we expect the 3PL to be growing at a really nice rate over the long term because that is how a lot of the specialty products are distributed internationally. And so thank you for the question. And those are some of the things that give us, you know, confidence in that 5% to 8% long-term guide.

Lucy: Thank you. The next question comes from Steven James Valiquette of Mizuho Securities. Your line is now open. Please go ahead.

Steven James Valiquette: Yes, thanks. Good morning. Thanks for taking the question. So I guess within the "other" segment, with most of those businesses under strategic review, most of us are going to assume likely to be divested. So I guess I am curious should we think about the potential accretion or dilution related to any asset sales? We assume that you would most likely use sale proceeds to maybe do buybacks to just avoid or mitigate dilution. Also, are all these businesses in the "other" segment profitable right now? Or any of them unprofitable where a sale could be immediately accretive? Just curious to get your thoughts around all. Thanks.

James F. Cleary: Yes. That is a great question. And as we said, we are currently beginning to explore strategic alternatives for the business and "other," though no path has been determined at this time. And, you know, that being said, if we look at some of the businesses and "other," sale of a business could be dilutive in the short term. But over the long term, we believe our portfolio being more focused on higher growth businesses would allow us to have a more strategic prioritization of investment to drive better long-term returns and long-term accretion. And you asked about the profitability of the businesses. And "other," and I mentioned that before.

We are expecting in fiscal year 2026, we are expecting profit growth at MWI and Pro Pharma, and then the balance of the businesses or what is causing the decline in fiscal year 'twenty-six. But some of the businesses there have been performing quite well. For instance, MWI had 6% revenue growth this past year and had good operating income growth. And then to address part of the question you asked, while some of the businesses and "other" are not showing profit, we are not expecting profit growth this year. All of the businesses in "other" are profitable. Thank you for the question.

Lucy: Thank you. The next question comes from George Robert Hill of Deutsche Bank. Your line is now open. Please go ahead.

George Robert Hill: Good morning, guys. Thanks for taking the question. And Jim, I want to zoom out for a second because if you look at the U.S. business for a decade or more, it has basically been a business that has seen margin erosion as lower margin brand drugs have outpaced higher margin generic drugs. Now with the business mix into the MSO segments and the expansion specialty, we seem to be at the inflection point where now the higher margin faster growth specialty segment is outpacing, I would call regular way brand and regular way generic.

My question is, has the business inflected to a point the margin expansion, as indicated by the guidance this year, operating earnings growing faster than revenue growth is sustainable on an ongoing basis? And should investors be looking at that segment going forward? Continuing to expect operating earnings growth to outpace revenue growth?

James F. Cleary: Yeah. Excellent questions that you asked there, and I will add, you know, just a couple of key things. I think your, you know, your focus on margins is key because, of course, that is a really important part of the business. But I will also add that, you know, one of the key metrics that we focus in on is return on invested capital. And even some of our lower margin businesses in the core distribution business, given our expertise in managing working capital, can be lower margin but still can be really good return on invested capital businesses.

Now to get more to the specific question you are asking, you know, of course, there are so many moving parts that can impact our gross margin and operating margin every year. And we really stay on top of those things that we benefit from in specialty is all of the wraparound services that we offer, and this is in part b. Such as GPO, and that is kind of one of the key things in specialty that has been accretive to our margins. And then, of course, the MSO strategy is the natural evolution of our highly successful specialty business that offers more services, of course, that is accretive to our margins also.

So very much for asking the question.

George Robert Hill: Thank you.

Lucy: The next question comes from Kevin Caliendo of UBS. Your line is now open. Please go ahead.

Kevin Caliendo: Morning and thanks for taking my question. I just, Jim, I know how conservatively you always guide and how thoughtful you are around the outlook for the business. And so raising the guidance and raising the LRP is, obviously, meaningful. I guess we are all trying to figure out underlying what has changed. And I just want to ask you, is your macro assumptions of your end markets different, or is this being driven by your own mix and the fact that you have more now, you are more levered to that? I am just wondering if anything has actually changed in the marketplace.

If your positioning and your assets have changed, and that is what has driven, you know, the sort of upside that we have seen in the macro and your ability to raise your guidance.

James F. Cleary: Yeah. I would not say it is a change in the macro. You know, we have been experiencing strong utilization trends for some time, and we have been, you know, benefiting from our strength in specialty for some time and the, you know, the growth in the specialty market. So I would not say that it is a change in macro, but it is, you know, based on our historical results, which have been great, and our expectations for future results. And I think Bob has things he would like to add.

Robert P. Mauch: Yeah. I will add a bit because I think it is important to take a step back and think about how, you know, we have been building capabilities and evolving the footprint of Cencora, Inc. over a long period of time. So the fact that, you know, the specialty market has become what it is not a surprise to us, and I do not think it is a surprise to anybody. And we have been, you know, very carefully working and investing to make sure that we were well-positioned for this moment, which will, you know, which will continue as you, we believe, will continue as you can tell from our tone, our results, and from our guidance.

And I will just reiterate something that Jim said earlier is that, you know, going back to, you know, 2016, 2015 when, you know, the generic market really changed significantly. We very actively, you know, work to balance our portfolio so that we were not in subsidized, you know, pricing models. So as mix changes over time, we are getting a fair return for the work that we do. Our customers are getting a fair price for what they receive from us, and that we both have predictability as we go forward. And that is an important part of the story as well.

But if you put those two things together, I think you see, you know, the consistent performance from Cencora, Inc. based on the fact that the market has been performing well on its own. The utilization trends, specialty market growth that we have discussed. Thank you very much for the question.

Kevin Caliendo: Thank you.

Lucy: Our final question comes from Daniel R. Grosslight of Citi. Your line is open. Please go ahead.

Daniel R. Grosslight: Hi guys. Thanks for taking the question. Want to focus back on capital deployment priorities in the near term. You obviously have a step up in CapEx. You are increasing your dividend and repurchases next year. And then you have the OneOncology call option exercise coming up. How are all these factors informing your near-term M&A strategy? Outside of oncology, do you think we will see a slowdown in some of the larger M&A given these competing priorities? And then just on oncology, can you remind us when you expect to exercise that call option? Thanks.

James F. Cleary: Sure. So, you know, first, let me say, most importantly, that our capital deployment strategy, it is focused on four key areas. Internal investments in the business, and you know, as we have indicated and Bob indicated earlier, and the company has said is that, you know, we are making significant investments in infrastructure in the businesses and then also technology investments. And then, of course, we are focused on strategic M&A, and RCA and OneOncology are examples of that. We will always look at opportunistic share repurchases. And I think over the last few years or so, we have done a very good job in repurchasing shares as WBA was selling shares.

And then we will maintain a reasonable growing dividend, and of course, we announced today that we increased our dividend growth rate to 9% growth, which we feel very good about given, you know, our previous growth rates. And then with regard to OneOncology, of course, we have been very pleased with the business. We experienced very good growth in sales to OneOncology this year, which is one of the things that is driving our increase in sales of specialty products. And then, of course, OneOncology is a business that is owned 35% by ourselves and then 65% by a private equity firm in the practices and the physicians at OneOncology.

And we have a put-call structure in place, so we ultimately will, you know, expect to own all of OneOncology. Thanks a lot for the question. And now I will turn it over to Bob.

Robert P. Mauch: Thanks, Jim. Just to close, everyone, thank you very much for joining the call today and your interest in Cencora, Inc. Our strategic positioning in specialty, our thoughtful approach to refocusing our portfolio, prioritization of growth-oriented investments enabling us to capitalize on positive industry trends. Cencora, Inc. will build on our track record of strong performance, continue to create value for all of our stakeholders through our focused execution, and strategic progress in the year to come. We are confident that with the strength of Cencora, Inc.'s positioning, demonstrated track record of execution, and continued market growth, we will deliver on our updated long-term guidance. Thank you, everyone.

Lucy: This concludes today's call. Thank you all for joining. You may now disconnect your lines.

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