Cencora (COR) Q1 2026 Earnings Call Transcript

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Date

Wednesday, Feb. 4, 2026 at 8:30 a.m. ET

Call participants

• Chief Executive Officer — Robert Mauch
• Chief Financial Officer — James Cleary

Takeaways

• Adjusted Diluted EPS -- $4.08, representing a 9% increase, attributed mainly to U.S. Healthcare Solutions segment performance.
• Consolidated Revenue -- $85.9 billion, up 5.5%, reflecting growth in both reportable segments and other business lines.
• U.S. Healthcare Solutions Revenue -- $76.2 billion, a 5% rise, driven by higher volumes in GLP-1 products, specialty sales, and health system partnerships.
• GLP-1 Product Sales -- Grew by $1 billion, an 11% increase, evidencing heightened specialty utilization in the U.S. market.
• Consolidated Gross Profit -- $3 billion, up 18%, primarily due to the U.S. Healthcare Solutions segment.
• Gross Profit Margin -- 3.48%, an improvement of 37 basis points, mainly influenced by the Retina Consultants of America (RCA) acquisition.
• Operating Expenses -- $1.9 billion, an approximately 22% increase, primarily from the RCA acquisition and overall revenue support.
• Consolidated Operating Income -- $1.1 billion, 12% higher, driven by both RCA acquisition impact and U.S. Healthcare Solutions growth.
• U.S. Healthcare Solutions Operating Income -- $831 million, a 21% increase, offsetting headwinds from the loss of an oncology customer in 2025.
• International Healthcare Solutions Revenue -- $7.6 billion, up approximately 10% as reported and 6% on a constant currency basis, led by European distribution and all segment businesses.
• International Healthcare Solutions Operating Income -- $142 million, declined 14% as reported and 17% on a constant currency basis, due to timing of manufacturer price adjustments in a developing market country.
• Other Revenue -- $2.1 billion, a 6% increase, primarily from MWI Animal Health and ProPharma, offset by a decline in legacy U.S. hub consulting services.
• Other Operating Income -- $91 million, 6% lower, primarily due to decreased consulting services operating income, partially offset by animal health growth.
• Net Interest Expense -- $72 million, an increase of $44 million, resulting from debt raised for the RCA acquisition.
• Effective Tax Rate -- 19%, down from 20%, with full-year rate expectation revised to approximately 20%.
• Cash Balance -- $1.8 billion at quarter-end.
• Adjusted Free Cash Flow -- Negative $2.4 billion, reflecting seasonal working capital, a smaller outflow versus the prior year period's negative $2.8 billion.
• Share Repurchases -- Paused due to the OneOncology acquisition, with focus shifted to debt reduction.
• Diluted Share Count -- 195.3 million, a 0.1% increase; full year expected at approximately 105.5 million shares.
• Acquisition Update -- Completed purchase of 92% of OneOncology with remaining 8% retained by partner practices and management.
• RCA Performance -- Outpaced initial expectations, with higher volumes, active research, technology adoption, and new physicians joining.
• Guidance -- Adjusted Diluted EPS -- Reaffirmed full-year range at $17.45–$17.75 due to strong execution and OneOncology contribution.
• Guidance -- Consolidated Revenue -- Raised to 7%-9% growth, above prior 5%-7% range, reflecting inclusion of OneOncology and segment utilization.
• Guidance -- U.S. Healthcare Solutions Operating Income -- Upgraded to 14%-16% growth, from previous 9%-11%, reflecting OneOncology and segment momentum.
• Guidance -- International Revenue -- Raised to 7%-9% growth as reported, with constant currency guidance unchanged at 6%-8%.
• Guidance -- International Operating Income -- Maintained at 5%-8% growth, with first quarter weakness cited as timing-driven.
• Guidance -- Other Operating Income -- Expected flat versus prior year revised results, following the full impairment of U.S. Consulting business depreciable assets.
• Guidance -- Consolidated Operating Income -- Upgraded to 11.5%-13.5% growth, from previous 8%-10%, from U.S. Healthcare Solutions upgrades and OneOncology impact.
• Guidance -- Interest Expense -- Increased to $480 million–$500 million from prior $315 million–$335 million, reflecting financing for the OneOncology acquisition.
• Guidance -- Adjusted Free Cash Flow -- Full-year expectation of approximately $3 billion, as working capital reverses later in fiscal year.
• MSO Expansion -- Management highlighted expected value from synergies in research, revenue cycle management, physician support, and advanced technology deployment across the RCA and OneOncology platforms.
• Strategic Portfolio Actions -- Management disclosed the business assessment process, indicating a shift to focus on growth-aligned segments, and reaffirmed the willingness to consider divestitures in non-core assets.
• Operational Trends -- Positive specialty utilization, strength in both health systems and physician practices, and solid trends underpin core performance.
• International Segment Timing Issue -- Manufacturer price adjustment timing in a developing market caused short-term headwind and is not expected to impact full-year outlook.
• Accounting Commentary -- CFO James Cleary stated that "approximately $30 million" of income related to OneOncology's UUG subsidiary will appear in other income, with an offsetting noncontrolling interest loss expected to keep the noncontrolling interest line "relatively small."

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Risks

• Interest expense is projected to rise to $480 million–$500 million for the year, which may weigh on near-term net income.
• The International Healthcare Solutions segment experienced a 14% decline in operating income.
• Temporary headwind in the U.S. Healthcare Solutions segment from a major oncology customer acquired by a competitor is cited as persisting in the second and third quarters, with growth improvement not expected until the fourth quarter.
• Management acknowledged that some future divestitures of non-core businesses could be potential dilution in the near term, despite the expectation of long-term growth rate benefits.

Summary

Cencora (NYSE:COR) reported substantial growth in adjusted diluted earnings per share and consolidated revenue, supported by strong execution and increased specialty utilization. Management completed the acquisition of OneOncology, raising fiscal year guidance for consolidated revenue, operating income, and the U.S. Healthcare Solutions segment. Interest expense guidance was significantly raised to reflect added debt from the OneOncology transaction, and share repurchases have been paused as a result. The performance of Retina Consultants of America continued to outperform initial projections, contributing to overall margin expansion. International Healthcare Solutions encountered operating income weakness due to a temporary timing issue with manufacturer pricing in a developing market. The company affirmed its shift in portfolio focus toward growth-oriented segments, including the ongoing assessment of non-core assets for potential divestiture.

• The U.S. Healthcare Solutions segment is forecast to maintain strong performance even if RCA and OneOncology contributions are excluded, with underlying utilization and specialty sales trends driving results.
• Income derived from OneOncology’s UUG joint venture is expected to be roughly offset by noncontrolling interest adjustments, resulting in a minimal impact on consolidated net income below the operating line this fiscal year.
• Management highlighted that the MSO model, newly scaled through the OneOncology acquisition, is predominantly an operating income driver, with limited effect on reported revenues due to its service-based structure.
• The company's global specialty logistics unit continued to record volume increases, translating into operating income growth within the international segment despite broader market timing challenges.

Industry glossary

• GLP-1: Glucagon-like peptide-1 receptor agonists; a class of drug for diabetes and obesity, representing significant specialty pharmaceutical volume in Cencora's distribution network.
• MSO: Management Services Organization; a platform that provides back-office, clinical, and administrative support services to healthcare practices, enhancing operating income growth potential through service fees and synergies.
• RCA: Retina Consultants of America; an acquisition target providing clinical research and physician support within the specialty distribution segment.
• AOI: Adjusted Operating Income; company-specific adjusted metric for segment and enterprise-wide profitability, often referenced as a guidance basis.
• UUG: A OneOncology subsidiary holding a noncontrolling stake in a joint venture, contributing to non-operating income and noncontrolling interest adjustments.
• ProPharma: A service unit within “other,” providing consulting and related pharma services integrated into Cencora’s diversified business line.
• MWI Animal Health: A veterinary pharmaceutical distribution and animal health solution platform, contributing to segment revenue and performance.

Full Conference Call Transcript

Robert Mauch: Thank you, Bennett. Hi, everyone, and thank you for joining Cencora's fiscal 2026 first quarter earnings call. I'll begin by thanking our team members who drive our strong performance while advancing our purpose. This morning, we were pleased to announce that we've completed our acquisition of the majority of the remaining equity interest in OneOncology. And I welcome CEO, Dr. Jeff Patton, and the entire OneOncology team to Cencora. Your commitment to and expertise in supporting community oncology practices is a cornerstone of the Cencora strategy. In 2026, we delivered adjusted operating income growth of 12% and adjusted diluted EPS growth of 9%, driven by our market-leading capabilities.

To reflect our performance, and the contribution from our recently completed acquisition of OneOncology, we are raising our fiscal 2026 guidance to reflect year-over-year adjusted operating income growth of 11.5% to 13.5%. Our results were driven by continued strength in our US healthcare solutions business, as we executed our pharmaceutical-centric strategy and worked to advance commercial solutions. Our dedication to understanding customer needs and delivering tailored services creates long-standing strategic relationships fueling our growth. We are furthering the customer experience and our operational excellence leveraging technology and advanced analytics. Our solutions differentiate us in the market and allow us to capitalize on strong specialty pharmaceutical utilization trends. We have three growth priorities core to our strategy.

First, strengthening our leadership in specialty. Second, leading with market leaders. And lastly, enhancing patient access to pharmaceuticals. On today's call, I'll focus on how our MSO expansion is advancing each growth priority. I'll begin with how our MSO footprint strengthens our leadership in specialty. Our investments in pharmaceutical-centric MSOs represent a natural extension of our long-standing leadership in specialty pharmaceuticals. Complementing our existing specialty distribution and GPO services. Our MSOs provide practices with critical back-office and administrative support while strengthening our relationship with pharmaceutical companies. We expect to drive significant value for physicians across OneOncology and Retina Consultants of America by creating an MSO platform that leverages the capabilities of these market leaders.

We'll unlock new opportunities and enhance our solutions for both providers and biopharma by leveraging our platform strength and scale in areas like clinical research, revenue cycle management, and data-driven clinical insights to support physicians and advance care. Focusing on our growth priority of leading with market leaders, our MSOs demonstrate the value of our commitment to support healthcare leaders at the forefront of innovation. While much focus today will be appropriately on completing the acquisition of OneOncology, in January, we celebrated the one-year anniversary of RCA joining Cencora. Over the past year, we've been very pleased with the addition of RCA, both in terms of their performance and leadership in driving pharmaceutical innovation.

RCA has clearly differentiated itself with its clinical trial and research capabilities, contributing to more than one-third of all retina clinical trial research conducted in the United States across our MSO platform. And we see significant potential in extending this offering. In addition to expanding research capabilities, RCA physicians continue to enhance the patient care journey by adopting advanced technologies in their practices that have a meaningful impact on patient experience. Since completing the acquisition, we've supported the deployment of hundreds of advanced imaging devices across RCA practices, enabling more precise noninvasive assessment of patients' clinical conditions. And finally, our MSO expansion is supporting our growth priority of enhancing patient access to pharmaceuticals.

As specialty pharmaceutical innovation continues to accelerate, physicians are navigating more advanced treatment options while facing increased operational complexity. Our MSOs help address these challenges by providing a robust portfolio of services that support physicians in delivering the most modern, high-quality care. Both RCA and OneOncology physicians are active contributors at leading retina and oncology conferences, presenting research across a wide range of disease states. Recently, OneOncology partner practices presented dozens of abstracts covering emerging treatments including cellular therapies, subcutaneous bispecific antibodies, and CAR T. These activities highlight the important role OneOncology physicians play in advancing cancer care and expanding access to complex treatments for patients in local communities.

Another recent example of our MSO physician's leadership advancing clinical practice is RCA's research chair, Dr. Charles Wyckoff, and team performing the world's first procedure of a new FDA-approved cell-based gene therapy for MacTel type two, a degenerative retina disease that previously had limited treatment options. We've also seen the real-world impact of this leadership in the retina biosimilar market. RCA physicians were highly involved in supporting research for a key biosimilar product, and due to their clinical familiarity and confidence, were leaders in its early adoption, helping to drive patient access to this high-quality, lower-cost treatment.

Across both platforms, OneOncology and RCA physicians are leading in the adoption of advanced and individualized treatment approaches, expanding access to clinical trials, and ensuring patients have access to the most cutting-edge treatments in an accessible setting. In closing, Cencora delivered a strong start to our fiscal 2026, continues to execute at a high level. We're advancing our strategy and strengthening our position as a leading healthcare company. Guided by our purpose, growth priorities, and strategic drivers, we are well-positioned to drive sustainable value creation for our stakeholders over the long term. Before handing it over to Jim for a detailed review of our quarterly results and updated guidance, I want to once again thank the Cencora team.

Their expertise, commitment, and dedication to our purpose power our strong performance. With that, I'll now hand the call over to Jim for an in-depth review of our performance and updated expectations for the year. Jim?

James Cleary: Thanks, Bob. Good morning and good afternoon, everyone. Before turning to a review of our fiscal 2026 first quarter financial results and updated guidance expectations, I want to take a moment to echo Bob in expressing my excitement on our announcement that we have completed our acquisition of OneOncology. OneOncology and its partner practices are leaders in community oncology, having built a differentiated MSO platform that has delivered exceptional growth since its founding and has been a key contributor to Cencora's leadership in specialty. As innovation and biosimilars continue to advance, our partnerships with pharmaceutical-centric MSOs will allow us to better support physicians, patients, and manufacturers, enhancing our specialty offering.

We are confident our investments in MSOs will unlock new value creation opportunities and support our long-term growth as evidenced by our recently increased long-term guidance. Moving now to our consolidated first quarter results. And as a reminder, unless otherwise stated, my remarks today will focus on our adjusted non-GAAP financial results. For further discussion of our GAAP results, please refer to our earnings press release and presentation. Starting with adjusted diluted earnings per share, we completed the quarter with adjusted diluted EPS of $4.08, an increase of 9% driven by performance in our US healthcare solutions segment. Consolidated revenue was $85.9 billion, up 5.5% due to solid growth in both reportable segments and in other.

The drivers of which I will detail when I speak to our segment level results. In the quarter, we continued to see strong sales growth in the US for GLP-1 products, which increased by $1 billion or 11% over the prior year quarter. Turning to gross profit. Consolidated gross profit was $3 billion, up 18% primarily due to growth in the US healthcare solutions segment. Consolidated gross profit margin was 3.48%, an increase of 37 basis points driven by the January 2025 acquisition of Retina Consultants of America. Moving to operating expenses. In the quarter, consolidated operating expenses were $1.9 billion, up approximately 22%, driven primarily by the RCA acquisition and to support our revenue growth.

Consolidated operating income was $1.1 billion, an increase of 12% compared to the prior year quarter due to strong execution by our teams and continued growth in our US Healthcare Solutions segment. Moving now to our net interest expense and effective tax rate for the first quarter. Net interest expense was $72 million, an increase of $44 million versus the prior year quarter primarily due to debt raised to finance a portion of the RCA acquisition. Our effective income tax rate was 19% compared to 20% in the prior year quarter. And as we look at the balance of fiscal year 2026, we now expect our full year effective tax rate to be approximately 20%.

Finally, diluted share count was 195.3 million shares, a 0.1% increase compared to the prior year first quarter. As a reminder, due to the OneOncology acquisition, we have paused share repurchases as we prioritize debt pay down and anticipate our full year diluted share count to be approximately 105.5 million shares. Regarding our cash balance and adjusted free cash flow, we ended December with $1.8 billion of cash and had negative adjusted free cash flow in the quarter of $2.4 billion as a result of seasonal working capital needs. This compares to negative adjusted free cash flow of $2.8 billion in 2025.

We continue to expect full year adjusted free cash flow to be approximately $3 billion as the working capital dynamics unwind in the balance of our fiscal year 2026 as they did in fiscal year 2025. This completes the review of our consolidated results. Now I'll turn to our segment results for the first quarter. Beginning with the US healthcare solutions segment, US healthcare solutions revenue was $76.2 billion, up 5% as we continue to see good volumes and revenue growth across our customer segments, including growth in GLP-1s, and in specialty sales to health systems and physicians.

As a reminder, this quarter, we faced a more challenging revenue comparison due to a large grocery customer we off-boarded in 2025 and the 2025 loss of an oncology customer as a result of it being acquired. US Healthcare Solutions segment operating income increased 21% to $831 million primarily driven by the RCA acquisition and continued specialty growth in health systems and physician practices, more than offsetting the headwind from the oncology customer loss. Our teams continue executing at a high level across the segment, contributing to our strong performance.

In the quarter, we saw particularly good volumes and trends in our health systems business where we continue to see benefits from our focus on strategic partnerships leveraging our expertise in specialty. At RCA, we saw better than expected volume, excellent trends in research, and new physicians joining the platform. Turning now to our international healthcare solutions segment. In the quarter, international healthcare solutions revenue was $7.6 billion, up approximately 10% on an as-reported basis and 6% on a constant currency basis driven primarily by our European distribution business but also reflecting revenue growth at each of the businesses within the segment.

International Healthcare Solutions operating income was $142 million, down 14% on an as-reported basis and down 17% on a constant currency basis. The decline was driven by lower operating income in our European distribution business largely due to the timing of manufacturer price adjustments in a developing market country, partially offset by operating income growth in our global specialty logistics business. In the quarter, we continued to see encouraging trends for our Global Specialty logistics services with volumes growing again this quarter. Our teams have been prioritizing operational excellence and targeted business development which are positioning us for success as the market begins to rebound.

Moving to other, Revenue in other was $2.1 billion, up 6% primarily due to growth at MWI Animal Health and ProPharma, and offset in part by a revenue decline in our legacy US hub consulting services. Operating income was $91 million, down 6% primarily due to a decline in operating income in our US hub consulting services business resulting from the fiscal 2025 loss of manufacturer program, partially offset by operating income growth at MWI Animal Health. The teams continue to execute well across companion and production animal markets. That completes a review of our segment level results. I will now discuss our updated fiscal 2026 guidance expectations.

As a reminder, we do not provide forward-looking guidance for certain metrics on a GAAP basis so the following information is provided on an adjusted non-GAAP basis except with respect to revenue. Beginning with adjusted diluted earnings per share, when we announced the acquisition of OneOncology, we indicated that we had expected to be towards the lower half of our EPS range due to pausing of share repurchases. Today, we are pleased to now be reaffirming our full guidance range of $17.45 to $17.75 to reflect our strong execution, the continued performance of our US healthcare solutions segment, and the expected contribution from OneOncology. Moving now to revenue.

We expect consolidated revenue growth to be in the range of 7% to 9%, up from the previous expectations of 5% to 7%, reflecting increased growth across both reportable segments and in other. In 7% to 9% revenue growth which includes the OneOncology MSO revenue and continued solid utilization trends across the segment. In the International Healthcare Solutions segment, we now expect revenue growth to be in the range of 7% to 9% on an as-reported basis to reflect the weakening of the US dollar against many currencies. On a constant currency basis, our International Healthcare Solutions segment revenue growth remains unchanged at 6% to 8% growth.

For other, we now expect revenue growth to be in the range of 1% to 5%, reflecting updated expectations for ProPharma and positive volume trends we have seen at MWI, which represents a significant majority of revenue in other. Moving to operating income, we expect consolidated operating income growth to be in the range of 11.5% to 13.5%, up from the previous guidance of 8% to 10%. This is primarily driven by our increased growth expectations for the US healthcare solutions segment where we now expect operating income growth to be in the range of 14% to 16% due to our acquisition of OneOncology and the continued strong execution and performance of the segment.

As a reminder, we expect OneOncology to be neutral net of financing costs, to adjusted diluted EPS in its first twelve months. There is no change in our full year operating income expectations for the International Healthcare Solutions segment, as the largest driver of the year-over-year weakness for the first quarter was timing related within the European distribution business which we expect to pick up in the balance of fiscal 2026. As it relates to our operating income expectations for other, we now expect to see operating income flat to the prior year revised reportable segment results.

This is due to the full impairment of depreciable assets of the US Consulting business as of December 31, 2025, thereby eliminating the need for future depreciation expense. While this consulting business is small in the context of the Cencora enterprise, we are pleased that we are making progress on focusing our portfolio. Before moving to our updated interest expense expectations, I wanted to spend a moment providing details on non-income contributions we expect from the OneOncology acquisition. Due to the nature of non-wholly owned investments held by OneOncology, we expect to have the following two additional benefits to Cencora's net income.

First, we expect to record approximately $30 million of income on our other income and loss line for the full year fiscal 2026 primarily relating to a joint venture in which OneOncology's UUG subsidiary holds a noncontrolling stake. Second, we expect to have a noncontrolling loss add back to net income also related to UUG that will largely offset the noncontrolling income we eliminate from ProPharma resulting in our noncontrolling interest line being relatively small in fiscal 2026. While these items are helpful callouts as you incorporate OneOncology into your models for Cencora, we do not anticipate them being regular points of discussion.

The OneOncology platform is well-positioned, high-performing, and will be a meaningful contributor to Cencora's operating income both in 2026 and in our long-term plans. Moving now to interest expense. We expect interest expense to be in the range of $480 million to $500 million, up from our previous range of $315 million to $335 million primarily due to additional borrowings required to fund our acquisition of OneOncology. As a reminder, our second quarter is typically our highest interest expense quarter due to the seasonal working capital needs. And with the OneOncology financing, we would expect second quarter net interest expense to be about double our first quarter interest expense. That concludes our updated full year guidance assumptions.

In closing, Cencora delivered a strong start to fiscal 2026. As our purpose-driven team members executed to support our partners and patients. Our strategy centered on our growth priorities and strategic drivers is powering our performance, informing our capital deployment, and will allow us to drive long-term value creation for all our stakeholders. Now I'll turn the call over to the operator to open the line for questions. Operator?

Operator: Thank you. When preparing to ask your question, please ensure your device is unmuted locally. The first question comes from Glen Santangelo from Barclays. Your line is now open. Please go ahead.

Glen Santangelo: Yes. Thanks for taking my question. Hey, Bob and Jim, I'm just going to talk about operating income growth for a second for the balance of the year. I think with so many moving parts like around, you know, RCA, the retina deal, and Florida Cancer, and now adding OneOncology. I think what the market's kinda confused a little bit about is the deceleration, Jim, that we saw in that in the US segment from the September to the December. And so I'm kind of curious if you can give us a little bit more color there. And within your full year guidance, should we just assume continued deceleration throughout the year due to the more difficult comps?

And I don't know if there's any other headwinds or tailwinds to that operating income line that you think are worth calling out as we think about the balance of the year? Thanks.

James Cleary: Sure. Glen, thanks a lot for asking that question. And then, you know, I'll start out with, the December. And during that it's December, as you know, in the US, we had adjusted operating income growth of 21%. And I'll start out talking about our long-term guidance. As you know, our long-term guidance for adjusted operating income growth in the US is 7% to 10%. And we've increased that twice in the last few months.

And the reason I bring that up is if you look at the first quarter, and look at that 21% operating income growth in the US, if you back out RCA, and RCA had a very good quarter, but if you back out RCA, our performance in the US was still towards the higher end of our long-term guidance range, and that's even with the headwind from the customer that we lost. And so if you back out that headwind, we were meaningfully above our long-term guidance range in the first quarter, and the US. And really, those positive results are due to things like utilization trends.

We've talked about for some time, really strong performance in Specialty in the quarter. We had particularly good performance with health systems, but also with physician practices and really good sales to both OneOncology and RCA and then just broad performance across the US segment. And so as a result of that and as a result of the contribution, of course, from OneOncology, we're increasing our guidance for the full year from in the US from 9% to 11% adjusted operating income growth to 14% to 16%.

And so if we look at the balance of the year guide that you asked about, and if we exclude RCA and exclude OneOncology, we're still solidly within that long-term guidance range of 7% to 10%. And that's in spite of the headwind that we have from the loss of the oncology customer that was acquired by a competitor. And, that, you know, very good performance is, you know, is driven by the same factors, including utilization trends, strength in specialty sales, and broad-based performance. And so if you look at our, performance now, I think we are performing really well may not be the same level of outperformance that we've had in some of the recent past.

Of course, the comps that we're hitting are, very strong comps. But I will say that we, you know, feel, very good about our long-term guidance and very good about even when you x out things like RCA and OneOncology, we're we're performing, you know, solidly within that long-term guidance range that we've increased a couple times in the last few months. So thanks a lot for the question, Glen.

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

Elizabeth Anderson: Hi, guys. Good morning, and thanks for the appreciate all the details. I was wondering if you could go into a little bit more detail on some of the MSO platform AOI accelerators such as, you know, you've owned RCA for about a year. You obviously have just rolled up OneOncology in terms of closing that. Where is it like shorter-term opportunities in terms of helping to drive AOI growth? And what sort of like a longer-term driver as we think about that platform, going forward. Thank you.

Robert Mauch: Hi, Elizabeth. Thank you for the question. You know, I'll just I'll take a step back and just kinda explain a bit kind of what why the MSOs fit so well within the Cencora strategy, and I'll get right to your specific question. But the MSO strategy is a natural extension of, the relationship that we have with specialty providers. As well as specialty biopharma. It's, in addition to the strong businesses that we have in specialty distribution and GPO. So the acquisition of RCA was a good important first step.

And as we saw the performance of that business, it became clear to us that we should, if we could, accelerate the acquisition of OneOncology, which we're extremely happy that we were able to accomplish. So what that gives us now, which gets to your question, is now we have two platform MSOs who are market leaders with significant capabilities within each MSO. And then the answer to your question is as we look across those MSOs, we have opportunities to leverage those capabilities, which we which we've talked about and we and we, you know, we restated in the in the prepared remarks today.

But the clinical trial excellence that exists within RCA is something that we believe we can quickly leverage across the entire platform. Revenue cycle management is a very strong capability, which within the MSOs that can become even stronger. That's a value driver. And then things, you know, around you know, future products and future technologies. That these excellent physicians have leadership in, that's where you get to a little bit of the medium and the longer term. We're confident that there will be new capabilities and new services that will be built over time.

That most importantly, will be there to support the physicians and you know, to restate again, the purpose of the MSO is to support the physicians and the physician practice. That allows them more time to focus on their patients, on clinical excellence. And driving. So as we build those capabilities, we have a scale and the footprint now to deploy them in a significant way. So we have short-term opportunities, which we talked about, but we're also excited about medium and long-term opportunities that we'll we'll talk more about once they become more apparent.

Operator: The next question is from Lisa Gill of JPMorgan. Your line is now open. Please go ahead.

Lisa Gill: Thanks very much. Bob, I have one question for you and then just a follow-up for Jim. Bob, on your side, I appreciate everything you're talking about from an MSO perspective and the physician relationship. But one of the comments that stood out to me today is the benefits of strategic partnerships with health systems. Can you talk a little bit more about the opportunities that you see there? You know, what's in the numbers today and what the future opportunity is? And then Jim, can you just help us to understand the cadence of earnings?

I just want to sure I know you don't give quarterly guidance, but anything to call out as we think about the next several quarters?

Robert Mauch: Hi, Lisa. Thank you for the question. You know, we certainly are focused, the MSOs today, but your question is spot on. With our strategy and the way that we think about our specialty business because certainly, the physician community physician side of care is critically important for patients and for Cencora, but we also see significant growth in our relationship with health systems who are also focused on that specialty growth. And we've been, you know, focused there over a number of years. We feel really comfortable with the customer portfolio that we have. And we expect to continue to see growth there.

And you know, as I as I mentioned in my prepared remarks, you know, we spend a lot of time understanding those customers, these health systems customers, understanding their strategy, how they wanna grow, and then we bring the capabilities of Cencora to help them do that. And so that's that's worked out well. To this point. We expect it will continue, but your question really is indicative of the way that we think about the specialty pharmaceutical growth and that we wanna be a leader in the sites of care where all of our customers are, and we're doing so certainly in the physician space, the health systems, but then others as well.

We wanna make sure that we're the right partner for those providers. Thanks for the question.

James Cleary: Lisa, thanks a lot for the follow-up question. I'll just call out two things. The first is, of course, the oncology customer that was acquired by a competitor. That will be a headwind like it was, the last two quarters. That'll be a headwind in the second and third fiscal quarter, and then we'll no longer have that headwind, in the fourth quarter, which will enhance our operating income growth rate in the fourth quarter.

Then the only other thing I'll call out which I said in my prepared remarks, and we kind of gave a lot of detail here to help with the modeling is due to the debt that we're taking on to fund the OneOncology acquisition we're indicating that our interest expense in the second quarter will be approximately 2x our interest expense in the first quarter. Thanks a lot for that follow-up question.

Robert Mauch: Thank you.

Operator: Next question comes from Michael Cherny of Leerink Partners. Your line is now open. Please go ahead.

Michael Cherny: Good morning. Thanks for taking the question. Maybe can talk about the market construct a little bit. Obviously, the first range of IRA price negotiations hit the market. Start of this year. Can you just give a sense, as you prepared for calendar '26 any changes or discussions, relative to the supplier side terms of how you go to market and any changes in terms of the contracting relative to any of the list price changes that were absorbed?

James Cleary: Yeah. Let me make a couple comments there. Thank you for that question. We have a very strong strategic global sourcing team and we were well prepared. And when there were the in list price, as we've said before, we have terms in our contracts which indicate that we'll get into discussions with manufacturers. And we were very successful in those discussions with manufacturers because of the value we provide the supply chain. So we were very successful in maintaining our economics and our gross profit dollars. And so we were, you know, pleased with the way that turned out.

And we had talked about, you know, for some time, the insulin example and how we had protected our gross profit dollars, and this was just another example at the end of this year of us, because of the value we provide in the supply chain, able to come out of those discussions with maintaining good economics and gross profit dollars. And then the only other one thing I'll comment on is just in general, what we saw at the end of the year in terms of, you know, brands and any price increases and those sorts of things was very much in line with our expectations. Thank you very much for the questions.

Operator: Thank you. The next question is from Erin Wright of Morgan Stanley. Your line is now open. Please go ahead.

Erin Wright: Great. Thanks. So I'll switch to international. It does seem to be more of a timing dynamic. Can you describe that a little bit more? Is there a specific geography that this was attributable to in terms of in the quarter? And I guess, give a little bit more detail on what that headwind was or quantify it for us? Then what gives you confidence in that ramp? What are you seeing in, like, bulk courier, for instance, and other areas as well? Thanks.

James Cleary: Yeah. Thank you. Appreciate the question, Erin. And so, I think the key thing is that in the international segment, we're maintaining our operating income guidance of adjusted operating income growth of 5% to 8% for the fiscal year. And what we saw during the first quarter in the International segment was a challenging quarter due to a timing difference for manufacturer price adjustments in a developing market country. And that price adjustment on last year happened at the beginning of the fiscal first quarter and this year, it happened at the very end of the fiscal first quarter. And so that'll really just be a timing difference that we'll see year over year.

And as a result of that, there's no change in our guidance for the fiscal year, and we expect it to pick up in the balance of the fiscal year. But then I think in the international segment, thing we were really pleased, to see during the quarter is, operating income growth in our global specialty logistics business. And, what we've seen the last two quarters is really volume growth in that business. And so we're, we're we're executing well as a as a team there, and we're, you know, really, pleased by the positive signals that we've seen of volume growth there. And of course, that translated in the most recent quarter to operating growth.

So those are the things that enable us to maintain our guidance of 5% to 8% in international for the fiscal year. Thank you, Erin.

Operator: Thank you. The next question comes from Stephen Baxter of Wells Fargo. Your line is now open. Please go ahead.

Stephen Baxter: Hi, thanks. I was hoping to spend a minute on the revised US EBIT guidance. It looks like that came up about $160 million or $170 million. I was hoping you could perhaps break that into perhaps the contribution from OneOncology whether we should think about any kind of transitory costs or kind of ramping going on with that to kind of consider. And then in terms of organic guidance provision, is there any organic guidance provision in the segment allowed to point to there? Thank you.

James Cleary: Yeah. Thanks a lot for the question. And, of course, in the US, we increased our guidance from 9% to 11%, as you know, to 14% to 16% and that was driven by, the OneOncology acquisition and also by continued performance in our US healthcare solutions segment for all the reasons that we've been, talking about. And as I said before, if you, you know, back out, RCA and you back out OneOncology, in the first quarter, we're towards the higher end of our long-term guidance range of 7% to 10%. And in the last March, if you back out RCA and OneOncology again, where we're within that long-term guidance range.

And both those things are in spite of the loss of the oncology customer that was acquired. Now one other thing that I want to raise, and this is why we got into a little bit of detail in my prepared remarks, is there are some OneOncology benefits that happen below the operating income line and part of those benefits are in the other income line, and part of those benefits are in the noncontrolling interest line.

And, and now these were covered, but just to quickly go through them, we expect approximately $30 million of Ben in our other income and loss line for the full year fiscal 2026, and that's primarily related to earnings from joint venture in which UUG holds a noncontrolling stake. And then second, we expect to have a noncontrolling loss add back to net income also related to UEG and just to size it this add backs will largely offset the noncontrolling income we eliminate from ProPharma. That results in our noncontrolling interest line being relatively small in fiscal 2026.

And that's a lot of detail there, but we just really wanted to, make the point that there's the operating income benefit from OneOncology, and then there's also some income below the operating income line.

Stephen Baxter: Thank you.

Operator: The next question comes from Eric Percher of Nephron Research. Your line is now open. Please go ahead.

Eric Percher: Thank you. Jim, I might ask you for a little bit more detail on top of that detailed description. When you look at 9% to 11% to 14% to 16%, looks like this quarter's performance would add a point recognizing there's a range here. But can you remind us maybe how the OneOnco acquisition contribution flows in at the segment level versus what you gave us at total company being neutral. And how much of that is attributed February 2 to the end of the fiscal year? Yeah.

James Cleary: Thanks for asking that follow-up question. And so that increase in guidance from nine to 11 fourteen to 16% in the US is largely driven by OneOncology, and it's also as a result of the continued strong performance in the US. And, you know, what you'll see is in the other income line, for the first four months of the fiscal year, we have our, you know, our 35% of the net after tax, earnings from OneOncology and that's after interest after tax. So it's a relatively small number. And then, of course, that moves up to operating income, for the last eight months.

And so it's really just kinda eight months there that drives the increase from nine to 11% to 14 to 16%. And, you know, just one other thing. That I'll add is that it does ramp. And so we'll see the OneOncology contribution ramp as the year goes on. Which is due to, you know, both organic growth and inorganic growth, some inorganic growth that we'll see there. But we do see a nice ramp over the course of the fiscal year that'll, of course, continue to ramp in future years. Thanks a lot, Eric.

Eric Percher: Thank you.

Operator: The next question is from Allen Lutz of Bank of America. Your line is now open. Please go ahead.

Allen Lutz: Good morning, and thanks for taking the questions. One for Jim. You mentioned if you back out RCA and OneOncology, you're toward the high end of the long-term EBIT guidance in the quarter. And then over the last three quarters, you're within that range. How should we think about what's embedded in that core business for the rest of fiscal '26 if we exclude RCA and OneOncology? Should we just assume it's basically within that? And then what gets you within US Healthcare Solutions on the EBIT side? What gets you to the low end and the high end of that range? Thanks.

James Cleary: Yeah. And, you know, really, it's the things we've been talking about for quite some time. And so it's, solid utilization trends. It's on strength and sales of specialty. To both health systems and physician practices. And we've seen really strong performance there in health systems. Given our strength in specialty in oncology, that's really helped us with health systems. And then broad-based performance throughout our US business. And so it's really, you know, just kinda all those sorts of things, and it's a range, because, of course, it's very strong performance, and it's just kinda what's that level of strong performance within the range.

And then, of course, know, our business has been good for, you know, for so long. That, that, we have, we have strong comps that we're comparing against. But, also, you know, we have a lot of confidence in our guidance because of our success and because of those underlying trends that we've been talking about for quite some time. Thanks a lot for the question.

Allen Lutz: Thank you.

Operator: Next question is from Charles Rhyee of TD Cowen. Your line is now open. Please go ahead.

Charles Rhyee: Yes. Thanks for taking question. Jim, maybe just to go back to the below the line items related to OneOncology. I guess, if I remember correctly, when you announced the deal, you know, you guys did say that you wouldn't be consolidating a 100% of that, and I assume that this is that portion that is not being consolidated and will continue to be below the line. You call it out this time, but is it right to think that this $30 million amount is an ongoing kind of a NCI piece that we should be modeling.

And then I and I guess then you know, when we think you know, how much of that so I guess, really, how much of total OneOncology are you owning in going to the future? Is this, like, is this, like, a 10% piece that will remain kinda staying outside? Or is it less? And then and then if I could just add a follow-up on share repurchase. I understand you're pausing in the short term, but when I look at your total leverage, it's still pretty low. And that would seem like you would have ability to both pay down debt and buy shares.

I love to understand maybe you're thinking why you necessarily have to pause if there's any kind of covenants or anything like that. Thanks.

James Cleary: Okay. Great. There was a lot there in that question. And what I'll say is that the two below the line items that I specifically related to OneOncology's UUG subsidiaries, and that they will they will continue to, know, be there over time and will continue to have those benefits that below the line below the operating income line contributions as a result of that. The second part of the question had to do with our, ownership stake in OneOncology. And we increased our ownership stake when we made the announcement today from 35% to 92%, and we're really pleased to say that the practices and managed management will own the remaining 8%.

And so I think that was the second part of the question. And then the third part of the question was share repo. And as we've said, you know, we're pausing share repo. And focusing on deleveraging. But I will add, that our, you know, long-term capital deployment priorities remain the same, which are, of course, investing in the business, strategic acquisitions that you've seen, share repurchase repurchases that you've seen over time? And then having a nice growing dividend, which we grew at 9%. This year. So a lot for the question.

Charles Rhyee: Thank you.

Operator: The next question is from George Hill of Deutsche Bank. Your line is now open. Please go ahead.

George Hill: Good morning, guys, and thanks for taking the question. And I'm gonna ask another one on MSL accounting. So first, I guess my question is, could you could you unpack a little bit of the revenue guidance change in the US business? It's about $5.7 billion. And I'm interested in you if you can provide some color on the OneOncology contribution, the growth in the core, and kind of how to think about any of the puts and takes in WAC price reductions, whether or not that played a point at all. I recognize that you guys have offset at the earnings line of inch I'm I'm surprised there's kinda no impact on the revenue line at all.

And maybe growth of GLP one. Then my quick follow-up would be know that we were all looking at the OneOncology acquisition as a multiple of EBITDA. Is that EBITDA number the right proxy to use for AOI as we model OneOncology? And, like, are there are there any significant puts and takes between the AOI line and the EBITDA line for OneOncology? Thank you.

James Cleary: Yeah. So there was a couple things there in that question. The first was on revenue and revenue guidance. And you know, OneOncology does not have a large impact on our on our revenue guidance and the growth there. And, of course, the MSO business model is, is a lower revenue business model, but a really nice operating margin business model. And that's similar to what you've seen from RCA. It really impacts our operating income margin. And then the other thing I'll say there is, know, we don't count the revenue twice that we, you know, of course, we, sell to, MSO, but, yep, but only count the revenue once, of course, and I'm sure you're aware of that.

And then the other things I'll say is that as we, you know, look at our revenue growth this year, of course, we have we have a grocery customer that we off boarded, and we also have the oncology customer that was acquired by a competitor. So that impacts our revenue growth this year. And then also the we fully anticipated the changes in list prices when we put together our revenue guidance for this year. And so we're, you know, pleased with the increase in guidance because it just shows you know, the underlying strength of our business when we have the increase in revenue guidance.

And then you, you know, you asked a question about kind of any differences between EBITDA and operating income other than the components. There is no meaningful difference there that I would, you know, call out other than, of course, the depreciation and amortization. Thank you for the questions.

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

Steven Valiquette: Yes. Great. Thanks. Good morning. I guess within the international business, your revenue growth is pretty strong. Any color just on the drug pricing trends in Europe? Really on the back of all the MFN drug related policies from the US might be impacting pricing in the Europe or UK? Any impact from that one way or the other? Or is it just kind of business as usual in Europe aside from your one call out? In the, that developing country? Thanks.

Robert Mauch: Hi, Steve. Thanks for the question. I'm gonna take this so we can give Jim a break, he can take a sip of water here. No, we haven't we haven't seen any real changes in the markets from MFN. So, you know, as Jim said earlier and you just restated, we did have the timing issue in one market. Overall, the international business is performing you know, within our expectations, and we expect to you know, meet our fiscal 2026 commitments there. But no changes based on MFN.

We're also seeing, Steve, you know, which maybe a sub bullet of your question kinda within we talked about the World Courier business improvement, but, you know, I do wanna state how strong our growth is in our global three PL platform. So, again, part of our specialty strategy and within that specialty strategy in Europe, those products are delivered, you know, through three PL and not necessarily through wholesale. And we have a pan European market leading service there. Also includes, obviously, the United States and all of North America. So which is which is performing very well. But full circle, no real changes in pricing that we're seeing in that market.

Steven Valiquette: Thanks for the question.

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

Kevin Caliendo: Hi, thanks for taking my question. I want to change it up a little bit. There was a relatively credible story about a private equity firm potentially being interested in buying MWI. I want you to you're not gonna comment on the story, but just broadly speaking, can you talk about how you think about asset divestitures in the context of long-term growth rate or impact to long-term growth rates, impact near term to earnings? Like, does that would you contemplate dilution? Or anything like that if strategically it made sense for you long term? And also maybe just speak to what's happening in that marketplace right now. In MWI's positioning, you called it out. It had a good quarter.

I'm just wondering strategically how it fits long term for you guys.

Robert Mauch: Yeah. Thank you for the question. As you said, we're certainly not gonna comment on any rumors, but I will, you know, reiterate, you know, what we said very specifically last quarter and really have been working on over the past year or so. And that is our strategy is being, you know, refocused and one of our strategic drivers is to make sure that we're prioritizing growth-oriented investments. And so we went through a process of assessing all of our businesses to make sure that they are very well aligned with our with our strategy and our future strategy going forward. And made the determination that we would put certain businesses in the other category.

And at that time, we said we would be looking at strategic alternatives for those businesses in other. The purpose of that is really to create that focus, management focus and strategic focus, and then we believe, you know, growth rate benefit from doing that. But I'll I'll hand it over to Jim and talk about some of the potential, you know, short-term impacts if any divestitures were to occur.

James Cleary: Yeah. So let me comment on a couple of things that you said. First of all, MWI continues to perform very well within its market. In this most recent quarter, it had 7% revenue growth. And performed well in both the companion and production animal markets. So we're we're we're pleased, that it continues to perform well. With regard to one aspect to your question is, any potential dilution from a divestiture. You know, from some divestitures, there could be potential dilution. But as Bob was saying, you know, we think it's the right thing to do for the long term. And one of Bob's real strategic priorities is to prioritize growth-oriented investments, as he was saying.

And that's why we're investing in businesses like MSOs that bring competitive advantage to the balance of the enterprise. And so while there might be dilution in the short term, we think it will, you know, it could enhance growth and enhance returns over the long term. Thanks for the questions.

Operator: Thank you. The next question is from Daniel Grosslight of Citi. Your line is now open. Please go ahead.

Daniel Grosslight: Hi, thanks for taking the question. It sounds like RCA is performing better than initial, expectation which has been the case for the past couple of quarters here now. I think when you initially announced that deal, you were thinking around $0.50 of accretion from RCA in the first full year. There was that kind of accounting change, and so I'm accounting for that. Now that we've passed that, one year mark, I was wondering if you could provide an update on how much accretion you saw from RCA in the first year or maybe quantify that app performance for us? And then maybe provide a little bit more detail on the sources of that outperformance. Thanks.

James Cleary: Sure. Yeah. We've, we've, continued to see you know, very strong performance at RCA. And we've seen, you know, good performance organically, and we've seen good tuck-in acquisition opportunities. So we've been just, you know, really pleased by the performance of, the team there. And we've you know, it exceeded, the expectations that we had and the clinical trial part of the business, but really performed well throughout the business. So we're very pleased with the acquisition. And seeing the growth continue to ramp over the balance of the year. And then, hey. Just one follow-up I want to, make on the on OneOncology.

Some of the below the op operating income line items that I was referring to, I just wanna make it clear that, you know, those are accounting nuanced items related to one of the OneOncology subsidiaries related to the UUG subsidiaries. And this will be a part of the model going forward.

It's not one so we'll continue to have that benefit from OneOncology below the operating income line, but we don't anticipate that we'll be talking much about it, you know, this year or in the future years because, you know, we, we fully expect, given the strength of the very strong performance we've seen in the business in the past and what we expect that there'll be very good operating income growth. Thank you for the RCA question also.

Operator: Thank you. That concludes today's Q&A session. I'd like to hand back to Bob for closing remarks.

Robert Mauch: Thank you very much. In all seriousness, do want to thank Jim for carrying the heavy load today, and thank you all for your questions and interest today. I'm proud of how Cencora continues to execute to drive value for all our stakeholders. Investing internally in our infrastructure and externally to extend our solutions for customers. We're well-positioned to drive long-term growth and are pleased to have raised our long-term guidance this year. Demonstrating our confidence and our ability to continue to execute and create shareholder value. Thank you all very much.

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

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