Cencora Stock

All right. Good afternoon, everyone. My name is Eric Coldwell. It is great to have everyone here with us. We'll fix the mic. We'll have good questions. Bob Mauch, CEO; Eva Boratto, nice to have you with us as CFO. This is what, 2 months now, 3 months.

A little more than 2 months, not quite.

I think we didn't officially get your first conference, but pretty close, right?

Pretty close, pretty close.

Pretty close. We're going to go straight into Q&A. Again, as always, send questions up to the iPad if you have any. I'll try to keep an eye on those. Otherwise, I think the team knows I have a very full list, overkill is normal. I'm going to dispense with normal formalities.

I'm going to skip the CEO and go straight over to the CFO since you're new to the company, relatively new to the company. I'd love to, first off, just set the stage for us, 3 decades in health care, CFO of CVS years ago. You've made a transition to more of the retail side for a few years. You're back in health care. How dare you? What is your mind straight coming back to health care? It's been such a crazy world over here. What got you excited about Cencora?

So my mind is absolutely straight, Eric. I just want to start there. And listen, it's great to be here with you, but also great to be back in health care. And I can genuinely say I missed it, right? You referenced 30 years across the health care ecosystem, starting back in the days with pharma at Merck to CVS Health and a PBM. And I love the industry. I love the support of patients and what we do from a purpose perspective.

My ties to Cencora go back quite a long time, something you may not know. During my time at Merck, I worked at Medco for a number of years, and Medco was, at that time, one of Cencora's largest customers. And the deep partnership that existed is something that has resonated with me through the years. So when the opportunity came up to meet with Bob, the extended leadership team, it felt like the right opportunity for me where I could bring value with my experience, but also learn another facet of a great business, right? And the strategy that Bob has put together is so clear the importance of the role that we'll play in the pharmaceutical space is just excites me every day.

I know you're a few years removed, but you had to have some bigger questions about the industry, the space, the world we live in, IRA, MFN, 340B, whatever the topic du jour is in the moment. What were the things if there were items that kept you up at night or said, maybe I want to rethink this. What would those have been?

I would say nothing really kept me up at night, right? This is a big job, a big role. I wanted to make sure I was all in it, right, which I am. The regulatory landscape was not something that I continue to track over the 3 years when I left the sector. So just learning the dynamics, how I can support Cencora and help the team continue to drive the business during ever-changing, constant changing time is where I would go to.

Eric, I would add. So Eva joined the beginning of -- actually the very end of June, and we had earnings on the first week of August. So like the focus and the determination to take all of our amazing experience that you already had, but then also learn the nuances of our industry and of Cencora and then just absolutely did an amazing job on the earnings call, which is an important one for us. We had to really demonstrate the momentum that we had committed to in our third quarter and throughout the year, and it was fun to watch.

I suspect Jim left you in a pretty good spot. I mean, good robust finance team. Company has been at it a while. Things have been executing pretty well. You've seen a lot of businesses. Is there anything that surprised you so far in terms of whether it be process, how they handle -- how the company handles the Street, guidance, transparency? Is there anything that one way or the other has surprised you? Or you say, no, I could actually add something here and maybe make a change as opposed to just carrying the baton on what's already a pretty well-oiled machine?

I think there is one thing that surprised me. So to your point, Jim did leave me in very good hands, the finance team, the depth of talent, Jim's generosity with his time during our transition, we've really built quite a relationship, which I really appreciate Jim's support during this transition. I think I might have underappreciated. I'm going to say in a good way, I underappreciated the breadth of services beyond the logistics and the distribution, the services that we're providing to our hospital accounts, to our corporate partners, to our other pharmacy partners, right? We think about each of these, how can we enable them to grow because we'll be successful when they're successful.

You had a lot of health care experience. You had retail pharmacy, PBM. You had a sliver, a touch of, I would say, what, 2 years, 3 years with insurance. How long was that?

About a couple of years.

Yes, about a couple of years. When you think -- and again, you're a couple of years removed from health care, you're a few years removed. But when you think about what this industry does, which I think your last response resonates with me because I always -- when somebody says, talk to me about the distributors, I cringe every time because you do so much more than just distribution. But what do you have any sense on -- as a past customer, do you have any sense on areas where this industry in general is missing out, maybe not telling the whole story, not getting the full value proposition across.

Do you see things that vertically integrated MCO, PBM, pharmacy companies out there, the big 3, the next 2 or 3, do you see things that they're doing that, hey, if we don't do X, Y, Z, we could fall behind to a vertically integrating industry. I'll leave it with that. I'll leave you alone for a minute and come back to Bob, but I want to hit on that if you have any perspective.

I'll give you two perspectives, Eric. The first is Bob has been very clear on the strategy, right? And the importance of the specialty distribution, the higher growth part of the sector as well as the acquisition of the MSOs. And you used the word integration, right? And I'll go back. Integration is important where it can create value and differentiate, but don't mess up the crown jewels where it's truly differentiated. And I used to say, don't get bogged down by the mothership on certain things. So balancing where you choose to integrate versus where you enable these companies to flourish and grow. So I think that's the key area that I would highlight.

That's great. Bob, you're coming off of a couple of quarters here that were, I wouldn't say tale of 2 cities, but the market response was quite a bit different from March quarter to June quarter. And step back, I think, maybe a victim of your own success, you still actually had a pretty darn good first quarter or March quarter if we think about it that way, but it wasn't quite up to what the Street was expecting at the time. There were some other noise in the channel. June looked felt smelt walk, talked a lot better. And you guided to a really strong fiscal fourth quarter, September quarter.

Some of this might be things that are just not recurring, whether it be higher OpEx a year ago that you've talked about, whether it be some of your customers being acquired and you needed to get through the annualization process. But I'm asking everybody in the space, and I know it's kind of -- it's a bit of a beat and drum in terms of the Street asking you about sustainable items versus more transitory items. But talk to us at a high level about what the next several years look like. I know the fourth quarter is good. It sounds like fiscal '27 is going to be a pretty good year for the space, maybe not quite the upside momentum of last year for everybody. But talk to us about what's structural secular versus maybe more cyclical or company-specific in terms of these drivers that have led to the strong performance.

Yes. Thanks, Eric. Thanks for the question. Thanks for having us. It's terrific to have an opportunity to talk about all of these things where Cencora really is strong. And I'll take it up a level and talk about the real drivers of the business, which at the end of the day, we're executing very, very well. But what is the driver of that growth is really the positioning that we have within the specialty pharmaceutical market. And you have this amazing innovation that's happening in pharma. It's absolutely incredible, whether you look at the pipeline or whether you look at new launches, even when you look at biosimilars, I mean, it's amazing what is happening there. And then you match that with the demographics.

So we are all getting older, whether we like it or not. And we have the opportunity to utilize health care services. Pharmaceuticals are the most cost-effective health care intervention. And then when you match that with the 2 decades -- 2-plus decades of investment that Cencora has made in the specialty space we sit in a position now. We tend to focus on the MSOs because those acquisitions are recent. And I think whether you're new to the company or new to the space, and Eric, you know this well, we've been investing, competing, winning in the specialty space for a very long period of time.

So whether that was specialty distribution businesses early on, the GPO came after that and the MSO services are really the next natural extension of that. And everything that we do is intended to provide services to the pharmaceutical manufacturer to help to get that product to the market and to the patients and for the providers to really work in the background, right? We want to be as invisible as we possibly can with the services that we provide so that they can care for patients. And as those patients come in, they need the specialty products, we're well positioned for that. And that's really -- whether you're talking about the third and fourth quarter or as we go forward, that's the driver. And that's what's durable beyond anything that might be a put or a take in a short period of time.

Let's jump off that specialty MSO, both came up in that response. And clearly, this has been a pretty big transformation in what the industry in total went after over the last roughly 2 years, 2 to 2.5 years is when you and one of your competitors really started to step on the gas. McKesson obviously had been here for a long time, but they too have been more acquisitive and more focused on building out their MSO.

We went out on a little bit of a limb. I drove Bennett and Melissa crazy for a couple of months with probably the most phone calls and e-mails I've ever given them. But we put out a deep dive, our best guess on what your MSO looked like, and I won't bore everyone with the details. But in that report, I forecast that based on the growth rates and the momentum that you had, we thought that perhaps that business could get to perhaps in the ZIP code of 10% double-digit contribution to profitability in fiscal '27.

The great thing about writing a report is you expose yourself to the Street and you never really find out if you're right unless the management team says you're right or you're wrong. I guess I'm curious, you had a chance to look at that perhaps how far off are we? And if you are getting towards double-digit profitability -- percent of profitability, is the business managed in such a way that this could actually become a carve-out segment, a reportable segment as we go into the next year, the next 2 years as it hits that at least threshold of materiality on percent. It also depends on how you're running it and how you're managing it if you're going to break it out. But I'm curious, is this something that could become broken out over time?

Yes. Eric, I'll give you a couple of thoughts, and then I will quickly hand it to Eva for anything '27 or reportable segments. But the background, the thesis that you're talking about is in line with how we see things. And we do believe that the MSO part of our business will perform well, will be an important part of our business. We've said often one of the things that we love about the MSO is that it's the next natural extension. Its purpose is to help the physicians care for patients. That's right in line with our purpose.

We stay far, far away from any clinical decision-making, and they have complete clinical autonomy to do that. And it's also a profitable and growing business on its own, which is terrific. So you do see this driver and you see mix improving with our business over time. Again, that's the market is moving in that direction and also how well we're positioned there. Eva, you want to add?

Eric, can I go to your point on disclosures? I'm going to make it a little more broad than a segment around disclosures. You've heard Bob talk a lot about here, right, the importance of specialty, the MSO acquisition. So as that part of the business becomes a larger part of our business, a faster-growing part of our business, we recognize the importance of thinking through our disclosures for our investors.

The transparency, a, unlocks greater appreciation, I think, for the growth and the growth opportunities, instills confidence. We've been deploying capital against this, right? So also being more transparent there. So we're going to be thoughtful about that, the right metrics, the right mechanism to do that. But as we head into 2027, it's something that's really top of mind for us.

And sort of a segue somewhat correlated, you could say it's not bad luck to me, it looked like bad luck that your 2 competitors did a number of acquisitions of MSOs where the underlying practices were your distribution customers and/or GPO customers as well, really just a confluence of events in a short period of time that had some impacts, both optical and I guess, real. Those transitions are annualizing in a pretty linear fashion from last quarter over the next couple of quarters. Is there anything left in the market that you see in terms of renewals? One of your competitors recently came out and said it sees a consistent customer base over the next year. I'm not really hearing in the next -- but for your two competitors, one big shared contract. I'm not really hearing about a lot of churn in the market or other activity.

It seems like some of the MSO acquisition activity has slowed down now as companies digest what they've done. You're still waiting on [ South ]. But other than that, is there a reason not to think that there's going to be more stability in the market and optically for you, I know tough comps against the core business last year, but annualizing the distribution transition of a GIA Alliance, Solaris, FC. I mean it feels like things are going to be smooth commerce sailing, if you will, a little smoother. Is that a fair assessment?

Yes. I'll hit a few pieces of that, Eric, and follow up if I don't get renewed. I mean one part of what you're describing, which is not necessarily the flow-through of the economics, but it's really strategic discipline. And one of the things that we've been really focused on the last couple of years is focusing the portfolio. So that's deploying capital into the MSOs, but into what we would say are the right MSOs, right? So that's going to be retina and oncology, pharmaceutical centric and also deprioritizing some businesses.

So when you're looking at a customer that's in the market that doesn't necessarily fit your strategic thesis from an MSO standpoint, you'd love to have them as a customer -- as a distribution customer, but don't fit your strategic thesis. It takes some discipline to sit on the sideline and allow that to happen. So I'm proud of the team and that we were able to do that. And yes, it takes some time to transition. But over the medium and longer term, we think that will pay dividends.

The second point in there, which aligns with where you're going is we will continue -- I'll just speak for us. Cencora will continue to add to our MSOs, but they're small additions. So there are small groups of physicians, they are individual physicians coming and we're being very successful in both RCA and in OneOncology, but they're not things that get headlines. And they're out on the tail. They're the independent physicians or independent practices that are not part of an MSO that are choosing to join our MSO. So it's not really competition between our peers, which is good.

And then the third piece is, which is kind of the overall market stability. And as you know, I've been in this industry for a very long time. And the market continues to be appropriately competitive but stable. And we still don't see a lot of movement around, and I don't expect that would change.

That's great. I'm a lifetime R&D services junkie. I covered CROs for as long as you've been in health care, I think. And one of your competitors just made a bigger, more direct bite into the space with an acquisition of a mid-tier, let's call it, a mid-tier hybrid CRO-CSO. You have a lot of businesses in and around R&D support. If you want to broadly call it biopharma services, it's a different angle on biopharma services, but you're a huge player in clinical trial logistics management. You still have some pieces left of the PharmaLex acquisition. Your MSOs, you have SMO, maybe some CRO hybrid businesses within them. And research has been highlighted repeatedly by you and your peers as a big growth opportunity. It's a big market. It's a recovering market. Things have been getting better in that space over the last 12-plus months after a bit of a downturn.

But long haul, it's a business that has over decades, become a much larger marketplace and opportunity. To that end, you talked about sitting some things out. Would you set out going down the path of maybe getting even closer to R&D through M&A? Or with all of your investment that you're talking about and your growth that you're talking about taking R&D, taking what you have in one of your MSO platforms, translating it maybe to the other one a bit more, should we think that no Cencora actually could be in the market at some point for an actual asset to complete the spectrum of R&D services?

Yes. Let me start there with how the clinical trial support services that we have, which you described so accurately connect to our pharmaceutical-centric specialty focus. So we do believe it's important for us to support clinical trials and clinical research. We have best-in-class global clinical logistics. So for any of you who don't know if there's a clinical trial going on anywhere in the world, cell therapies, gene therapies, other complex therapies that require very advanced transport of products for tissues, we're very likely involved in that trial, and that's our World Courier business, which is best-in-class. And given the R&D portfolios, that's very likely going to be driving the specialty strategy.

Secondly, we have these physician networks now in the MSOs, and we talked a lot about the capabilities that RCA has in terms of supporting clinical trials. And we think that's very important for patient care, for patient access. It helps recruit physicians. It's also a good business within the MSOs. Having said all of that, we like the way we're playing in the space. And said another way, I don't think that if we owned a CRO that we would be a better site management organization or that we would be a better global logistics provider.

So the spaces that we play are spaces that we feel like we can lead and don't see the need to be a CRO. We want to support the CROs, and we want to support the manufacturers and making sure that they can get their trials done, get patients accrued into those trials. And we think that's the right place for us right now.

Are there adjacencies that are of interest on the M&A side, not just the little tuck-in MSO, even one physician at a time or one small practice at a time are there areas that you are particularly interested in to complete the biopharma service spectrum of what you do today?

Yes, I'll start and maybe you can kind of hit capital deployment hub as part of that. So Eric, we have pretty significantly deployed capital to our primary focus area and investing in the MSOs over the past few years was exactly the right thing for us to do for our business in the short, medium and long term. Frankly, we're going to stay focused there. So that's not a priority for us right now. So the priority for us is continuing to tuck in with the MSOs. That's where the growth opportunities are. Now we're always going to be open-minded and active, but having another adjacency is not on the priority list right now. Eva, do you want to add anything?

Sure. Just broadly on capital deployment, Eric, what I would say is there are no changes to our priorities, right? Number one, of course, investing in the business and growing the business. Bob has been pretty clear here today around M&A, right? We'll focus on the tuck-ins, the things to enhance our portfolio, opportunistic share repurchase, which we did last quarter. The team did in a really smart way.

And finally, I'd say growing our dividend consistent with earnings growth while maintaining our strong balance sheet, right? We generate a significant amount of cash, and we'll look to deploy it in the optimal way to drive TSR.

Not my favorite topic because there's only so much you can say, but it is very relevant from a Wall Street stock picking perspective. Recently, headlines hit that your largest and long-term partner, Walgreens was shifting some distribution. I think this topic has been absolutely explored. You've made some other comments even this week at another event on the topic.

So I don't want to rehash all of that. But to be clear, it was in your guidance. It started impacting this quarter. This quarter's guidance is great. This kind of stuff happens all of the time. We don't always see it. It became topical because of the nature of the relationship. I really want to come at it from a different angle, which is understanding that large customers, large partners oftentimes do use other vendors or they switch for whatever reason. What would have been that reason? I don't know how much you can share with us, but was it a business that you weren't well set up to do? Was it something you didn't want to do? Did somebody else just offer a heck of a good price? Like what actually drove -- even if it was a tiny sliver outside of the prime vendor relationship, what actually drove the decision not to just stay with you?

Yes. I can't get into any specifics of that. But I do think it's important to reiterate some of the things you said. I mean this does happen, right? It wouldn't be something that would be talked about if it didn't come out in a research report. I mean I think our team did a fantastic job of recognizing that, that report was not necessarily being interpreted for the scope that it was and that it could have been -- there could have been an overreaction.

So we did what we needed to do to give the -- our investors the information that was going to be most helpful. When you think about Cencora and Walgreens, I think it's really important to think about the history of the relationship, the amount of work that we do together, the amount of integration that we have together. And they have a terrific team. And as far as we can tell, they seem to be focused on the right things. We're talking, we're working together. So again, these things happen, and I can't comment on the specifics, but we like our portfolio of customers, including Walgreens.

And there's no reason to anticipate any kind of more material or notable change from here until at bare minimum, 2029 or 2031 when the existing contracts mature. Is that a fair statement?

Yes. As you said, we have a contract in the U.S. through 2029 and '31 in the U.K. with Boots, and we expect to continue to support them throughout that time.

That's great. I'm not going to try to squeeze one more in with 12 seconds. So I'll just say thank you again for being here. It's wonderful to see you. And it's great to have you back. We overlapped briefly many years ago, but welcome back to health care. Welcome to a great company, Eva.

Thank you.

Thank you, Eric.

Thank you very much. Everyone, please join me in thanking now the company for being here with us today.

Okay. Good morning, everyone, and welcome to the 24th Annual Morgan Stanley Global Healthcare Conference. I'm Erin Wright, health care services analyst at Morgan Stanley. For more important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. And this morning, we're happy to kick off the healthcare services portion of the day with Cencora. We have CEO, Bob Mauch; as well as CFO, Eva Boratto our new CFO. Welcome. We'll go ahead and get started because we have a lot to get through this morning. But bigger picture, you posted strong results in the fiscal third quarter report with drivers across the core distribution business.

Continuing here, especially across specialty you're proactively also optimizing your business, prioritizing some of those areas where you have those core competencies in faster-growing areas such as specialty. You're calling for Healthcare Solutions AOI growth of 14.5%, 15.5% growth, tracking really nicely ahead of the long-term profile. So how do you think about -- there's different moving pieces, I guess, with OneOncology, but how do you think about the momentum continuing into fiscal '27 and beyond?

Yes. Thanks, Erin. First of all, thanks for having us here. I'm excited to be joined by Eva, who's been a terrific addition to our team, and we're excited to talk to you about Cencora today. And as you said, Erin, so strong growth really due to the positioning that we have within the specialty pharma marketplace. So that's in health systems, that's in community physicians. We've deployed capital to expand our capabilities in those areas. And as you said, we're also focusing our portfolio to make sure that our time investments are aligned with our strategy over the long run. And in terms of momentum, as we look into 2027, we're confident that the trends will continue and that we're very confident in our long-term growth algorithm. Our specialty centric, pharmaceutical-centric strategy and also the areas that we're continuing to execute to make sure that we're very well positioned in our U.S. segment as well as our International segment.

And what are some of those moving pieces that we think about in terms of into 2027, just as we're thinking about from a financial modeling standpoint?

Yes. I think as we look forward to 2027, as you can appreciate, Erin, we're in the midst of our planning process now. So we'll have -- we'll certainly have more to say about 2027 on our earnings call. But a couple of things to call out is we'll have another 4 months benefit of the OneOncology acquisition that we experienced this year; two, we -- our investments in MSOs and the growth in specialty, we expect will continue to perform well, and we'll have more to say about our guidance in November.

Okay. That's fair. And let's switch gears a little bit to utilization. It's been a topic of conversation across this conference. It has been relatively strong in terms of the utilization environment that we've seen for quite some time now. Can this continue? How would you characterize the nature of kind of prescription volume utilization trends? Is this the new normal in terms of utilization at these levels?

Yes. I think, Erin, I'll go backwards to go forward a little bit, right? If you go back to 2025, right, you saw utilization trends elevated. They were outside of our growth algorithm and the company before I got here had commented that we didn't expect those trends to continue. This fiscal year for us, you saw some pressure, I would say, particularly in our -- in the January, February time frame, supported by the IQVIA data. We saw those utilization trends rebound in March and continue through the third quarter in a consistent manner, and that's where our outlook for Q4 represents. Listen, specialty is an increasing part of our business. We believe we're in the right areas as we're focusing on distribution, but also our presence in MSOs in oncology and retina and believe we have confidence in our long-term growth algorithm, as Bob said.

Okay. And then one of the other investor questions we've been getting of late, so I have to ask is just the relationship with Walgreens and some of the dynamics that are happening there. What -- I guess, can you quantify the magnitude and presumably small, but what the rationale is why some of the volume may be shifting here? It sounds like this is the natural nature of some of these contracts, but will this continue in terms of the volume shift into fiscal '27? And you used the terms began to move outside of the company. So I just want to see if there's more to come or does that suggest that there's more to come? Or how do we think about this?

Yes. Thanks, Erin. I'll start and then I'll hand it over to Eva. It is an important question. I mean, Walgreens is a really important customer to us, a long-term strategic relationship that goes back more than a decade. On the specifics of the volume move that we disclosed, and you hinted to this Erin, which is true. It's not uncommon within our industry for very large buyers to have small pieces of their business with other wholesalers. We do have the prime vendor agreements, which ensures that the contract is solid over a long period of time, but there can be smaller ins and outs over the life of that contract, which again is absolutely normal.

What was abnormal in this case is that it came out through a research report and our team quickly identified the need to clarify because what we didn't want is to have any investor confusion. So we didn't want to have people assume it was too big or nothing at all or anything in between. So we wanted to be specific. So the team made a great decision to put out the 8-K and make sure that we clarified the small scope of that. I think it's important to say that as we look forward that Walgreens has been an important strategic partner for us over a long period of time. We have an excellent relationship with their new team, and we will continue to work very productively with them.

Okay. And Bob, if I could just, again, to level set on the factual context, right? The vast majority of the business is in the primary contract. This change, which became effective July -- July 1, basically, was included in our Q4 guidance that we provided back on our earnings call in August 3, there will be a wraparound impact into 2027 of the of the remaining 3 quarters, and I'll come back to what Bob said. Overall, this is an important customer. As you look at our Q4 guidance, right, we are -- our expectations are to deliver accelerating growth despite the impact of this. .

Okay. Let's switch gears to specialty then. I guess, can you provide an update on just trends across the specialty business, including MSOs, health systems, community physician practices, can you talk about the long-term growth and margin profile of some of these businesses and what's feasible in terms of the opportunity to potentially increase your exposure in specialty over time?

Yes, I'll take that one, Erin. So I think it's best to start with just the market growth in specialty pharma, right? So if you look at the disease areas that are being treated, our specific focus is in oncology and retina. If you look at the pipelines of innovation are significant in both of those disease areas. We have an aging population who is increasingly having access to care.

And so there's a macro trend there that is really important when we talk about the growth in our business because when you match that macro trend, with the fact that we have, for decades, been investing in capabilities to be the best partner that we possibly can be to the pharmaceutical industry as well as the providers, you see us benefit from that innovation utilization and trend. That shows up in our community physician practices, whether that's specialty distribution, the GPO or the MSO, which you correctly called out. So all of those benefit from those trends. And it's not just in the community physician space, it's also in the health system space where specialty products are used significantly.

We have, over several years, worked to also position ourselves with health systems who are excelling in specialty care. So cancer treatment centers for example. So we feel good about our positioning there, and we'll continue to work hard at meeting the needs of the manufacturers and the providers. And Erin, the end of your question, it was about expanding our exposure. And I do want to just make the point that we're very happy with the oncology and the retina space. And that is driven by the fact that we have a pharmaceutical-centric strategy.

And when we think about the services that we provide, particularly in the MSO space, we are kind of -- our thesis, our funnel goes through it has to be a pharmaceutical-centric specialty. And the most pharmaceutical-centric specialties are retina and in oncology. And so we will continue to expand within those, but it would be very unlikely that we would expand beyond those until at some point in the future, and there probably will be another specialty that is pharmaceutical-centric and administered in the physician office. But as we sit here right now, you will see us focused on those 2 areas.

Okay. So let's dig into OneOncology. And you completed a transaction or the remaining majority interest in OneOncology back in February. That was ahead of your original put call timeline. what has surprised you since closing? Why was this an accelerated time line? Why was that strategically and financially important to you? And it's running, I think you said kind of modestly ahead of your expectations. It's still expected to be neutral to adjusted EPS in the first 12 months, net of the financing costs. But how do we assess kind of the progress from here?

Yes. Erin, I think just to deal with your question of why did we accelerate? It really became clear to us, one, that OneOncology was the platform that we believed it was. So there are no surprises, but I will tell you, and we see this in the performance, and we see this in our relationship, but this is a fantastic platform. It's a fantastic management team. Their focus on enabling physicians to care for patients and therefore, improving outcomes in the lowest site of care is just -- it's inspiring, to be honest with you, not surprising because that's exactly what we believed, but it's absolutely what we saw. The strategic rationale for accelerating, and you'll know well. So we had done RCA before that.

So we had RCA also performing very well, sitting on its own. And we really -- while we had the investment in OneOncology, we really weren't able to have them talking to one another, working together, sharing best practices, creating synergies. So one of the big drivers for us in and accelerating the OneOncology transaction was so that we could get them to the table with RCA. And so now what we have is a platform with the 2 verticals.

So oncology and retina, very different clinical profile. So they can't really go together, but there are capabilities that they can share, which we've talked a bit about, and we can talk more about if you'd like. But that was really the driver. So we see them working together now. And again, that drives best practices for both MSOs and creates value over the short and long term.

And so you kind of spoke to this a little bit, but you've outlined these sort of 3 phases in terms of that MSO value creation, integrating RCA and OneOncology, which you were kind of alluding to and then sharing some of those capabilities across the 2 platforms and then developing kind of new services for physicians and pharmaceutical manufacturers. I guess, where in each phase are we at of that? And then bigger picture, are you going to start breaking out sort of the MSO and specialty business similar to one of your peers?

Yes. I'll let Eva answer the last part of that and give you a chance to think about it. And so Erin, it's a great question, yes, and I did allude to that. Before I get into how they work together and the capabilities and value creation of working together, I think it's really important to remind everyone that which is sort of where we started this conversation that without any working together, without any synergy of clinical trials and all the things that we talk about, these are platforms that grow. They are platforms that grow because they are in attractive specialty spaces.

They're able to attract physicians into their platform that is not just acquiring smaller practices or having smaller practices join. It's also physicians out of fellowship are joining both RCA and OneOncology. So they grow on their own. And so then we get to the second phase that you mentioned, which is what are the things that we can do together that will add incremental value on top of that growth. And I'll just repeat the ones that we've talked about and clinical trial participation is such an important aspect of specialty care. And I mentioned the accessibility of the community physicians, the lower cost site of care of the specialty physicians having clinical trial access there is really important to patients. It's also a good business within there.

So RCA has a significant clinical trial support capability that we're now working very closely with OneOncology on. And that works because the capability is a process capability. It's not clinically differentiated. To put together a clinical trial service, you have to be able to go through step A to step Z in a flawless way. And that's what RCA has built that we're now moving into OneOncology. And then as you said, the third part of this is really new services. The best example would be analytics. services for pharma. So within these large growing specialties, we'll have access to data from pharmaceutical utilization to real-world evidence, other clinical indicators and outcomes that physicians have that certainly will be valuable to the pharmaceutical companies that we have not really begun to leverage yet.

Okay. And Erin, on your disclosure point, I'll jump in there. So I think looking back, Cencora has done a really nice job in evolving disclosures, evaluating disclosures to ensure investors have the right information. I would say from my past experience, right, continuing to do that is also, I've seen value in that as your strategic priorities shift, obviously, a growing specialty and MSO business, looking at our disclosures to make sure investors have the right information to evaluate those business and to build investor confidence. So as we look forward, we'll be really thoughtful around what disclosures we can provide to help investors appreciate the strength of our business here.

Okay. That's fair. So maybe dig a little bit into RCA, some of the opportunities you see there, including the EyeSouth transaction and any sort of surprises on that front in terms of how that's performing? And RCA is in the later innings of building out sort of that clinical research infrastructure, while OneOncology is much earlier in that journey. I guess, do you think a more meaningful presence in clinical research is important to you? It sounds like it is, but how could that fit in nicely with World Courier and your other businesses in terms of a potential CRO asset?

Yes. Thanks, Erin. You kind of at the end is where -- I maybe your question, which is where I would start. So we certainly are interested in supporting clinical trials. And we can do that through services that support manufacturers and support CROs through having access to the patients, having the capabilities within the practice to enroll patients and then monitor those patients over time. You mentioned the specialty logistics capability that we have in World Courier, which is a global platform, which can handle the most specialized, whether that's gene therapy, cell therapy, it's tissue samples from a clinical trial, if it's products that need to be transported. But the takeaway from that is we are interested in supporting the clinical trial ecosystem, but we believe there are enough services that we can have to be a strong supporting partner. We don't need to be in the middle of that process.

I'm going to switch gears a little bit to CuraScript and Express Scripts and the relationship there. The following some of the faster-than-expected brand to biosimilar conversions that we saw at CuraScript and some of that in-sourcing and contributing to some of the sales dynamics that we saw in fiscal '26. I guess how should we think about the pace and ultimate extent of further CuraScript in-sourcing? How would you characterize that relationship and the direct impacts? Are they significant maybe from a revenue perspective, but not necessarily from a profit perspective for you? And any sort of broader implications to consider on that front?

Yes. Erin, Evernorth, Express Scripts, CuraScript, all of that, another important customer for a long time. And we do have a very productive and constructive relationship. It's important to note that the idea that, that customer of ours would in-source a generic conversion is exactly the way that it's always been. So if I just go back from a history standpoint, we weren't talking about biosimilars and things like that, when an oral product went from brand to generic, that went away from us to them self fulfilling that. It's always been that way. It's always been part of our relationship.

And so the fact that it also happens with biosimilars is actually not new. It's something that's talked about a bit more, but it's actually not new. And I think it's important to note that the customer relationship type. So a specialty mail customer is going to be in the profile of low margin, as you said, potentially higher revenue depending on the product. So when something does move there, there's a change in revenue, but there's very little change in profit, which we've talked about over a long period of time. So the relationship is productive. We -- for all of our customers, we work hard to ensure that we're supporting them in executing their strategy, and we see what they're doing as kind of normal course.

Part B biosimilars would be more of your sweet spot anyway, I guess, how meaningful still of a tailwind do you believe in that strategy? And obviously, that plays into what you're doing within the retina business, what you're doing with OneOncology as well. Presumably, that's a disproportionate benefit that you see kind of coming down the pike. And do biosimilars alone kind of get you to kind of higher than that long-term targeted range, too, as we think about the drivers going forward?

Yes. I'll start and maybe you can take the driver. And Erin, thanks for asking that because I should have pivoted from Part D to Part B because what you said is exactly right. So for all the reasons that the Part D dynamics are manageable, something that we have experienced for a long time, the bigger point for us is that the Part B biosimilars is our sweet spot. It is a tailwind for Cencora. That's where all the specialty positioning that we talked about earlier is really important. And we have the capabilities to help the pharmaceutical manufacturer come to market and also the physicians to understand the clinical and economic components of any new product that's going to come to market, including biosimilars. So as that transition happens from a brand to a biosimilar within Part B, that is a tailwind for Cencora. It's a benefit, again, to all the components of our specialty physician business. And that really is because of the significant services that we provide to the manufacturer and to the providers as those products are coming to market.

Yes. And Bob, I think I'd just add, one, I'd reinforce, as you just said, right, it is an incremental tailwind. But I would just remind you that our specialty business is already accretive to our margins, given the wraparound services that Bob has -- was just talking about. So while there will be a benefit, it won't be as great as what you may have seen with generics.

Okay. Regulatory dynamics are also top of mind in drug pricing trends. You've successfully renegotiated the manufacturer contract to preserve kind of gross profit dollars through the initial IRA-related price reductions as we saw kind of at the beginning of the year. Negotiated pricing expands into Part B in 2028? How should we think about that risk shifting from Cencora's distribution economics to physician reimbursement and the economics at OneOncology and RCA? And like just bigger picture, taking a step back, you knew about IRA and the dynamics when you're closing deals like OneOncology and RCA and presumably, you wouldn't be doing those and doubling down in this area if you knew that you were kind of walking off a cliff in terms of reimbursement. Is that the right way to bigger picture think about this and the disproportionate opportunities in biosimilars are great as well as other drivers across those businesses. Sorry, that was a bigger question than I wanted it to be, but...

It's a really important question. And I'll start with, yes. So when we look at continuing to deploy capital into the specialty physician space through the MSOs, we absolutely modeled all of the scenarios, right, and became very comfortable that there was going to be an issue. There's not going to be an issue there. And I'll go through a few of the reasons why we believe that. One is that -- and I apologize to the crowds because I think this will be the third or fourth time that I said this, but it's important. But the community physician side of care is the highest access and lowest cost side of care for specialty treatment. And when you think about government health policy, and IRA, you see a focus there on pharmaceutical costs.

And the focus there is not on physician reimbursement. So you have lowest cost site of care, highest access and you have the intent of IRA to have some impact on pharmaceutical costs, presumably patient out-of-pocket costs. And so as we looked at this and continue to look at it, and I'll mention that we spent a lot of time in Washington doing our best to educate the very well-intentioned people who work on these types of things about the need to not impact physician economics and whatever they do. And there's 2 points that I'll make, so I don't get too long-winded on this answer. One, -- in Part D, you saw for many of the IRA products, you saw list price reductions, primarily due to the fact that they had significant gross to net spreads in that area for lots of reasons.

You don't see that gross to net spread in the Part B. So one shouldn't assume that there'll be list price decreases in that space. Secondarily, if you think about a discount that would be paid from a manufacturer to the government to meet the requirements of the IRA, if you don't want to impact physician economics, you would look at methods that could get that discount from the manufacturer to the government without flowing through physician reimbursement. And there are many ideas out there, serious ideas out there about how that could work without impacting the physician. And that's where we're going to continue to stay very involved in educating. But as you said, Erin we feel good that the physicians will be able to continue to care for those patients because a reduction in physician economics would not be good for patient care.

And 340B exposure just because that's topical from a regulatory standpoint, can you discuss that?

Yes. I mean it's sort of in the same bucket. I won't go into as much detail, but it's very early on, Erin, as you know. And there are proposals that could impact how 340B works in this administrator, and there are proposals out there that are focused on not having any changes. So we stay close to it. It's a very complex dynamic within health care. We have a broad set of customers that see 340B in different ways and from different perspectives. So we stay close to it. We'll monitor it. And most importantly, we are always working to make sure that we're helping our customers navigate any changes that may come down in the future.

Okay. On the international side, anything to call out in terms of the underlying growth trends there, I think, excluding some of the manufacturer price adjustments that you saw kind of developing in certain markets in the third quarter. How do we think about kind of longer-term growth there, especially now with some of the portfolio optimization that you've been doing as well?

Yes. I'll start, Bob. Overall, there are a couple of parts to your question, Erin. So I'll go to the first part around the price adjustments there. Those can affect a particular quarter in a significant way. But as you look over a longer period, right, it's certainly not as meaningful. As you look at our Q3 performance as well as our Q4 guidance as you look at the growth that we're delivering international, right, our World Courier Global Service Logistics business is performing quite well. We're really pleased with the rebound that we've delivered there. And I'd say it's on 2 fronts. One, the market for clinical trials has come back, but also how our team is executing in the market. We've made some changes. We've made some operational changes, leadership changes that are helping us execute and win in the market. The other place that I would call out is really 3PL across Europe is growing nicely, and we're competing well in retention of business, new business in those areas also.

And then lastly, on capital deployment and Eva you're newer, so I would love to hear a little bit about your kind of philosophy on things on that front, but can you provide an update on just the priorities? You completed $1 billion in opportunistic repurchases in the third quarter. You've really, I guess, fully repaid the $800 million in RCA financing related term loan. I guess, how should we think about the additional share repurchase opportunity there, debt reduction, internal investment, M&A opportunities as well?

Yes. Erin, I would start with -- we don't have any changes in our capital allocation priorities, right? One, investing in the business to drive growth, to drive shareholder returns; two, our M&A activities. I think Bob answered that previously around our real focus in oncology and the retina space. Opportunistic share repurchases, as you said, you saw us do that in Q3. And I'd say maintaining and growing our dividend in line with our earnings while all maintaining a strong balance sheet. We're a strong cash-generating company. So we will look to maximize total shareholder return as we make these trade-offs across these priorities.

Okay. And just closing out, any sort of update in terms of some of those portfolio optimization initiatives like MWI and also just the -- what's next in terms of is there more that you need to do in terms of optimizing the portfolio on that front?

Yes. I would say on the previously announced optimization of the portfolio, we really have no timing updates on those. For MWI, what we had indicated was for modeling purposes, assuming a midyear transaction there, and I don't have any updates on the other areas.

Okay. All right. Thank you so much for the time. I really appreciate it.

Thank you.

Thanks, everyone.

Hi, everyone. Thanks again for joining us. So we're really pleased to have Cencora for our next fireside chat. So Cencora is a drug distributor and provider of pharma-focused services. With us from the company are Bob Mauch, CEO, President and CEO; and Eva Boratto, EVP and CFO.

We also have Bennett with us in the audience. So first, I wanted to see if you wanted to make any kind of introductory comments or whether we should just really hop right into Q&A.

Yes. Maybe just a quick word. Hi, everyone. Thank you very much for being here. We're in the midst of an excellent fiscal 2026. We reported last month our third quarter earnings, which demonstrated continued growth in our areas of focus, which really are the specialty pharmaceutical areas, both in the physician part of our business as well as in health systems, we also had the opportunity to opportunistically repurchase $1 billion in shares and expect a strong year in line with our guidance, and we're very excited about the future in terms of our pharmaceutical-centric strategy and the way that we're continuing to focus the company on areas of growth in the market where the specialty area, in particular, where demographics are strong and there's tremendous pharmaceutical innovation.

Okay. Of course. Yes. So maybe we'll just clear through this bit kind of off the top. I think the most recent disclosure piece of news from the company was that certain volumes related to your customer Walgreens and that were outside of the prime vendor agreement or outside of the prime vendor contract started to move away from the company. Would love to just a little additional context on kind of the nature of these volumes, like why they are outside of the PV contract? And anything to kind of characterize like how typical this is or isn't as part of your business?

Yes, sure, happy to -- I'll start and then I'll hand it to Eva. Also should have noted in the introduction that this is the first investor conference for Eva and I to do this together, which has been fun so far, and she's been an amazing addition to the Cencora team. So I look forward to hearing more from Eva.

Yes. So that's a part of the industry that doesn't get talked about very much. But the idea that a very large purchaser would take a small portion and have that with another distributor it's not uncommon. It is -- what is uncommon is the fact that, that would be something that would have to be discussed. And our team did a great job upon realizing that we want to make sure that people didn't misunderstand the size of that relative to the overall relationship, the very small size relative to the overall relationship. So we did do the 8-K and make sure that we provided the right level of clarity.

So as I said in the beginning, it is something that happens within the industry. It's not part of our core contract, as you said, and I'll let Eva take it from there.

Yes. I think, Bob, the only thing I would add is we wanted to provide to the investor community the full factual context around that. And a couple of things. One, the business began moving in July. So at the start of the fiscal fourth quarter. Two, it was contemplated in our guidance, which shows the acceleration in Q4, the guidance we provided back in August. And finally, three, as Bob said, the vast majority of our business with Walgreens is in the prime contract, not outside.

Yes. I appreciate that. And then maybe just to expand on kind of the financial component, mentioning that it's obviously it's fully contemplated. I guess, one, it looks to us like kind of the revenue guidance that's implied for the fourth quarter doesn't really stand out as looking like anything different than we might have expected kind of any way implying a small top line impact. So I hope you can maybe touch on that thought process a little bit and whether that stands up to a reason -- and then as we think about the volumes, I guess, transitioning starting in July, I think a natural kind of question is what's the exit rate look like? And do you have visibility to the exit rate at this point? So maybe if you could touch on both, that would be appreciated.

Yes. So overall, let me take a step back at the Q4 guide that we provided, right? It was a strong guidance. It was an acceleration from Q3. As you think about what is a key driver of our performance is underlying utilization trends, particularly in specialty. And specialty is becoming an increasingly important part of our business as you think about the acquisitions with the MSOs. So we were pleased with the guidance we were able to provide.

In terms of revenue and underneath, while, yes, there's the Walgreens loss in Q4, we also annualized the oncology. We've now fully annualized at the end of Q3, the oncology customer that we lost as well as we continue to benefit from the OneOncology acquisition that we have. Additionally, in our guidance, in addition to the strength in the U.S., our international business is performing well also driven by our World Courier and our 3PL businesses, right? World Courier, really pleased with what that business has been able to do in terms of the market improving, but also the execution, and then on the 3PL benefiting from the specialty tailwind.

So overall, we're pleased with the outlook that we provided, and we're focused on executing. And I would think about the wraparound of the Walgreens, you have 3 quarters of that wraparound.

Okay. And then just last one on this topic, and it's kind of a question of the day really across all the distributors because there are some major near-term renewals and ones that are even more closer proximity and time line than really yours is. But obviously, Walgreens itself has been going through a period of fairly dramatic change. I guess how should the investment community think about this relationship and what it might look like over the next 5 to 10 years potentially for the new Walgreens?

Yes. Thank you for the question. I think to look at it first is to realize it's a strong long-term strategic relationship, right? And that is true over multiple generations of leadership at Walgreens. So that doesn't change. It's an important customer to us. Obviously, we're a very important partner to them and the fact that we are servicing every one of their stores every single day over a long period of time. So the relationship is strong. The relationship is important.

And I'll go back to the strategic part because whether you're talking about Walgreens and Cencora or other parts of the market, these large relationships are generally long-term strategic relationships. And I think that's foundationally how we all should look at them. And we feel really good about our relationship with Walgreens. We feel good about the team that's there, and we expect to have a long-term relationship with them.

Okay. Great. And then maybe to kind of touch on the organic growth trajectory of the U.S. health care business over the past couple of years. I mean, we had a calendar 2025 for you that was obviously incredibly strong. There's a bit of deceleration in calendar Q1. And then you've seen pretty significant rebound since. I think one thing the market struggles with a little bit is kind of like what are the key factors we should be monitoring kind of explain the quarter-to-quarter variability in organic growth. So I guess what are some of the factors that have been influencing the growth rates above and beyond sort of the long-term expectations? And how are you thinking about that going forward?

Yes. I'll start. Going back to 2025, and I wasn't here, but as I've studied, right, the 2025 utilization trends were outside of our long-term growth algorithm. And I think as the company said at that time, expected them to moderate more in line with our expectations. So I'll put that off to the side in terms of 2025. In 2026, fiscal Q2, calendar Q1 had some unique dynamics affecting the quarter, particularly in January and February, there were some real pressures. I think you also saw it not just in our data, but in the IQVIA data as well. That rebounded at the end of fiscal Q2, and we saw that rebound stabilize, consistent in Q3 and consistent as of our earnings call.

I think one of the reasons why revenue isn't part of our long-term growth algorithms is this volatility, right? And we're focused on managing through that and delivering the operating income growth as we've outlined, underlying, I think, important utilization, I said this earlier, is an important aspect of our algorithm and particularly in specialty, and we think there are healthy tailwinds to those trends as we look forward.

And then to kind of go into the different subcomponents of the business. If we think about generics, it's really been like a much more healthy part of the market than really it had been maybe going back 10 or 15 years, and there's been a lot less volatility there. But I'd love to hear a little bit about how you're thinking about the generic franchise over the next couple of years. There's obviously some material loss of exclusivity opportunities. What do you think happens there as we forecast out maybe 1, 2, 3 years?

Yes. Look, the generics -- loss of exclusivity, the generic market is something that is -- it's important for the for the overall market, right? So as products mature, whether it's a small molecule generic or biosimilar, as the products mature, they have an opportunity to go to a generic format. That's good for our business in both cases. I will caveat that kind of as you kind of did more of the historical perspective, there was a time when generics were a larger part of the profitability growth in the model. And as we've rebalanced contracts over a long period of time, that is less.

So still very positive, and it's excellent for our business, but it wouldn't be the significant upside that we might have seen 10 years ago in that we've taken some of the upside out, but we've also taken some of the downside out from that deflation that we've experienced.

And as we think about some Part B biosimilars, I guess, how do we think about potential contribution from biosimilar? Obviously, we follow your biosimilar report quite closely. We see things like additional EYLEA biosimilars or first biosimilar launches for drugs like SIMPONI as an example. I guess how is the company thinking about that and maybe how the cadence of biosimilar opportunities looks relative to the past couple of years that have influenced the numbers?

Yes. Let's start with Part B. So EYLEA biosimilar that you gave is a good example of our future additional biosimilars. That is a tailwind to our business. So as products go biosimilar within the Part B space, which is where we have the significant wraparound services with those physician practices. So specialty distribution, the MSO, the GPO analytics services that we're providing to the practices and the manufacturers, that really allows us to help the biosimilar gain market traction even more quickly.

And we've seen over a long period of time that the physicians in the Part B space, in part due to the services that we're providing, get comfortable with the biosimilar more quickly. They begin using it. And therefore, we have that adoption, which, again, from a profitability standpoint, it is net positive for Cencora as a tailwind.

Okay. And then if we think about GLP-1 has obviously been like a huge contributor to top line growth over the past few years. But I think like the message across the industry overall is that economics on these drugs have been pretty limited relative to maybe the rest of your business. I guess how should we think about that maybe as you've seen, maybe the mix of drugs potentially change over the next couple of years? Like why shouldn't this be a business that eventually the industry can maybe earn a little bit better economics on?

Yes. I'll start, Bob, and if you need to add anything. Overall, I don't think there's an analogy model out there for the GLP-1s, right, the robust growth and the continued growth, and we saw that on the top line in Q3, right, 25%, $2.3 billion of growth. And as you said, the profitability is modest. And we don't expect that to change in the near term as you look at the distribution of those, overall from a growth perspective, one would expect at some point, the law of large numbers comes into play here as well as any pricing actions pharma decides to take.

But what we've seen to date and what we continue to see is the innovation that's coming is bringing broader market access, right, with some of the direct-to-consumer programs as well as the innovation from a performance perspective. So we'll see. But from a profitability perspective, we don't expect a change in the near term.

Okay. And then just to touch on the IRA. I mean, the company has been pretty clear that in terms of the drugs that were selected for 2026, you've been able to maintain economics. I assume at this point, you're probably well on the way to conversations around 2027. I guess how should we be thinking about 2027, is there any reason to think that the ultimate outcome has any real variability around it compared to maybe what you're able to generate for 2026?

Yes. We assume that there's not a change so that the success that we've had working with the manufacturers continues. But a couple of points for context. I think one, as it relates to IRA, an IRA product doesn't necessarily mean a WAC reduction. And so most of them have taken WAC reductions. They all haven't. And then there are other products outside of the IRA who will take list price reductions from time to time. And the important thing to think about is just the relationship that we have with the manufacturers and the services that we provide because we will tend to talk about -- we always have the opportunity to go and have a conversation, right? We can talk about the value that we're providing.

But really, the proof is in the pudding, and this goes back several years, but we've been answering the question about WAC reductions for many, many, many years before they actually were happening. And what we said at the time was we were confident that the services that we provide would be valued by the manufacturers and that we would be able to maintain that value. Then when we saw the insulin reductions, that was true. And I think people would say, well, maybe that was a one-off. That was kind of a unique case.

But then over the past year, as you said, we were able to talk to the manufacturers and discuss the value of the services that we provide. And it's everything we tend to think about the delivery that we do, but it's also we're buying the product, we're warehousing the product. We're insuring the product. We're taking on the AR risk for the product. We're managing the inventory for the manufacturer. We're providing data services to the manufacturers.

So there are significant things that we do for those fees that are important. And so we've seen that validated over many proof points at this point, and we expect to continue to work closely with the manufacturers and having that success continue going forward.

Okay. Maybe to pivot to OneOncology, you completed the acquisition of the majority of the remaining equity interest earlier this year. I would love to just get an update on the financial performance of that asset, what top line and earnings growth look like at the moment? And what changes operationally, if anything, now with the greater control that you have?

Yes. So overall, OneOncology is performing really well, right, slightly better than we expected. We continue to expect it to be net neutral to earnings over the first 12 months. That assumption remains based on current performance trends. But on an exciting note, right, there are tremendous opportunities as we look at OneOncology platform and RCA to expand value pools, right? We've spoken about the clinical research side, the clinical trial side is an important part of the RCA model, whereas in OneOncology to date, it's not. That's an opportunity. There are opportunities to expand the back-office services we provide, the revenue cycle. So as the teams are working, they're really focused on driving the growth and enhancing those areas of opportunities.

Got it. And then when we look at the -- there's a OneOncology annual report in case anyone hasn't seen it. But it looks like you now have over 2,300 providers on the platform. I think at this time last year, it was closer to a number that was like 1,700. It's a pretty substantial number of providers that you've added. Can you talk a little bit about the nature of those provider adds? Like how much of it's been through like acquisition or requiring capital? How much of it is through maybe organic means and how we should really be thinking about that over the next couple of years?

Yes. I mean this is what's really exciting, right, about and that's OneOncology. That is also happening within RCA. And when you think about the growth of the MSOs. We love to talk about kind of the things that we can do together, whether it's clinical research or revenue cycle management, but it's always helpful to go back to the base thesis, which is that these are attractive platforms for individual physicians or small groups of physicians to join because of the services that they provide. It helps them care for patients better. And that's what you really see in that growth.

And when you couple the attractiveness of the platforms with the market growth that occurs in both oncology and retina, that really is what is driving growth and what will continue to drive growth. The innovation and the demographics -- innovation in the pharmaceutical manufacturers and the demographics for these diseases really will drive growth. And then we have the ability to layer on the synergies as we have the MSOs working together. So your -- the numbers you put out there are instructive of the success that we've had in attracting physicians, which we're really happy with.

Great. And then when we think about the -- I guess, the right way to think about the growth of the company over the next, specifically like OneOncology and other MSO assets, I guess what are the key components beyond sort of growth of the market that they're in and kind of adding providers? Like what are some of the maybe like 2- to 3- to 4- to 5-year opportunities for the business to maybe add additional services or different revenue streams that exist today?

I think this is where kind of if you go -- if you -- I kind of go up a level because we have the MSOs and they're attracting the physicians and the upper level is really Cencora layer that is very thin, but is where we can begin to cross-pollinate and find the synergies between the practices. So Eva spoke about the clinical research capabilities, which are very strong in RCA that will be actively moving to OneOncology, which is a huge opportunity for the physicians, for patients and for manufacturers in terms of clinical trial accrual.

Revenue cycle management is another opportunity for a shared capability where there'll be both growth and cost opportunities there. And I think when you -- if you play that out 3 to 5 years, we're really excited about the data and analytics opportunities that we'll have through those platforms, again, partly downstream to the physicians to help them with their practices, run their practices better, but also upstream to the manufacturers. We're going to have information about the product utilization and outcomes, real-world evidence that we'll have in those sites that the manufacturers will be very interested in.

Okay. Got it. And then the big focus has just been for the MSO assets again, kind of specifically, how is the company thinking about -- obviously, there's some pretty material loss of exclusivities on the Part B side, oncology focus kind of going out towards the end of the decade. At the same time, there's also some real uncertainty, I guess, with how kind of IRA dynamics for Part B could play out. I guess big picture, like how is the company kind of weighing the risks and opportunities around these dynamics? And how are you planning for that over the next couple of years?

Yes. Thank you. It's an important question. We're confident in how that plays out. So I'll start there. So you do have loss of exclusivity of some large products that will result in biosimilars, which, as we've discussed here, will be a real opportunity, a growth opportunity for Cencora where you have a Part B IRA in 2029. So the worry there is that somehow those discounts are administered through a reduction in reimbursement to the physicians. And so that's where we're confident that, that won't happen. And we spend a lot of time -- I spend a lot of time in Washington, D.C. talking to regulators and legislators. And what I'm confident about is that in the IRA negotiations, the intent is not to reduce physician reimbursement, right?

So it's focused on drug, drug pricing, patient out-of-pocket costs. And so there are examples out there. So the GLOBE demonstration project, for example, takes that discount from the manufacturer directly to the government and does not go through reimbursement. There's other legislation that's being considered in Congress, which has a similar mechanism. And so those are reasons to believe that the intent is not to reduce physician reimbursement because to speak to oncology specifically, the community oncology side of care is the lowest cost site of care. It's the most accessible site of care.

And so to have a drug price negotiation result in the physicians being damaged in some way, which would surely impact patient access and patient care is certainly not the intent of anyone in Washington. So we're going to stay involved and focused, and that's from an educational standpoint, but we also feel confident that, that won't be the result. But we'll watch it closely.

Great. Is there -- do you have an expectation around like when you might know the kind of first certain like how this is going to play out or what the time line to that is?

Yes, it won't be until the -- everything is finalized for 2029. We don't have the time line for that right now.

Got it. Yes, a little ways away. To pivot a little bit to international, it seems like the business is performing a bit better after a little bit more of a rocky period. I guess when we think about the key drivers of that improvement, it would be good to maybe hear a little bit more about that. And I guess when we think about the leading indicators over the next few quarters, do you think that business could be a little bit more stable, a little bit more consistent with the long-term aspirations that you guys have set out for it?

Yes. Thanks for that question. Overall, the 2 core key drivers that have led to the improved business performance is our World Courier business, our global supply logistics business as well as the 3PL business. So I spoke to this a little bit earlier. But as you think about the World Courier business, there were some market dynamics that affected that business as well as some of our own challenges. And we've done -- a, the market has rebounded a bit, and we see consistent demand.

But I think more importantly, we've made changes to respond to the market. We've made leadership changes. We've changed how we operate to be closer to the customer. And really, our go-to-market strategies have enhanced, and I truly commend the leadership team there for those changes and driving our ability to win in the marketplace.

On the 3PL side, right, it's pinned to the utilization of specialty. So that's a real tailwind to that business, and we continue to see opportunities there. So we'll continue to push to have the consistent performance. We're confident with our long-term growth algorithm for the international business.

Okay. Great. And then just to think a little bit more about the pivot to fiscal 2027. You made some early comments on fiscal 2027 on the last earnings call, including kind of your current planning assumption around MWI. I guess as we think about 2027 and kind of putting MWI potentially to the side as a discrete item, I guess at this point, like how is the company thinking about key headwinds and tailwinds as you approach the next fiscal year?

Yes. I appreciate the question, and we'll have a fulsome update of 2027 on our Q4 earnings call. We're in the throes. We're in the heart of our planning process. In terms of -- you called out MWI and what we said to investors was assume a midyear transaction. We have no updates on the exact timing, but felt that was a balanced assumption to take. I would remind investors that we'll benefit from the continued annualization of the OneOncology acquisition, right, from Q1 through January. And as you look at both the U.S. and international business segments, we're confident with the long-term growth algorithms that are out there for those respective businesses.

Okay. That's great. And then we're obviously very focused on how companies across our coverage are using artificial intelligence. I guess how should we think about the areas that the company has invested in to date in AI? I guess any -- maybe materiality or returns that you're targeting as you make investments in AI? And if there's any way to characterize maybe the investments that you've made to date and like what the company could look to do potentially in the future as capabilities improve.

Take a quick step back. So we have 4 performance drivers at Cencora that we've -- that we've called out. One of them is talent culture. The other is productivity. So just driving efficiency all the time, the portfolio optimization that you see us doing, whether that's areas we're investing for growth and areas that we're deprioritizing. And then the last but not least, but relevant to this question is really the digital transformation that's underway at Cencora. And that's everything from modernization to business process optimization to using advanced analytics and artificial intelligence to create value. So we are excited about some of the progress that we're making. Eva, I don't know if you want to get into any specific examples.

Yes. I think I'll just give a couple. Obviously, we're focused on making sure our colleagues have access to these tools, right, in their day-to-day. We're going to focus on prioritization of projects where we believe we can drive the most value, whether that's improved customer service, whether that's cost reduction, right? And I'll use one example around forecasting demand, right? It seems silly, but you can be more precise, manage your cash better, have better service -- have better service levels, although our service levels are extremely high, right? These are critical aspects.

So we're going to make sure we focus on the areas that can truly benefit our customers and benefit Cencora. And obviously, there's plenty of back-office operational areas to simplify, reduce complexity and cost.

Okay. And maybe to kind of come back to capital deployment. Obviously, there's been a pretty healthy focus on MSO over the past few years. I guess how should we think about, I guess, first, whether there could be more to do on the MSO asset side from here? And if there's any way to characterize what you might expect capital deployment priorities to be over the next few years relative to what they've been perhaps more recently?

Yes. I'll start, right? As you think about our capital deployment priorities, things haven't changed, right? First and foremost, investing organically in the business to drive growth, strategic M&A aligned to our pharmaceutical-centric strategy, opportunistic share repurchases and growing the dividend consistent with our earnings growth over time. And as we look at, as I'm new here and come in and as Bob continues the strategy and the leadership team, right, our goal is to drive the strongest total shareholder returns we can and optimize that deployment and make those decisions within that.

Okay. That's great. And then maybe to circle back to one on the U.S. health care business. And I guess this is a good question for you given some of your prior experience. I guess when we look at retail pharmacies today, I guess, like how do you think about sort of the health of that part of the market? And you've obviously seen some pretty -- what seem to be constructive changes about how reimbursement now works in that business. I guess how are you guys thinking about the health of retail pharmacy and maybe specifically like health of like independents since we've already spoken a little bit to some of the larger customer dynamics.

Good. I mean it's -- and I'll start with the independents because I think that's an area that people think about, wonder about and are continuously surprised by the resilience of the independent pharmacy of the independent pharmacy owner, and we absolutely see that in our business. We just had our trade show in Orlando a few weeks ago where we had a few thousand independent pharmacy owners and staff there to learn together, to talk to us about what they need for us to talk to them about the exciting solutions that we have for them.

But look, I think the market -- you mentioned some likely positive changes in terms of reimbursement. So I think that certainly has stabilized, and that's positive. And community pharmacy is an access point to health care in a really important way. The independents tend to see the sicker patients who are going into a retail setting, the more comorbidities that you have, the more likely you are to need to talk to a pharmacist. And so they have a really nice value proposition there.

So they're doing well. And I'm a pharmacist. I grew up in independent pharmacy. So I have some affinity for this group. But also, it's amazing to me, they're not only resilient, but they're scrappy. I mean they're entrepreneurs. They find a niche in their community to serve that community from a health care standpoint. Everyone looks a little different, but they work and they grow. And we find that the customers within our Good Neighbor Pharmacy network and Elevate Provider Network, which is the PBM contracting arm, when they utilize our services, they tend to grow faster than their peers who use less of our services.

So we're happy to support them. We're proud of the work that they do. And over the long term, which I think is the most important question, I think we can all be confident that community pharmacy will continue to play an important role in health care.

And it's been a while since I've seen this data, but they're one of the most trusted health care providers in the ecosystem. So just to echo Bob's point.

Okay. That's great. I think that's all we have time for today. So thank you so much. Appreciate you being here.

Thank you.

Hello, everyone. Thank you for joining us, and welcome to the Cencora Inc. Q3 Fiscal Year 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Bennett Murphy. Bennett, please go ahead.

Good morning, good afternoon, and thank you all for joining us for this conference call to discuss Cencora's fiscal 2026 third quarter results. I am Bennett Murphy, Senior Vice President, Investor Relations and Enterprise Productivity. Joining me today are Bob Mauch, President and CEO; and Eva Boratto, 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 within today's press release, which is available on our website at investors.cencora.com.

We've also posted a slide presentation to accompany today's press release on our investor website. During this conference call, we 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 assumes no obligation to update any forward-looking statements, and this call cannot be rebroadcast without the permission of the company. You have the 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 as possible. With that, I'll turn the call over to Bob.

Thank you, Bennett. Hi, everyone, and thank you for joining Cencora's fiscal 2026 Third Quarter Earnings Call. To start, I'd like to thank our Cencora team members for their continued commitment to providing valuable solutions for our customers. In our third quarter, we delivered strong results driven by execution across Cencora and investments to advance our specialty positioning and our pharmaceutical-centric strategy. Our business performance drove double-digit adjusted operating income growth and supported by $1 billion of opportunistic share repurchases, we achieved 12% EPS growth in the quarter.

We're pleased to be raising our fiscal 2026 EPS guidance, reflecting our confidence in our continued execution and the strength of our portfolio as we close out the fiscal year. I'm very happy Eva Boratto has joined us as Chief Financial Officer. She will provide details on our performance and continued confidence in our short- and long-term expectations. During my remarks today, I'll highlight how our strategy enables us to deliver on our growth priorities. First, our differentiated specialty pharmaceutical platform uniquely positions us to support innovation and patient care across our footprint. Second, through our digital transformation, we are modernizing how we operate and serve our partners.

And finally, our focus on talent and culture is equipping our teams with the skills, resources and leadership needed to continue advancing our pharmaceutical-centric strategy and delivering our purpose. I'll start with specialty, where our platform supports growth across the health care ecosystem. Our specialty platform builds on our strong foundation in pharmaceutical distribution and deep relationships with providers and manufacturers. Over time, we've expanded our capabilities into a broad set of services designed to address the needs of specialty care. Over nearly 3 decades, Cencora has worked alongside community providers to advance our distribution, GPO and practice solutions, helping physicians operate effectively and care for patients close to home.

As specialty care has become more complex, these providers are seeking partners who can help them navigate access, reimbursement and administrative demands while preserving their ability to deliver care in community-based settings. Our management services organizations are well positioned to help oncology and retina practices manage the growing complexity of specialty care and broaden access to clinical trials and research while allowing physicians to remain focused on patient care. Importantly, our role across the specialty landscape gives us a clear view of what it takes for new therapies to reach patients. That unique perspective informs the work we do with manufacturers who increasingly need partners with the infrastructure, expertise and connectivity to enable successful launches and protect product integrity.

Across Cencora, our specialty logistics, 3PL and commercialization services help bring innovation to market and drive reliable access to therapies. Before moving to the next topic, I want to reiterate our confidence in the value Cencora provides and our ability to help all stakeholders navigate the impact of market dynamics as we've demonstrated. As the market continues to digest and annualized list price changes, the value proposition of the services we provide remains clear. We're well positioned through our distribution footprint, sourcing scale and end-to-end channel relationships. Importantly, Part B biosimilars will continue to be an opportunity for Syncora to drive value for all stakeholders while taking cost out of the health care system and improving patient access. Moving to our digital transformation, where we're combining business process improvement and technology advances to improve how we operate and work with partners across the health care system. A tangible example of this is our work and demand forecasting.

Our teams are using AI to better anticipate product needs across our network and identify key factors driving changes in demand. In a business like ours, these tools help improve planning, enhance product availability and maintain reliable service for providers, pharmacies and health systems. Across our organization, we're applying the same disciplined approach to simplify routine activities and give our team members better insights. That allows team members to spend less time on manual processes and more time using their expertise to work with partners and solve problems.

Next, through our focus on talent culture, we're equipping our teams to continue advancing our pharmaceutical-centric strategy and delivering on our purpose. Across Cencora, our teams bring the expertise and commitment needed to serve providers, manufacturers and patients in an evolving health care environment. We're focused on ensuring our talent has clear career paths while strengthening our ability to execute for customers and partners. That focus extends to key roles across the organization. This quarter, -- in addition to Eva, we welcome Sam Hammock as Chief Human Resources Officer. Since joining the company, both Eva and Sam have brought valuable expertise and proven to be excellent enterprise leadership team members.

I also want to recognize the significant contributions of Jim Cleary and Silvana Battaglia, who recently retired as CFO and CHRO. Both will continue as advisers through the end of the calendar year. With that, I'll turn the call over to Eva for a discussion of our financial results and updated fiscal 2026 guidance. We're glad to have her here with us today for her first earnings call as CFO. Eva?

Thanks, Bob, and good morning, everyone. It's a pleasure to join the call today, and I look forward to engaging with the investor community in the coming weeks and months. Since joining Syncora in June, I've spent time with leaders across the enterprise and deepened my understanding of the strength of our businesses, the durability of our pharmaceutical-centric strategy and the financial discipline that underpins our long-term growth algorithm. Today, I'll provide an overview of our consolidated fiscal 2026 3rd quarter results and segment level results before turning to our updated guidance. Unless otherwise stated, my remarks will focus on our adjusted non-GAAP financial results. For further discussions of our GAAP results, please refer to our earnings press release and presentation.

Our third quarter performance reflects the strength of our pharmaceutical-centric strategy the breadth of our specialty platform and our disciplined capital deployment. Adjusted operating income grew 17%, driven by strong execution in our U.S. Healthcare Solutions segment including the performance of our One Oncology acquisition and continued growth in our International segment, while share repurchases also contributed to the 12% adjusted earnings per share growth. Based on our year-to-date performance and confidence in continued execution, we are raising our adjusted EPS guidance for fiscal 2026 to a range of $17.75 to $17.95.

Turning now to consolidated revenue. Revenue was $84.8 billion, up 5% and driven by growth in both reportable segments and in other, which I will describe in more detail when discussing segment level results. Moving to gross profit. Consolidated adjusted gross profit was $3.5 billion, up 23%, primarily due to growth in the U.S. Healthcare Solutions segment. In the quarter, consolidated gross profit margin expanded by 61 basis points to 4.16%, largely due to our acquisition of One Oncology in February.

Consolidated adjusted operating expenses were $2.3 billion, an increase of 27%, which again reflects the impact of the February 2026 acquisition of One Oncology. Excluding both MSOs, operating expenses grew 5% on a constant currency basis. Turning now to operating income. Consolidated adjusted operating income was $1.2 billion, an increase of 17% compared to the prior year. driven by double-digit growth across both reportable segments and other.

Moving now to our net interest expense and effective tax rate for the third quarter. Net interest expense was $141 million, an increase of $59 million compared to the prior year quarter primarily due to the debt raised in February to finance the One Oncology acquisition. We have made significant progress on our debt repayment commitments and have fully paid off our RCA financing-related term loan balance of $800 million, $400 million repaid in the June quarter and an additional $400 million repaid in July.

Our effective income tax rate was 19.9% compared to 20.7% in the prior year quarter. Finally, diluted share count was 193.9 million shares, a 0.7% decrease compared to the prior year quarter as a result of $1 billion of share repurchases in the quarter at an average price of $268 per share. Regarding our cash balances and adjusted free cash flow, we ended June with $2.8 billion of cash and had strong free cash flow generation which results in year-to-date adjusted free cash flow of $1.1 billion. Our full year adjusted free cash flow guidance of approximately $3 billion remains unchanged. Now I'll turn to our segment results for the third quarter and key drivers of our performance, starting with the U.S. Healthcare Solutions segment.

Our U.S. Healthcare Solutions revenue was $74.9 billion, an increase of 5%. In the quarter, our revenue growth was supported by strength in specialty across both health systems and physician practices. We also saw continued growth in sales of GLP-1 which increased by $2.3 billion year-over-year. The growth was offset by 3 items. First, manufacturer list price reductions that represented a $2.4 billion headwind to revenue growth; second, the 2025 loss of an oncology customer; and lastly, lower sales to our large mail order customer as expected and consistent with second quarter.

Moving now to operating income. U.S. Healthcare Solutions segment operating income increased 16% to $966 million. In the quarter, we saw strong growth in specialty across our MSOs, health systems, and community provider businesses. We were particularly pleased with the performance of our MSO platform with both One Oncology and RCA performing ahead of our expectations. Our core business continued to demonstrate its strength and value, delivering double-digit organic operating income growth when excluding the One Oncology contribution and the loss of the oncology customer last July.

I'll now turn to our International Healthcare Solutions segment. International Healthcare Solutions revenue was $7.7 billion, up 6% on both an as-reported and constant currency basis, driven by growth in our European distribution and specialty logistics businesses, World Courier and European 3PL. In the quarter, International Healthcare Solutions operating income was $166 million, up 21% on an as-reported basis and up 23% on a constant currency basis. In the quarter, our European distribution business continued to benefit from the shift in timing of manufacturer price adjustments in a developing market country, again in the third quarter. And there was strength across our global specialty logistics and European 3PL businesses that delivered double-digit operating income growth.

Moving to other, which reflects the businesses for which we are pursuing strategic alternatives. Revenue in Other was $2.3 billion, up 7% largely due to growth at Pro Pharma and MWI Animal Health. Operating income was $109 million, up 25% due to operating income growth at MWI Animal Health which also benefited from being accounted for as held for sale. That completes the review of our segment level results. I'll now discuss our updated fiscal 2026 guidance. Driven by our strong performance and opportunistic share repurchases, we are pleased to raise our full year adjusted EPS guidance range to $17.75 to $17.95, up from $17.70 to $17.90. There is no change to our full year guidance for consolidated or U.S. Healthcare Solutions revenue. As you continue to refine your models for our full year U.S. revenue, we would expect revenue to be in the lower half of our 4% to 6% growth range given current expectations.

In the International Healthcare Solutions segment, we now expect revenue growth to be approximately 8% at the low end of our previous range as a result of the stronger dollar in the second half of the year. On a constant currency basis, we expect International Healthcare Solutions segment revenue growth to be approximately 7%. In other, we anticipate revenue growth of approximately 6%. Moving to operating income. We are raising the bottom end of our guidance for consolidated operating income growth and now expect growth to be in the range of 13% to 14%. At a segment level, we now expect U.S. Healthcare Solutions segment operating income growth to be in the range of 14.5% to 15.5%. This contemplates continued strong growth in the U.S. Healthcare Solutions segment as we have now fully lapped the loss of the oncology customer continue to benefit from the One Oncology acquisition and have an easier expense comparison in the fourth quarter.

In the International Healthcare Solutions segment, we now expect both as reported and constant currency operating income growth to be approximately 9%. We -- in other, we now expect operating income growth to be approximately 10%, reflecting MWI's strong execution and performance. Moving now to our below-the-line items. We now expect net interest expense to be approximately $490 million up from our previous expectations of approximately $485 million, primarily reflecting lower interest income following the $1 billion in share repurchases and we completed in the quarter. As a result of these repurchases, we are also updating our expectations for full year diluted shares outstanding to be approximately 194 million shares.

Looking ahead to fiscal 2027, we are currently in the midst of our fiscal 2027 planning process and will provide full fiscal year '27 guidance on our November earnings call. That said, I wanted to offer some perspective as you think about your models. First, as we announced in February, we have reached an agreement to merge MWI Animal Health with Covetrus. We are continuing to work through the regulatory process and have no update on timing. However, for modeling purposes, if the transaction were to close at the midpoint of our fiscal year, we would have a $150 million operating income headwind within other. Given the structure of the transaction, that includes upfront cash, preferred equity and common equity, it would partially offset the earnings headwind, netting to an EPS headwind of approximately $0.35.

Second, we do not have an update on the expected timing of the i South retina carve-out acquisition. As a result, we would not suggest incorporating that into the models at this time. Sancor is well positioned across our core U.S. and International Healthcare Solutions segment giving us confidence in our long-term guidance. Although I've only been the CFO for a month, I've been impressed by the strength of our talent, the clarity of our strategy and the dedication to our purpose. As I look to fiscal 2027 and beyond, I'm excited to further Cencora's strong track record of execution and disciplined capital stewardship to drive durable shareholder value creation. Now I'll turn the call back to Bob for some closing remarks before we move to Q&A. Bob?

Thank you, Eva. To close, we were pleased with our strong third quarter performance, which supports our increased fiscal 2026 guidance as a testament to the power of our pharmaceutical-centric strategy. I look forward to closely working with Eva as we continue building upon our track record of execution, growth and disciplined capital deployment to deliver on our long-term guidance. Power by our purpose, we continue to execute against our growth priorities and performance drivers, positioning Cencora to deliver sustainable long-term value creation. As we look ahead, we remain confident in our ability to deliver continued growth in our U.S. and International Healthcare Solutions segments, consistent with our long-term guidance and we look forward to sharing our 2027 outlook on the November call. We'll now open the call for questions.

[Operator Instructions] Your first question comes from the line of Lisa Gill with JPMorgan. Please go ahead.

Good to hear your voice, Eva. Just really want to understand 2 things a little bit better. When will this be the reacceleration that we saw in the U.S. pharma business, last quarter growing roughly 6%, this quarter growing double digits. Can you maybe just give a little more color around what you're seeing? And then secondly, Bob, you did reiterate on fiscal '27, you're comfortable with the long-term view. Just curious if you're comfortable with where the Street currently is, which is about 14% growth for next year. Are you saying that that's within the range? Or is there anything else that we need to think about beyond the 2 things that Eva talked about? .

Thanks for the question, Lisa. And I appreciate your kind words, and I'm super excited to have joined Cencora. And I'll start with your Q3 question. we're really pleased with the performance and the execution in the quarter. On the outperformance, it was largely in the U.S. segment, with strength in our MSO and underlying business trends in the core with strength in specialty in both health systems as well as physician providers. One Oncology did outperform our expectations demonstrating the strength of their platform and its ability to attract physicians to the MSO which we benefited from overall distribution and GPOs for some time.

Excluding the loss, as you said, of Florida Cancer and the contribution from One Oncology, our operating income growth was up double digits, a meaningful acceleration from the 7% last quarter. I'll let turn it over to Bob on 2027.

Yes. Thanks, Eva. Lisa, thank you for the question. And yes, we're really excited that Eva is here with us to help us continue to execute at a very high level. On your question about 2027. So Eva gave some modeling guidance that will help everyone kind of estimate where we should be for the year. I'm not going to take it any further than that. But I will reiterate kind of what I was meaning to say in the remarks is that we are confident in our long-term guidance and feel like our execution, the market strength and the strength of our portfolio will continue to have us within that range.

Your next question comes from the line of Glen Santangelo with Barclays. Please go ahead.

Bob, I also wanted to follow up on the strength that you saw in the U.S. health care operating profit this quarter. And to that end, I want to focus a bit more on the specialty business. Back in the March quarter, the company called out some weather-related disruptions, but this quarter, in the prepared remarks, you're specifically calling out RCA and One Oncology is doing better than expected, kind of implying that you've seen some reacceleration this quarter. And I want to separate specialty into Part B versus Part B, as I think there's a very important distinction here, and I suspect you're going to tell me the Part B the much more meaningful driver. And so maybe could you give us a little bit of additional color here in terms of what you saw in the quarter? I think that would be helpful.

Glenn, thanks for the question. And it is important on a lot of levels, and I appreciate the opportunity to explain. So we absolutely did call out the acceleration of the businesses in RCA and One Onc, and the market absolutely performed well, and we have these amazing platforms in RCA and One Oncology that certainly, we're meeting the needs of patients through that market acceleration, and we believe we'll continue to do so. And Eva can spend a little bit more time on kind of expectations and kind of where we were relative to those -- but I do want to spend a minute on the biosimilar part of your question and the kind of Part D versus Part D because I do think it's important for everyone to understand how we think about it.

I'll start with Part D. And well, maybe I'll start with biosimilars are good. Biosimilars are good for patients. They're good for cost. They're good for patient access. And so anywhere in our business, it's an incremental positive from a profit standpoint. In Part D, it's less so because we provide less services, less wraparound services in the part D space when a product goes from an innovator brand to a biosimilar. And as we saw last quarter with our large mail order customer that may be in-sourced. And so then we have the revenue decrease, but not a meaningful profit increase. So when we think about the Part D space, biosimilars are good, incrementally positive for Part B, it's much more important, as you alluded to. And that is because the Part B buy-and-bill infusion space, which is where our MSOs where our distribution and GPOs have such a long history of supporting physicians.

And within that history, and I talked about distribution, GPO and the MSO, and when we talk about wraparound services, those are all the things that we do to support those products coming to market from a physician perspective, I mean from a manufacturing perspective and then support the physicians and understanding how they may choose to use those products. So that's -- therefore, there's a larger profit opportunity because we play a bigger role in how they're assessed and utilized. So we should think, again, kind of all the way back, biosimilars are good for Cencora. Part D much less so, but still good even though we'll have revenue pressure from time to time with those switches. But Part B will always be good, and we feel very confident about the durability of that over the long term. Eva, why don't you go ahead?

Okay. Just to add on the utilization trends, right? We did see a sequential rebound in the utilization trends from the March quarter. Strong sales in specialty products, as I said previously, to health systems and physician providers. Oncology clearly is the larger but retina also contributed to that sequential improvement. .

Your next question comes from the line of Elizabeth Anderson with Evercore ISI.

Welcome, Eva. Nice to hear you on the call. Could you talk about the operational improvements you're seeing in the One Oncology business and sort of where do you think you are in the integration efforts? And sort of how do we think about this? Just help us understand the sustainability of that above average growth rate.

Elizabeth, it's Bob. I'll start that, and then I'll hand it over to Eva. So as we've explained there really are 3 phases to the value creation thesis that we have for the MSOs. One is the integration of those MSOs into Cencora. So we have significant progress on RCA, good progress on One Oncology, and that's working very well. So the value that Cencora can provide to those businesses we're providing. And as we've talked about, you're seeing the results of their performance. The second phase is where we will share capabilities across the platform. And the example that we've used throughout is the clinical trial space. And I would say we're still early days there and kind of that Phase 2 of sharing capabilities. On track, we feel good about where we are but still early days there. And then the third phase is where we will be developing new services. So the excellent capabilities that we have at Santora from a corporate standpoint and then also within the MSOs of RCA and on oncology, where we'll build new solutions for both physicians and for pharmaceutical manufacturers. So you can think about analytics-type solutions and insights that we'll be providing. But that's in the future. And then in Phase III. And all of that is underpinned by the continuous addition of physicians to both platforms and those additions come in the form of tuck-ins that will happen within either in both of the platforms.

And it also happens with individual physicians joining the platform, whether they're recently out of fellowship or moving from another side of care to the community setting. So all of that is working well. I would say we're on track. You see the results of that, but still early days in terms of the value creation that we believe that we can create. And I'll hand it over to Eva.

Great. Thanks, Bob, and to you as well, Elizabeth. As Bob said and I said earlier, both One Oncology and RCA continue to perform to perform well, and we're very pleased with these platforms. I'll go a little deeper on One Oncology. As you think about it on a 12-month basis, we continue to expect One Oncology to be neutral from an adjusted earnings per share net of financing. I would also note, as we continue to evaluate One Oncology's accounting, for its UUT subsidiary as it relates to noncontrolling interest. In the third quarter, we determined that there should not be a noncontrolling loss add back to net income. There was no impact to operating income from this change. It's a complex area. So looking beyond this pretty modest accounting item. Overall, One Oncology operating income is modestly better than our initial expectations.

Your next question comes from the line of Allen Lutz with Bank of America. .

I want to follow up on the strength in the U.S. Healthcare Solutions business. I think if we look at the sequential improvement in growth. You talked about -- well, obviously, weather was an impact in 2Q. I think if you ex that out, the rebound was maybe a little bit stronger than we expected. Can you -- is there anything else to call out as you think about the pockets of strength from your fiscal 2Q or that calendar 1Q quarter going into calendar 2Q. Was there any onetime dynamic around the IRA that impacted 1Q that is now normalized? Trying to understand if there's anything there that was maybe onetime in that calendar 1Q that may be abating now. And then just a quick follow-up. Any of the changes going on in 340B have any impact on your business?

Yes. Thanks for the question. For fiscal quarter Q2 to Q3 really the driver of the acceleration was the underlying strength in the utilization as we called out, relative to the prior quarter. I would also note, as you look forward to Q4, our Q4 implied guidance also implies strong double-digit growth. across our reportable segments. And as you think about that in the U.S., we'll have fully lapped the One Oncology customer loss, and will have an easier expense comp. But when excluding One Oncology, we expect to see the strongest organic growth of the year at the midpoint of our guidance. So just underlying continued momentum of the business, strength in international as well. And I'll turn it over to Bob.

Yes. Allen, thanks. Thanks for the questions. And I just want to reiterate what Eva was saying with the ramp is happening just as we planned. So as we talked about the second quarter being our lowest growth quarter, which it was, and we talked about the ramp that we had in the second half of the year and got a lot of terrific questions about how we were going to do that. But as you heard, we had a lot of confidence. It was mechanical, not aspirational, and we continue to see the opportunities there. On 340B, Allen, as you know, there's recently been guidance on the 340B program test that will be out there. We're still assessing it. We -- as you know, we stay very close to all things policy spend a lot of time in Washington. So we will participate in continuing to monitor talking to regulators and legislators about potential unattended consequences. And our focus on all these discussions is always patient access and having the most efficient access to care.

Your next question comes from the line of Charles Rhyee with TD Cowen. Please go ahead.

Eva, great to hear you again. Bob, when you talked about One Oncology earlier, you talked a little bit about opportunities, particularly in research and clinical trials. I think that's -- maybe can you talk a little bit about how much of that is already being done by One Oncology, maybe how much of revenues or maybe some qualitative estimate of how important that is today? And how mature is that as an opportunity for One Oncology because is this maybe -- are we still like in early innings? And -- how big of an opportunity do you think that could really be?

Charles, thank you for the question. It's -- I'll connect One Oncology and RCA together and kind of the answer of what inning we're in, it varies depending on which part of the MSO platform that you are. So one, as we expand the clinical trial business within the MSOs, it's an absolute driver of profitability and growth. RCA is mature in this space. So they've built a significant well-respected platform that pharmaceutical manufacturers depend on when getting clinical trials done in the retina space. There is a meaningful clinical trial activity within One Oncology, but there's significant opportunity for growth. So I would say, to use your innings, analogy, I think we're kind of in the later innings of the build-out of RCA.

Now remember, the growth continues because products are always coming for clinical trials. So it doesn't mean that the growth slows, but the build -- maturity of the build-out is in the latter innings. In One Oncology, it's in the earlier innings, which is why we have so much optimism about the opportunity. Obviously, the amount of innovation in the oncology space and the need for clinical trial support will only continue to grow and will be a great source of that. And just to add, and this is true for RCA and One Oncology, the community oncology community specialty physician side of care we talk about as being the most cost-effective side of care in almost all cases, but it's also the most accessible side of care. So having a meaningful clinical trial access within the community physician space means that more patients will have access to those trials, which is really important for their health care and also for the accrual of the trials, which is 1 of the biggest challenges that the manufacturers have. Thank you for the question.

Your next question comes from the line of George Hill with Deutsche Bank. Please go ahead.

And Eva, again, welcome back to the health care services space. I guess I have kind of 2 quick ones I'd like to bounce through is, number one, on the World Courier in the 3PL business. It seems like there's been a step up in competitiveness in that market over the last 12 months. Would just appreciate if you could comment on anything you've seen there? And then as it relates to kind of the Q4 guidance, like -- and as it relates to specialty in oncology with the pricing dynamics, there also seems to be a little bit of a dollar-based slowdown in the market, given drug pricing and a little bit of a utilization slowdown. Just would be interesting in any -- if kind of a slowdown in the oncology market is weighing on kind of the Q4 results and the Q4 guidance in the U.S. business? .

George, I'll take the first part of the question, and then I'll hand over to to Eva for the second. So we are really well positioned in the specialty logistics and on 3PL space. So remembering, and you know well, George, our World Courier business is the highest and specialized logistics services for pharmaceutical manufacturers primarily with clinical trials, and we have differentiated capabilities that have been there over a long period of time. Within our 3PL business, the European part of the 3PL business came with the Alliance Healthcare acquisition, we have a U.S.-based part of that business called ICS, who also have very specialized capabilities for specialty product movement.

So I start with our capabilities, and that leads to differentiation because George, there certainly are other players who are building health care 3PL logistics capabilities, very credible players. We play at a higher end of those services and also find that the pharmaceutical manufacturers often prefer someone who is a pharmaceutical focused. And we talk about our pharmaceutical-centric strategy. That also is true for our 3PL and specialty logistics. So when we're talking to pharmaceutical manufacturer, we're talking about capabilities, but also our expertise in the pharma channel, which allows us to compete very well even though there are well-known credible competitors in the space we continue to grow. And I'll hand it over to Eva.

Great. Thanks, Bob. So George, and nice to hear your voice again. Listen, we've seen good utilization trends in specialty, including oncology as part of the market that we saw consistent growth throughout Q3, and it's continued to be a long-term growth driver. As you see by our implied 4Q guidance, right, there's a sequential improvement, the U.S. performing the strongest organic growth in the segment at the midpoint of our guidance. So we're pleased with the underlying performance and the trends we're seeing. .

Your next question comes from the line of Kevin Caliendo with UBS. Please go ahead. .

Eva, good to hear from you again. My question is around some of the proposed changes in the ASP rules that came out recently and just how you're thinking about it or how we should think about it as a potential risk going forward or not a risk at all. Have you sort of explored how this might change ASPs and how to think about that for your MSO business or your GPO? And if there's any way to sort of quantify it at this point? .

Yes. Kevin, thank you for that important question. So yes, we spend a lot of time evaluating and studying all of the policy ideas that are out there and how that may or may not impact ASP risk. And where we land in all cases is that the policies that are under consideration or being tested are not intended to impact physician reimbursement. I've talked about today, we talk about often the community physician being the most accessible and the lowest cost site of care. And any policy that would negatively impact those physicians would impact their ability to care for patients and therefore, decrease access for patients to those important physicians. So that's what we -- when we're in Washington, those are the types of things that we talk about. And it's all about patient access and cost effectiveness within the health care system, which is where these community specialists really differentiate themselves. So how that plays through as you see things like in the globe demonstration project that any discounts that are paid from the manufacturer to the government actually are not going to flow through reimbursement or impact ASP.

They're going to be adjudicated in a direct payment from the manufacturer to the government. So that is recognition that the policymakers understand the risk to impacting community physician reimbursement. I think it also demonstrates the fact that they do not want to do that and they're, therefore, testing and alternate mechanism. So Kevin, it's an important question. It's something that we spend a lot of time on. But we do feel confident that as this plays out and as we get to 2028, in particular, with with IRA and Part B, that the reimbursement to physicians will not be negatively impacted. Thanks for the question.

Your next question comes from the line of Erin Wright with Morgan Stanley. Please go ahead.

Great. I have a quick 2-parter. So just in the context of what you were just talking about with the ASP changes in pricing dynamics from a regulatory perspective, do you anticipate that -- in that context, you can still invest more and lean more into the MSO businesses. I know there's not much left to do in oncology world on MSO side, but other ologies in the context of everything from a regulatory perspective is the biosimilar opportunity there, for instance, disproportionately greater in some of those certain areas. And then just quickly, Eva, looking forward to working with you again. since you've come on board, I guess, any surprises, how do you think about how any changes in terms of the philosophy around guidance, their capital deployment we're already going through some rightsizing across the Cencora business with some divestitures. But how do you think about the commitment to the various parts of the business, the mix of the business today at this juncture?

Erin, thanks for the question. I'll take the ASP and MSO question, and then I'll obviously hand it to Eva for your question to her. So yes, we feel confident in the long-term outlook for the community physician space, and that includes reimbursement over over the long term. So we do intend to continue to invest in the MSO space. I'll note that our intention is to really focus on tuck-in acquisitions for RCA in the retina space and One Oncology in the oncology space. As it pertains to other ologies, we're very happy to service all specialty products in whatever site of care that they're intended to go in our portfolio of services and customers allows us to do that. But in terms of MSO investment, we intend to stay pharmaceutical-centric.

So right now, oncology and retina are the only 2 specialties that we view as pharmaceutical-centric per our assessment. And so you wouldn't see us getting into other disease states in terms of MSOs. And then I would say you never say never, right? Because there could be in the future an area where it would make sense. It would be more pharmaceutical-centric. It would be a specialty physician administered and that is a place that we certainly would look to lead when that happens. But we don't see anything in the near term. So our focus is on accretive tuck-in acquisitions within the retina and oncology space. Thanks for the question, and I'll hand it over to Eva.

Great. Thanks for the question. On the guidance question, I'll start with my philosophies on guidance. I set guidance based on a disciplined internal process reflective of the businesses, our expectations of the business. And I'm supported by an amazing team here long tenured with deep expertise in this business. I will look to continue Cencora's long track record of delivering or exceeding expectations. Now moving to capital deployment priorities. Overall, Cencora had a great capital allocation strategy that's honestly allowed it to continue to invest in key growth initiatives while returning capital to shareholders. .

So our capital deployment strategy remains focused on internal investments in the business, strategic M&A, opportunistic share repurchase, as we just did in the in the third fiscal quarter and maintaining a reasonable and growing dividend. So overall, I want to build on the framework to enhance our flexibility to invest in the business and drive shareholder value.

And Erin, I'll just add, I mentioned in my prepared remarks how excited I am to work closely with Eva, and you just heard one of the reasons why. So our philosophies in terms of how this will go forward are very aligned, very aligned to how we've done things in the past and our performance and financial discipline has allowed us to have excellent performance and continue to implement and expand our strategy. So I'm looking forward to continuing to work with Eva to do that. Thanks for the question.

Your next question comes from the line of Eric Coldwell with Baird. Please go ahead.

Most of the more important stuff was covered. But 2 quick ones, if I might. First, just if I missed it, the held-for-sale accounting benefit in the other segment, if you could quantify that for us would be great. And then on GLP-1 sales, I know you said they were up $2.3 billion year-over-year. That looks like low to mid-20% growth, maybe up low-double digits quarter-over-quarter. I'm curious how that stacked up versus your expectations? And then if you have any thoughts on the GLP-1 bridge program with Medicare. .

Yes. On your held-for-sale, the benefit of the accounting impact, the majority of the growth in the other segment was driven by the held-for-sale accounting. Underlying MWI delivered about 10% growth and drove the change to our outlook for the year. In terms of the GLP-1s, up 25%, that was generally in line with our expectations.

Your next question comes from the line of Daniel Grosslight with Citi. Please go ahead.

I want to switch over to to the international side a little bit, particularly the European distribution former for the past few quarters now. I was hoping you could give us a little bit more color on which geographies or therapeutic categories are are driving this growth? Is it broad-based or concentrated in any specific market or area? And perhaps more importantly, as we think about fiscal '27, are there any -- apart from it being a more difficult comp period, are there any things we should be aware of heading into fiscal '27 on European distribution.

Yes. So I'll just -- you cut out there a little bit in the beginning, so I'm going to repeat the question for the benefit of everyone on the call. But it sounded to me as though you're asking for the past couple of quarters after the first quarter, we've had higher-than-expected performance out of the international segment. What are some of the drivers within that segment and that obviously, we called out the European distribution. But Eva, if you could kind of speak to some of those year-over-year drivers in the international segment.

Sure. Thanks for repeating the question. And Daniel, thanks for the question. In our European business, it continued to benefit from the timing of manufacturer price increases, in developing market country, consistent with previous quarters. Now we wouldn't expect that impact in Q4, given some of the timing changes. In our specialty logistics business, I think Bob hit on this a little earlier. Both World Courier and the European 3PL businesses delivered double-digit operating income growth. In 3PL, we had strong renewals. We've been focused on growing our pipeline, excuse me, that have supported new business wins, and in World Courier, the business saw good momentum following a challenging market in fiscal '25 and the business continues to position itself for continued growth as the market has stabilized. .

Your next question comes from the line of Eric Percher with Nephron Research.

Thank you, Bob, and welcome Eva. Question relative to the 340B comment earlier. One of your peers in the drug channel commented today that it is a headwind to a business that is more focused on the TPAs and contract pharmacy. Could you remind us your business, the focus on covered entities and on pharma. What you are doing in 340B and what your value prop is to various participants? .

Yes, Eric, thank you for the question. And I would just answer that with just we have such a broad portfolio of customers who are all providing amazing care for patients and their stakeholders. And so if something were to go through and be implemented there would be different impacts to different parts of the business, which we haven't really spoken to. But I wouldn't assume that, that's all negative. I think there would be puts and takes potentially. And we're still obviously assessing what could be and then until there's something implemented, we wouldn't necessarily size it.

Your next question comes from the line of Michael Cherny with LeerInk.

Eva, welcome back as well. Maybe just 1 quick question on the current market landscape. Obviously, you talked about some of the dynamics with your large mail customer, your other large customers gone through an ownership transition. As you think about your current customer construct, is it in a place that you wanted to be? And are there any significant renewals moves, anything outside the norm relative to the market that you're currently exploring or within your purview?

Michael, thanks for the question. Yes, we are very happy with our customer portfolio. And as I just said, it's very broad. We have a significant presence in really all sites of care. And our goal, as I've said before, is to support patient access and we're supporting pharmacies and physicians and other providers kind of wherever the patient needs care Cencora will be making sure that, that customer has the product at the right time and at the right price. So we're happy with that. Our relationships with our our large customers and our small customers are good and nothing to call out in terms of renewals. Thanks for the question.

This concludes our Q&A session. I will now turn the call back to Bob Mauch for closing remarks. .

Thank you. Thanks, everyone, for joining. We're proud of the strong results that we've posted today and our opportunistic repurchase of $1 billion in the quarter. Cencora is delivering on our long-term track record of execution. We're well positioned by a robust specialty business and broad-based scale and solutions. We have confidence in our talent, our value proposition, end-to-end in health care solutions and our ability to continue driving long-term value for all stakeholders. Thanks, everyone, very much.

This concludes today's call. Thank you for attending. You may now disconnect.

All right. Good morning. Welcome to day 2 of the BofA Global Healthcare Conference. My name is Allen Lutz, I run health care tech and distribution here at Bank of America. We are excited to have the Cencora team here. We have President and CEO, Bob Mauch; EVP and CFO, Jim Cleary; and Head of Investor Relations and Enterprise Productivity, Bennett Murphy. Thank you to the team for joining us. Really appreciate it.

I'll start with Bob. You reported earnings last week. I guess before we dive in, is there anything you want to highlight about the quarter or just any thoughts there?

Yes. First, thanks, Allen. Thanks for having us. We're excited to be here to talk about Cencora. And I'll say we don't take the recent pullback in our shares lightly, and we wanted to be here to explicitly express our confidence in our full year guidance as well as our long-term guidance. We recognize that there are some noise around the quarter and so we want to do everything that we can to make sure everybody understands why we have that confidence.

And I'll also note that in our press release, we announced that we were resuming share repurchases and that we expect to repurchase $1 billion in shares by the end of the calendar year. Maybe most importantly, longer term is why we're confident and we have a very focused pharmaceutical-centric strategy that is supported by our purpose. And we have very specific growth priorities and performance drivers that I've spoken to extensively over multiple quarters over the last couple of years. So I won't do that again here.

But one of the things that we're really working on is being focused and executing on that strategy across a number of domains. And that's what gives us confidence. And to just say again, we are very confident in our full year guidance as well as our long-term guidance.

That's great to hear. And to start to dive in here around the U.S. Healthcare Solutions business, there's been a lot of investor focus really on rate of change around the AOI growth for you and your peers. But I think if we take a step back and look at the growth in the business, last quarter, you said that organic AOI growth was toward the high end of your LRP, which is 7% to 10%. So we'll call that 9%, 9.5% in that ballpark.

This quarter, AOI growth was 7%. But as we dug in, there's a couple of one-timers in there that I think are reasonable to take out about 1 percentage point headwind from COVID and 1 percentage point headwind from weather. So as I think about the momentum in the business, maybe momentum or AOI growth organically slowed from 9.5% to 9%. I guess first question is, is that the right way to think about the growth that you're seeing in the business. And then to the extent that there is some level of moderation in growth, can you talk about where that's coming from?

Allen, thank you very much for that question, and I will address, as you said, both the first quarter of our fiscal year '26 and the second quarter of our fiscal year '26. And during the first quarter when we reported results, we indicated that if you exclude the benefit of the RCA acquisition, our growth would have been at the high end of our long-term guidance.

And then we also said, if you exclude the headwind from the loss of the oncology customer, our growth rate would have been above our long-term guidance. And if you compare that to the second quarter of fiscal year we reported U.S. growth of 6%. But we also indicated if you exclude the benefit of the OneOncology acquisition, and you exclude the headwind from the loss of the oncology customer, our growth rate would have been 7%.

And then if you take into account 2 headwinds that we faced, the $10 million headwind from some inclement weather at the end of January and early February that impacted visits to physician practices. And if you exclude the COVID headwind of $10 million, our normalized growth rate would have been 9% in the U.S. for the quarter. And that really sets us up very well to hit our guidance for the fiscal year of EPS of $17.65 to $17.90.

That's great. And then related to that, as we think about the organic growth rates in the business, for the next couple of quarters, what is embedded in the guidance? Do you expect U.S. health care AOI growth to reaccelerate, to moderate, to stay the same? And as you think about the next 2 quarters, I would love to get a sense of any insight you have into April or early May and how you think about that as it relates to the guidance.

Sure. Well, there's a couple of things there. And let me talk about the balance of the year and things that will cause our growth rate to accelerate over the balance of the fiscal year. And there are really 3 things that I'll call out.

The first is that the headwind from the loss of the oncology customer that was acquired by a competitor, that anniversaries and we lap that for the fourth quarter. So that benefits our fourth quarter of the fiscal year. We've also indicated when we acquired OneOncology, which we're really pleased with that the growth in OneOncology would accelerate each quarter over the fiscal year. And so that benefits us. And then -- and so those are 2 things.

And the third thing is that we have an easy comp on OpEx in the fourth quarter, and we've been working on a number of OpEx initiatives also. And so that will benefit us over the balance of the fiscal year. And so on the earnings call, we indicated that we're expecting EPS growth of high single digits in the third quarter, and then we expect further acceleration in the fourth quarter of the fiscal year. Thank you for that question.

Thanks, Jim, for that. And then the second part of the question was any insight into Rx trends utilization in April or May. Is there anything to glean or learn from that?

Yes. One of the things that we've talked about is that the headwind that we saw from inclement weather at the end of January and early February that impacted physician practice visits. We have seen that improve in March and April. And really kind of the key thing that will move us within our guidance range. And again, I said we have confidence in our guidance for the fiscal year, probably the most important thing that moves us within that range utilization trends, particularly in specialty.

Got it. You mentioned brand conversions happened faster than you expected on the call. I believe what you're seeing is around STELARA, and this is not something that's new. You and your peers saw the same thing happen with Humira a couple of years ago. Can you frame -- so you've gone through this type of transition. Can you talk about what helps Cencora deal with this a couple of years ago around the Humira transition and how do you think that applies to STELARA today?

Yes, that's a great question. And probably the most important thing to emphasize is that's the sort of thing that impacts our revenue and our revenue growth rate but this is a lower margin part of our business. And so it has a very, very small impact on our operating income and our operating income growth.

It's really the same customer that we're talking about. And this is a customer where we're shipping very high volumes of products that are palletized to a handful of locations around the country. So it's understandably low-margin business for us. It impacts revenue a lot more than it has very little impact on our operating income and operating income growth.

And you asked about the difference when we had the experience with Humira a couple of years ago compared to STELARA now, I think that's the conversion was faster now than it was a couple of years back. But I think, again, the thing to emphasize is the impact it has on the top line and very minimal impact on operating income.

Got it. And then just a quick follow-up. I think at the time Humira went biosimilar, we estimated that the combination of Humira and STELARA going biosimilar might impact EPS by the combined impact could be a percent. Is that -- is there any way you can give any type of granularity around that? I mean that's a pretty small impact on 2 big drugs. But curious if there's any more perspective you could provide there.

No, I would just go back to Jim's comment on -- given the rate of decline that we saw in -- for STELARA in the March quarter, and that's not highlighting a material headwind specific to that dynamic in our operating income results that I would -- I just wouldn't put a number to it.

Okay. Got that. As we think about the Part D biosimilars, there's obviously some economics that are flowing to the PBMs. But on the Part B side, I think it's fair to say that as drugs go biosimilar in the Part B environment, that generally seems to help oncologists, at least historically. Would love to get a sense of your perspective. Is -- as you look at maybe some of the historical biosimilar launches in oncology Avastin, Herceptin, Rituxan. Can you just talk about -- is that -- was that a positive for the OneOncology business at the time?

Just curious about your perspective there because from our perspective, it seems like Part D, some of the economics might be moving to the PBMs but in the Part B space, that seems like a potential opportunity for Cencora and the distribution business.

Yes, Allen, I'll take that. Thanks for the question. And you outlined it well in the previous questions around Humira and STELARA. But I would also add a point to that is the dynamic within our business model where when a brand moves to a generic within the male PBM space that they take that inside. That's been here even when we were talking about oral generics.

So the fact that, that's happening with biosimilars is actually not new, and it's something that we expected and as we talked about, has a minimal profit impact importantly, which is your question, is the Part B biosimilars is absolutely a tailwind for most importantly, for health care, right? So it's lowering cost for patients in health care overall. It is good for the physician practices and the MSOs and historically has been good for Cencora overall.

And I'll add a couple of things. And so your question was focused on oncology, but I want to make the point, it's also true in retina, right, where we have biosimilars and we'll have more coming. And the reason that, that is relatively more advantageous and part of that is certainly that the PBM control of the Part D space, but also the amount of services that we provide in the Part B space.

And that's obviously for brand products, but it's also for biosimilar products. So if you think about a biosimilar coming to market, Cencora is going to be involved in helping the manufacturers, educate the physicians about that, helping the physicians understand the value proposition of the product.

And so we use the term wraparound services, in many cases for our physician practice businesses. But it's those wraparound services that really help that Part B biosimilar space continue to be advantages for Cencora and for our customers.

And then related to that, one of your peers is co-manufacturing an old cancer adjacent drug Neulasta. I believe the drug is used in conjunction with chemotherapy treatment. Bob, with all the talk around PBMs and what they're doing around Part D, would love to get a sense of your perspective around the future potential or opportunity to co-manufacture biosimilars, maybe similar to the way that you're doing that with the generics business today in select cases. Have you -- has Cencora evaluated the opportunity to structure similar relationships given its large and growing presence in both oncology and retina?

Certainly nothing to call out. But as you said, we have done this in the in the oral solid space and the generic injectable space. So it certainly is something that could be contemplated in the future, but we don't have anything to discuss specifically today.

Got it. That's helpful. And then as we think about the revenue for the U.S. health care solutions here, there's a lot of moving pieces heading into 2026, we have the IRA and manufactured price reductions. We have the GLP-1 volume. We have STELARA as we talked about. But you reiterated your full year free cash flow guidance. So you did a great job managing that.

Was there any from the -- I know that these revenue headwinds don't have an impact or a material impact on the income statement. But as we think about working capital, as we think about free cash flow generation, can you talk about whether any of these specific dynamics or anything else is impacting your free cash flow for the current fiscal year?

Yes. So let me just say that, of course, free cash flow and return on invested capital are 2 metrics that we're really focused on in terms of long-term value creation. And so we are constantly analyzing free cash flow and the impacts of a number of factors on working capital. And of course, our negative working capital is one of the real benefits of our business model.

And so I'll just say that we are always updating our free cash flow estimates, and we were very pleased to confirm our free cash flow guidance for the fiscal year $3 billion.

Yes. And I would just say, as you think about it, I mean, you're thinking about it directionally correct, but the key to keep in mind here is, as you think about brand products, you're talking about shorter payables, tighter inventories. And then it's just the customer mix, where is that going? And then what's the debt -- so what's the average days payable outstanding that kind of flows that through. So directionally, but certainly, that working capital dynamic is key to what we -- how we manage the business.

And then can we get an update on the integration of OneOncology and RCA. Obviously, you've been acquisitive even since then with the recent Retina acquisition, another retina acquisition. Can you talk about how those businesses are performing relative to your expectations? And how we should think about the level of contributions during the back half of the fiscal year from both of those businesses?

Allen, I'll take that to begin with. The integration of the -- those MSOs, RCA OneOncology individually is going very, very well. We are absolutely happy with everything that we've seen so far and importantly, that we've talked about that we're excited to get to once we completed the OneOncology acquisition is that now we have the RCA team and the OneOncology team able to work together. And that's where there will be additional synergies created.

And we've talked a lot about our excitement about the clinical trial space and the area that RCA is really the leader in and there are capabilities there that we're excited to share more broadly with OneOncology, which is a bigger space, right? So that clinical trial excellence that we have at RCA as we kind of make that a platform capability and not just something in one of the MSO verticals, we're really excited about it.

And there are other areas where they're sharing capabilities, they're meeting together. We have working teams, as you would expect. But without going on too long about it, we're very excited not only about the performance in terms of what we expected, but also the teamwork that's going on between the legacy Cencora team as well as the RCA team and the OneOncology team, it's going very well. And as Jim said earlier, we're excited about the contribution that OneOncology will make in the back half of this fiscal year and beyond.

You asked about kind of acquisitions. So I was just going to add one more thing. So there's the performance of the business and the integration of the business. And then there's also both RCA and OneOncology, having the ability to continue to tuck in acquisitions. And that's part of the thesis, and that's also going very well in terms of what we've been able to identify. The pipelines are strong for both. So we again, kind of short term and longer term, we're very optimistic.

Yes, I want to unpack that last comment, Bob, on the pipelines are strong, we'd love to get an update on the pipeline for both oncology and retina. Are there still the same number of assets out there? Is there any way to quantify number of assets that are out there? And I would love to get a sense of how broadly some of those smaller players have performed because I guess as we look at it, it seems like there's a pretty significant variability in quality of assets as we think about some of these smaller MSOs. So would love to get a sense of some updated thoughts on the pipeline and how that compares to maybe a year ago.

So we're optimistic. We don't have a specific number that we provide, but there are many opportunities out there in both retina and oncology, and they're predominantly smaller and by definition. And kind of when you talk about relative quality, there's a lot of ways to look at that. But I would also say by definition, probably a smaller practice is not going to be as sophisticated as a larger practice. And that's a big part of the value proposition of why you would join in MSO because that just brings the scale, the buying power, the expertise, the access to clinical trials, all the things that we've talked about.

So it's not so much lower quality. It's to the extent that they're less sophisticated, that's actually why they would want why they would want to join and then we bring those capabilities to them, which improves their practice and improves their ability to provide care for patients. I would probably end with and then Jim and Ben can jump in on anything that they want to add. But we're really happy with the 2 platforms that we have, right? So we're really talking about now our focus being on tuck-ins in both retina and oncology.

Yes. And I think the only thing I would add is, I mean, we've seen it. Well, it's not like there's no big press releases, there's no big activity around those things. You've seen like in our cash flow that you'll see a little small deals, as Bob talked about for RCA over the past year.

I think the key thing is to what Bob said is that there's a lot of opportunities to tuck in to that platform. It was unique in that we're able to carve out the retina focused parts of that business or that's -- part of the deal has been announced not closed, but so that deal being structured way that allows us to carve out the asset, the retina focus assets.

And with the multiple different regions that are touched by that, that could be a good -- that's a unique opportunity to essentially do a bunch of tuck-in all at once and create a lot of value while the general ophthalmology, non-pharmaceutical centric part of that business stays and does not come -- would not come Cencora as part of that deal. We think it very much aligns with our pharmaceutical-centric strategy and is a good example of multiple tuck-ins.

And the only thing I'll add is that as we've analyzed the businesses over the past couple of years and even during a period prior to our ownership of the businesses, due to the synergies that Bob was talking about, we see that when they do an acquisition and then we compare the earnings from that business to 2 or 3 years later, really the synergies and the benefit we see from operating income growth and the operating income growth CAGRs are quite good.

Yes. And actually, the last piece I want to it's very -- it's really important because it gives the physicians the opportunity to maintain their clinical independence, operate independently be part of an MSO that gives them a lot of breadth and scale to compete in the market. But most importantly, gives them that critical independence and it gives a thoughtful strategic partner for long term.

Yes. Thank you for all that detail. That's really helpful. And then pivoting to the international business. Bob, you talked about a lot of confidence in the U.S. business moving forward. The international business had a really strong quarter. Can you talk about the sources of strength there and how to think about what's embedded in the guide and what you're seeing that gives you confidence into the rest of the year there?

Yes. Well, what I'll say is we were really pleased to see both the revenue growth and the operating income growth in our international business during the quarter. And of course, our operating income mix is about 80% in the U.S. and 20% international. And what we saw during the quarter is really 2 key benefits in our International Healthcare Solutions segment.

One is the timing of a price increase in a developing market economy, and that was a benefit for us. And we talked about that during the first fiscal quarter and the fact that we expected to see that fiscal quarter, and we did see that in the second fiscal quarter. And we'll continue to see that benefit in the third quarter also. And then importantly, the second benefit we saw during the quarter is the performance of our global specialty logistics business, our World Courier business.

We saw the second consecutive quarter of operating income growth and so we're pleased with what we're seeing in that business, and that will be an additional benefit for our International Healthcare Solutions segment in the third and fourth quarter, particularly as we have easier comps for our global specialty logistics business.

Around the World Courier business and the improvement there. Can you talk a little bit about what you're seeing around that improvement? Is the market inflecting there is Cencora taking share? Would love to get a little bit more details on what you're seeing and the sustainability of that AOI growth in that part of the business.

Yes. Thanks, Allen. Yes, we're really pleased with the performance of the World Courier Global Logistics business. I would start with just the level of quality that World Courier provides in the marketplace. So market-leading quality across very, very specialized logistics. So think cell and gene therapies and other clinical trial support.

Second, Allen, as you mentioned, kind of about the market and the market certainly has stabilized. We went through a period of a real slowdown kind of in the biopharma space in terms of clinical trial starts, and that has -- that certainly has stabilized, which we can see in a lot of different report outs, and we're benefiting from that. And very importantly, I think the -- I think I know the team has been very, very focused on the right operating model, the right efficiencies and making sure that the value proposition for the pharmaceutical companies and others that we serve is as sharp as it needs to be.

So you can be the high-quality leader and you also have to make sure that the overall commercial value proposition is right. And I think we're at a point now where we have a stabilized market and we have the right combination of efficiency, high quality and pricing that should allow us to continue to grow.

Great. And then moving on to the Other segment. Can you provide an update on when you expect the MWI transaction to close? And can you speak to your confidence that the deal will close?

Sure. We've indicated that our fiscal year '26 guidance assumes that the deal will not close during fiscal year '26. And so that's what our guidance assumes that it will close after that in fiscal year '27. We aren't now accounting for MWI as an asset held for sale. And so that's something that caused our operating income to improve in our guidance to go up for the other segment when we announced guidance recently.

And then I'll also say just the deal is subject to regulatory approval. But as we have said, we like the fact that the combined business will really be able to increase innovation, efficiency and affordability throughout the Animal Health ecosystem. So thank you for the question, Allen.

Thank you for that, Jim. And then moving on to capital deployment. You talked about opportunistic share repo later in the year. You also talked about a really strong pipeline for M&A. Your share price is lower than where it was 3 to 6 months ago. Can you talk about -- does this change the way that you think about capital deployment in the relative pecking order of share repo versus M&A? I would love to get your thoughts there.

Yes. Thank you very much for the question, Allen. And this question. I was really hoping you were going to ask and really most wanted to answer, and Bob commented on it during his opening remarks, of course. And we've always talked about capital deployment in 4 areas.

The first is investing in the business through CapEx. The second is strategic acquisitions that would be pharmaceutical-centric like tuck-ins in the MSOs, opportunistic share repurchases and then also a reasonable growing dividend. We announced the -- that we'll buy $1 billion back before the end of the calendar year and now is clearly an opportune time for us to be buying back stock.

I think if you look at the history of the company over the past 6, 8, 10 years and look at when there's been pullbacks of this type of nature, that company has absolutely executed against opportunistic share repurchases in a material way.

Great. And then as we kind of going back to the top here and going back to the guidance, there's a lot of moving pieces in the business, a lot of onetime dynamics. But as we think about the guidance for the second half of the year, can you maybe risk weight -- what are the biggest drivers to get you to the top end of the guide versus the low end of the guide? And I guess I'll start on AOI for the U.S. Healthcare business.

Yes, sure. And we did increase our guidance when we announced our results. Really, the reason for the increase was the asset held for sale accounting in our MWI business. Otherwise, the guidance and would stay be the same.

But I think we have a very good confidence in the guidance. And the thing that moves us within the range is, of course, utilization, particularly in specialty. But as I said before, 3 of the things that give us confidence in the guidance is we lap the loss of the oncology customer that was acquired in the fourth quarter.

As we've said, OneOncology ramps over the course of the fiscal year. And then also, we have easy operating expense comps, and we've been doing some key operating expense initiatives. So thank you for the question. And of course, our guidance for the year is EPS of $17.65 to $17.90 a share.

And then Cencora has been investing in the infrastructure of the business for a while now. And a lot of the conversations more recently just broadly from investors is around AI and optimization and things like that. We'd love to get a sense -- as you think about the investments you're making in technology, how do you think about AI? Is there an opportunity to improve the efficiency within your business? And if so, where would that be?

We're starting -- you'll notice in Bennett's title that he's also a Head of Enterprise productivity. So we have an expert on the stage as well. But I'll just say it. I wasn't going to go through our performance drivers, but maybe I'll just take a step back and go there because we're very focused on the portfolio optimization, which we've talked a lot about here today. So that's both investing in the growth areas as well as deprioritizing certain areas, talent and culture as a significant focus for us.

Enterprise productivity is a focus than I would say, AI-led digital transformation is a significant focus for us. So Allen, I think the way to think about it, and you framed it this way, we're -- and not being naive, but I'd say we're -- given the services that we provide and the infrastructure that we have, we're not a business or an industry that's likely to be disrupted by AI.

However, we have significant opportunity for efficiency improvement with AI. And that is through a real kind of end-to-end business process reengineering that's enabled by AI that will increase quality, increase team member experience, increased customer experience and certainly take out costs. It's a big initiative, and it's not just about technology because you can't -- my take on it is kind of putting technology or AI into your current business process here. I'm doing this because those are generally going to be verticals has limited benefit.

You'll find some short-term costs, but it's going to be limited. You really have to think about the business process end to end and then apply the technology and very likely AI on that to drive the efficiency. So we're looking at this end-to-end and not just as a technology play.

Yes. And since we only have 20 seconds, I'll quickly chime in with -- when you think about the sheer operation that we run around managing inventory replenishment operations, there's a lot of opportunities for us to be better and better, better in leveraging AI to make really thoughtful strategic decisions informed by the right data. That's where -- that's a good initial steps into the AI space ahead of the business process transformation that Bob laid out.

Yes, that's great. I appreciate all those comments. Bob, Jim, Bennett, really appreciate the time. Thank you for joining us, and thank you to everyone in the audience as well. Thank you.

Thank you.

Hello, everyone, and thank you for joining us, and welcome to Cencora Inc. Q2 2026 Earnings Call. After today's prepared remarks, we'll host a question-and-answer session. [Operator Instructions] I will now hand the conference over to Bennett Murphy, Senior Vice President, Head of Investor Relations and Enterprise Productivity. Please go ahead.

Good morning, good afternoon. Thank you all for joining us for this conference call to discuss Cencora's fiscal 2026 second quarter results. I am Ben Murphy, Senior Vice President, Investor Relations and Enterprise Productivity. Joining me today are Bob Match, President and CEO; and Jim Mary, 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, investor.cencora.com. We have also posted a slide presentation to accompany today's press release on our investor website. During this conference call, we will 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 today's press release and our SEC filings, including our most recent 10-K. Cencora assumes no obligation to update forward-looking statements, and this call cannot be your broadcast without the express permission of the company. And you will have the opportunity to ask questions after today's remarks by management. We ask that you limit your questions to 1 participant in order for us to get to as many as possible within the hour. With that, I will turn the call over to Bob.

Thank you, Bennett. Hi, everyone, and thank you for joining Cencora's Fiscal 2026 Second Quarter Earnings Call. In our fiscal second quarter, we saw operating income growth in both our U.S. and International Healthcare Solutions segments and delivered adjusted diluted EPS growth of 7.5%. These results reflect the resilience of our business, and we remain confident in our full year fiscal 2026 guidance. Building upon that confidence, today, we announced the resumption of opportunistic share repurchases. Today, I'll focus on how our growth priorities and performance drivers support continued long-term growth. Specifically, building upon the critical role we play within the pharmaceutical supply chain through digital transformation, strengthening our position in specialty pharmaceuticals across channels. and optimizing our portfolio to focus on our pharmaceutical-centric strategy.

I'll start with building on the critical role we play within the pharmaceutical supply chain through digital transformation. We serve as the backbone of the pharmaceutical supply chain, ensuring the safe and secure delivery of medications from the manufacturers who develop them to the sites of care supporting patients. Every day, our teams move millions of medications through the supply chain to thousands of health care sites, creating significant efficiency for our manufacturer and provider partners through advanced technology and a network of highly automated fulfillment centers we help simplify ordering and inventory processes, providing centralized access to products, ranging from over-the-counter treatments to highly complex specialty pharmaceuticals.

Our services streamline the industry's logistics and working capital needs, provide data and insights and drive reliable patient access, ultimately lowering costs. Given our critical role, we continuously invest to strengthen our physical and digital infrastructure, driving enhanced customer visibility, accelerated issue resolution and improvements, depending on the value we provide. We are seeing positive impact from these efforts, recently launching AI-supported tools, improving consistency and quality across our customer support operations benefiting both our customers and team members. We're excited to continue deeply embedding these capabilities across our enterprise.

Second, we are strengthening our position in specialty pharmaceuticals across channels. I've spoken extensively about the investments we've made in management services organizations that provide physician practices with the tools needed to thrive. But MSOs are just one example of how we're supporting the growth of specialty pharmaceuticals across Cencora. In our global specialty logistics business, the efforts we've taken to improve performance have yielded results and we're pleased to report our second consecutive quarter of operating income growth. We're winning new contracts in areas like cell and gene therapies and laboratory logistics as well as executing productivity initiatives to drive sustained success.

As manufacturers increasingly develop products targeting smaller patient populations, our global reach and ability to support complex specialty products positions us uniquely as a trusted partner. Health systems represent another area where specialty pharmaceuticals have seen continued growth and our teams have worked to build comprehensive solutions designed to provide end-to-end support to these customers. Through our Accelerate Pharmacy Solutions portfolio, we offer services aimed at streamlining the complexity of health systems operations from specialty strategy enablement to freight management optimization. This offering has been well received in the market with health systems increasingly seeking to deepen and form new partnerships with us due to our differentiated consultative approach.

The breadth of our specialty solutions and market-leading customer portfolio allow us to capitalize on the growing specialty pharmaceutical market. And finally, we're optimizing our portfolio to provide focus. During the quarter, we took key steps in our ongoing work to focus our portfolio, including the agreement to merge MWI Animal Health with Covetrus and the sale of our U.S. hub consulting services positioning these businesses for success with strategically aligned partners. Optimizing our portfolio supports focus on our investments in MSOs and ongoing integration efforts. While it's still early days, we are encouraged by our initial progress in building shared capabilities across OneOncology and RCA that will drive growth across our MSO platform. We've established joint teams to share best practices in key areas like research and clinical trials, back-office services and physician recruitment and retention, so we can leverage what is working well across the platform.

Before turning to my closing remarks, I'll now pass the call to Jim for a discussion of our financial results and updated fiscal 2026 guidance. Jim?

Thanks, Bob. Good morning and good afternoon, everyone. Cencora delivered solid performance in our second quarter, demonstrating the resilience of our business and our team members' execution to serve our customers and partners. In the quarter, we delivered adjusted diluted EPS of $4.75, reflecting growth of 7.5% and which puts us on track to achieve our increased EPS guidance of $17.65 to $17.90. During my remarks today, I'll provide an overview of our consolidated results before turning to our segment level results and updated guidance. As a reminder, unless otherwise stated, my remarks 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.

Turning now to consolidated revenue. Consolidated revenue was $78.4 billion, up 4%, driven by growth in both reportable segments and in other, which I will describe in more detail when discussing segment level results. Moving to gross profit. Consolidated gross profit was $3.4 billion, up 16% primarily due to growth in the U.S. Healthcare Solutions segment. Consolidated gross profit margin was 4.31%, an increase of 45 basis points, largely driven by the February 2026 acquisition of OneOncology. Consolidated operating expenses were $2.1 billion, up 22.5%, which included the impact of the February 2026 acquisition of OneOncology, excluding both MSOs operating expenses grew 5% on a constant currency basis.

In the second half of the year, we expect our core expense growth will moderate particularly in the fourth quarter with an easier comparison for the U.S. Healthcare Solutions segment, excluding OneOncology. Turning now to operating income. Consolidated operating income was $1.3 billion, an increase of 6% compared to the prior year quarter, driven by solid growth in both our U.S. and International Healthcare Solutions segments more than offsetting the slight decline in other. Moving now to our interest expense and effective tax rate for the second quarter. Net interest expense was $140 million an increase of $36 million versus the prior year quarter, primarily due to debt raised in February to finance the OneOncology acquisition. We expect third quarter net interest expense to be roughly the same as our second quarter interest expense.

Our effective income tax rate was 18.9% and compared to 20.8% in the prior year quarter as we benefited from discrete tax items in the current year quarter. Finally, diluted share count was 195.4 million shares a 0.1% increase compared to the prior year second quarter. Regarding our cash balance and adjusted free cash flow, we ended March with $2.2 billion of cash reflecting $1.1 billion of free cash flow generated in the March quarter. Our full year adjusted free cash flow guidance of approximately $3 billion remains unchanged as we expect to continue to generate cash in the back half of the fiscal year.

This completes the review of our consolidated results. Now I'll turn to our segment results for the second quarter. U.S. Healthcare Solutions revenue was $68.8 billion, up 3% and in the quarter, we saw continued volume growth, including specialty sales to health systems and physician practices and in sales of GLP-1s, which increased $1.9 billion year-over-year. Despite these trends, our revenue growth was tempered by 3 main factors, 2 of which were fully contemplated. The 2 factors that were fully contemplated were: first, manufactured list price reductions, which represented a $2 billion revenue headwind in the quarter; and second, the previously disclosed fiscal 2025 loss of an oncology customer and a grocery customer. The third factor, which was not fully contemplated was the speed of brand conversions for our large mail order pharmacy customer. These sales are low margin, which concentrates their impact to our revenue line.

The increase in brand conversions is a meaningful contributor to our reduced revenue growth expectations for the fiscal year but results in higher margins for Cencora overall. Moving now to operating income. U.S. Healthcare Solutions segment operating income increased 6% to $998 million. In the quarter, we saw good trends across much of our business. However, there were a few items that impacted our growth. First, we have not yet lapped the loss of an oncology customer that began to hit our numbers in July 2025 due to its acquisition. This headwind was larger than the contribution we recognized from our February 2026 acquisition of OneOncology.

Second, many physician offices had lower volumes due to missed patient appointments as a result of inclement weather across the U.S. And given our leading presence in this channel, we saw some lighter volumes in late January and early February. We were encouraged to see a rebound in patient appointments and specialty product volumes in March. Overall, we estimate that weather represented a $10 million headwind to U.S. segment operating income growth in the quarter.

And finally, as we noted on our earnings call last May, we had a $15 million contribution from COVID-19 vaccines in the fiscal 2025 second quarter. This quarter, COVID vaccines represented a $10 million operating income headwind for the segment. Taking a step back, if we exclude the OneOncology acquisition and the 2025 loss of the oncology customer the U.S. Healthcare Solutions segment growth would have been approximately 7% in line with our long-term guidance in spite of the transitory weather and COVID items. Turning now to our International Healthcare Solutions segment. International Healthcare Solutions revenue was $7.6 billion, up 13% on an as-reported basis and up 7% on a constant currency basis primarily driven by growth in our European distribution business.

In the quarter, International Healthcare Solutions operating income was $176 million, up approximately 14% on an as-reported basis and up 13% on a constant currency basis. In the quarter, our European distribution business benefited from the shift in timing of manufacturer price adjustments in a developing market country, as I called out last quarter and the continued rebound of our global specialty logistics business, where we saw a second consecutive quarter of operating income growth. We are very pleased with this rebound of our global specialty logistics business.

Moving to other. Revenue in Other was $2.1 billion, up 5% and largely due to growth at Pro Pharma and MWI Animal Health, partially offset by an expected revenue decline in our legacy U.S. hub consulting services, which was divested on April 30. Operating income was $92 million, down 1% due to a decline in operating income in our U.S. hub consulting service business resulting from the fiscal 2025 loss of a manufacturer program partially offset by operating income growth at MWI Animal Health. That completes the 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. I will start with adjusted diluted earnings per share. We are pleased to raise our full year guidance range to $17.65 to $17.9 and up from $17.45 to $17.75. The updated guidance reflects our strong full year fiscal 2026 operating income growth expectations for the U.S. and International Healthcare Solutions segments and our updated expectations in other.

I will now turn to updates to our revenue guidance. On a consolidated basis, we now expect revenue growth to be in the range of 4% to 6%, down from the previous expectations of 7% to 9%. This is driven by our lower expectations for revenue growth in the U.S. Healthcare Solutions segment, where we now expect revenue growth of 4% to 6%. As a reminder, our guidance for fiscal 2026 has always contemplated the impact of manufacturer WACC price reductions. However, our updated guidance reflects the faster-than-expected branded conversions at our large mail order customer and slower anticipated GLP-1 growth than we had been expecting.

In the International Healthcare Solutions segment, we now expect revenue growth to be in the range of 8% to 10% on an as-reported basis to reflect changes in foreign exchange rates. Our International Healthcare Solutions segment constant currency revenue growth expectations remain unchanged at 6% to 8% growth. Our revenue growth expectations for other remain unchanged. Moving to operating income. We expect consolidated operating income growth to be in the range of 12% to 14%, up from our previous guidance of 11.5% to 13.5%. This is driven by our updated full year expectations for other to show operating income growth in the high single-digit percent range due to MWI now being accounted for as an asset held for sale and as a result, depreciation expenses suspended.

Our full year operating income expectations of 14% to 16% growth for the U.S. Healthcare Solutions segment remain unchanged, but as you think about our second half cadence, we continue to expect to see our strongest growth of the fiscal year in the fourth quarter after we lapped the loss of the oncology customer that occurred on July 1, 2025, and as OneOncology accretion ramps.

Our expectations for International Healthcare Solutions segment operating income growth remains unchanged at growth of 5% to 8%. Moving now to interest expense. We expect interest expense to be approximately $485 million compared to our previous range of $480 million to $500 million reflecting progress on debt paydown and incrementally better-than-expected rates on our senior notes that we priced in February. As you look at your models, in the third quarter, we anticipate net interest expense will be at a similar level as this quarter before modestly stepping down in the fourth quarter, given working capital dynamics.

Finally, turning to share count. We expect our full year diluted shares outstanding to be under 195.5 million shares as we resume opportunistic share repurchases and -- as we indicated in our press release, we expect to repurchase $1 billion worth of shares by calendar year-end. That concludes our updated full year guidance assumptions. As it relates to quarterly cadence, I would point out that we expect third quarter adjusted diluted EPS growth to be in the high single digits, partly as a result of our net interest expense remaining at that $140 million level in the quarter. To close, I am proud of our teams who worked diligently to support our customers and partners guided by our purpose and pharmaceutical-centric strategy.

As we continue to prioritize a balanced approach to capital deployment, we are pleased to be resuming opportunistic share repurchases that will support value creation. Despite noise today, given some transitory items causing our results to be below expectations, we remain on track to deliver strong guidance for fiscal 2026 and I'll now turn the call back to Bob for some closing remarks before moving to Q&A. Bob?

Thank you. As Jim said, today's results are impacted by transitory items and our full year guidance remains strong. reflecting the strength of our business and execution to drive sustainable long-term growth. The critical role we play in the pharmaceutical supply chain and the investments we are making allow us to capitalize on growth opportunities. As we look to the balance of the fiscal year and beyond, our focused strategy guided by our purpose, growth priorities and performance drivers positions us to continue creating value for all our stakeholders. Before opening the call for Q&A, I want to take a moment to acknowledge that today is Jim's final earnings call before his retirement as CFO in June and from the company in December. On behalf of all of us at Cencora, I thank Jim for his many years of service. His leadership and expertise have shaped our company and performance, and Jim has been a terrific partner to me. I wish him all the best.

[Operator Instructions] Your first question comes from the line of Lisa Gill at JPMorgan.

Jim, I wish you the best in your retirement. I just really wanted to understand and Jim, I appreciate you kind of laying out that the core underlying growth was about 7%. But when we look at stripping out WAC, IRA changes, the lost business, everything you talked about. How do we think about the impact to operating profit from those changes as well as the shift in the mail channel that you talked about, generally, that's going to be lower margin. And how -- when we put this all together, how do we think about -- does this have an impact on your long-term growth rates on either revenue or operating profit as we see these changes, especially on WACC and IRA moving forward? .

Sure. Thank you very much for the question, Lisa. And what I'll do is I'll go through our revenue and our operating income and the key drivers in Q2. And so as you know, our revenue growth was 4% during the quarter and in the U.S. health care segment, it was 3%, and I'll go through some of the growth drivers and the growth headwinds.

First of all, with regard to growth drivers, we saw continued volume growth, including specialty sales to health systems and physician practices. We also saw $1.9 billion of growth from GLP-1s and we're still seeing growth in GLP-1s, of course, but at a slower pace than we expected, which is contributing to our lower revenue guidance. And then we saw some growth headwinds on the revenue front. For instance, we saw $2 billion from IRA WACC reductions. And so that had a 3% impact to U.S. revenue growth during the quarter. And then as previously disclosed, there's a loss of an oncology customer and a grocery customer that impacted growth in the quarter. And then there were also faster-than-anticipated brand conversions at a large mail order customer that meaningfully contributes to the reduced revenue growth.

Of course, in international, we saw a 13% revenue growth, primarily due to Alliance Healthcare, but also saw growth in global specialty logistics. And then in other, we saw 5% growth driven by MWI and pro forma and so you ask kind of what is driving the operating income growth during the quarter. And so let me go through those factors. Operating income up 6% in the quarter and in U.S. operating income up 6%. And we continue to have the headwind related to the loss of an oncology customer due to its acquisition, and this headwind during the quarter was larger than the contribution we recognized from the February acquisition of OneOncology.

And if we exclude the impact of the oncology customer loss and our February 2026 acquisition of OneOncology our growth would have been approximately 7% in line with our long-term guidance. And we were able to achieve this in spite of 2 headwinds. And the 2 headwinds where we saw a $10 million operating income headwind related to weather and specialty practices due to some patient visit cancellations and delays and we did see the business rebound in March and saw good trends in April as well. And we also had a $10 million operating income headwind related to COVID-19 vaccines.

And as a reminder, we had $15 million of COVID-19 contributions in the second quarter of fiscal year '25. And then I'll say to address your question as we talk about the things that impacted operating income in the quarter, we haven't called out the faster-than-anticipated brand conversions, which are lower margin, and we haven't called out the IRA WACC reductions when we're talking about the quarter. In international, we had good growth of operating income in the quarter, 14% driven by growth in our European distribution business and also we benefited from a shift in the timing of manufacturer price adjustments in a developing market country, which was mentioned on our February call.

And we also saw the second consecutive quarter at growth of our global specialty logistics business. We were very pleased to see this business continue to rebound. And so that's really kind of a driver of our revenue growth during the quarter and our operating income growth. And you asked about our long-term guidance, and we continue to have confidence in our long-term guidance, which is, of course, 7% to 10% organic operating income growth, another 3% to 4% from capital deployment and 10% to 14% EPS growth. So thanks a lot for the question, Lisa.

So I'll just -- I'll follow on to Jim's excellent answer and just summarize by -- and reinforcing the last point that Jim just made, which is while there are times where there'll be revenue pressure. They are generally -- these are lower margin activities in the case of WACC decreases as you know, we've been able to recoup the value of those changes. And we guide on operating income for the long term, and it's for that very reason because there can be some variability in revenue, especially as we cycle through some of the policy initiatives and other things that we'll see in the U.S. market, but our confidence in maintaining our operating income growth is high.

[Operator Instructions]

Your next question comes from the line of Michael Cherny at Leerink Partners.

And yes, I'll echo Lisa's comments, Jim. Congratulations and good luck in retirement. Lisa kind of hit on some of the longer-term dynamics, I want to dive in, if I can, on the second half of the year. As I understand, as I think through the moving pieces, obviously, you have some comp dynamics, you have some deals. But as we think about the acceleration of growth, can you kind of risk weight where you have the most confidence versus the most potential variability in terms of the U.S. AOI build, in particular, into the back half of the year, both because of comp dynamics, but also because of what you're seeing in the market relative to customer behavior and other key factors.

Yes. Thank you very much for that question. And Michael, what I'll do is I'll start by describing our guidance update and some of the key drivers. And then I'll finish up with what really gives us confidence in our growth acceleration in the balance of the fiscal year. And so first of all, with regard to our guidance update and drivers, as you know, we are increasing our EPS guidance to a range of $17.65 to $17.90 up from the previous range of $17.45 to $17.75 and this reflects our strong fiscal 2026 guidance and growth in both the U.S. and International Healthcare Solutions segments, it also reflects the increase in expectations for other as a result of MWI being classified as an asset held for sale and excluding this asset held for sale benefit, our full year fiscal 2026 EPS guidance would have remained largely unchanged with the incrementally lower interest expense and share count moving EPS up modestly.

Our revenue growth guidance for the fiscal year is now 4% to 6% down from the previous range. And in the U.S. Healthcare segment, growth is also 4% to 6% for revenue down from the previous range and this is driven by a reduction in growth expectations for GLP-1s. That's one of the few things that's driving it. And given the size of this product class, a 5% delta in growth year-over-year represents approximately $2 billion in annual revenue. It's also driven by the faster-than-expected brand conversions at our large mail order pharmacy customer and updated expectations for mix, including slower growth in lower-margin categories.

In International, we're now guiding to growth of 8% to 10%, up from the previous range of 7% to 9%, and this reflects updates to foreign exchange rates and constant currency guidance remains unchanged. Now talking about operating income growth, we've increased our operating income growth guidance of 12% to 14%, up from the previous range of growth of 11.5% to 13.5% in and U.S. health care and international Healthcare Solutions guidance remains unchanged for operating income, and our guidance now calls for high single-digit growth, up from flat and this reflects MWI now being classified as an asset held for sale, as I previously discussed.

So what's giving us confidence in our growth acceleration in the balance of the year, I'd really like to address that. And we do have high confidence in our full year fiscal 2026 guidance that contemplates operating income growth of 12% to 14% and strong growth across both reportable segments and other and there are a few factors that support the growth ramp in the balance of the year. In U.S. health care, there's the lapping of the loss of the oncology customer due to its acquisition in July 2025. We also see, as we talked about in the past, OneOncology accretion ramping over the fiscal year, and we also see an easier expense comparison for our U.S. Healthcare Solutions segment in the fourth quarter.

Also in the International Healthcare Solutions segment, our global specialty logistics business is seeing continued growth, and it also has easier comps in the balance of the year. And then another, of course, we have the benefit of MWI asset held for sale accounting treatment. And so those are some of the key things that give us confidence in growth acceleration in the balance of the year and give us confidence in our guidance for the fiscal year. Thank you for the question.

Your next question comes from the line of Glen Santangelo at Barclays.

I also have a longer-term operating profit growth question. it seems to me that investors, they're obviously aware of the increasing generics and biosimilar pipeline that is emerging here over the next couple of years. And -- and while I think the traditional generics opportunity is well understood, I think especially the biosimilar conversion is much less understood. And we saw it perhaps have an impact on revs this quarter with your mail order customer. But more importantly, we're hearing concerns from investors that the lower-priced biosimilars could potentially have a negative impact on some of the profit pools in your specialty.

And so what I was hoping you'd do is just spend a minute and talk about these biosimilar conversions and maybe the longer-term impact do you think they'll have on your long-term operating profit growth in your distribution business.

Thanks, Glen. I'll take that. Terrific question. And it's -- I think it's probably best to start by taking a step back just with a little context. And separating the biosimilar market in the Part D mail market and then the biosimilar market in the Part B space. And I think if we go down the Part D path for a second, I think that's where people would rightly assume that as a product moves from brand to biosimilar that it's very likely to move away from the wholesaler, which is exactly what happened in oral generics. And so that's part of the model that we have with our customers currently. So that's not surprise. And then on the kind of revenue and profit side, but again, just to reiterate that. So that's a revenue hit, but it's not a meaningful profit hit.

So to the extent that the mail order pharmacies and PBMs have selection choice over the biosimilar, and that could go around the wholesaler. I think that is -- that's going to be true in many cases, but that's part of the model today. So that's not incremental pressure. And then next to that, it's important to talk about how the Part B space is not that. So the Part B space, which is where we have an important presence both with our GPO distribution and with MSOs and that as a product converts from the brand to the biosimilar in that space, it actually is incrementally beneficial to to the practice and to Cencora.

So I think those are good things for us to watch over time. There are all things that we have contemplated in our planning. But again, there's not unknown pressure out there as biosimilars grow in the Part D space, and there is actually benefit as biosimilars grow in the Part B space. Thank you for the question.

Your next question comes from the line of Elizabeth Anderson at Evercore ISI.

Jim, congrats on your retirement. My question is about U.S. oncology. I heard your call out about some of the transitory issues sorry, OneOncology. I heard some of your transitory issues about weather and stuff in the first quarter. My question is sort of how are you thinking about that business and its performance on a run rate business basis? Can you talk to us a little bit more about sort of the synergy acquisition? How is the rest of it tracking versus your expectations minus obviously, the transitory issues?

Yes. Thanks, Elizabeth, for the question. We couldn't be happier with being able to acquire OneOncology in February. We have now full ownership of that business. And what's exciting is having the opportunity for RCA and OneOncology to now collaborate. As I said in my prepared remarks, we're really starting to see the benefits of that collaboration. And as we signaled over several quarters as we were kind of awaiting this full acquisition at some point was that we -- there are best practices that exist within both of those MSO platforms that are transferable to the other. So there are strengths within one that are different than the strength in the other. And now we're able to all get in a room together and those teams are formed and they're working on making sure that we can deliver the value to the practices, which is value to the patients, ultimately, and it's going really well.

And as you mentioned, I think this is a new phenomenon for Cencora where a significant storm could have some pressure on office visits, but it's -- as Jim said, the volume comes back, which we've seen already, and we're very happy with the acquisition. We're very happy with the integration progress to date. And I would say most importantly, we're really happy that OneOcology and RCA are now able to work more closely together along with the expertise that we have within Cencora to make sure that we're driving long-term value. .

Bob, and I'll just add one thing, if I may. And that's that OneOncology and RCA have both been significant contributors to our specialty growth for several years. And so it's, of course, wonderful to have the MSO presence now, which we're very pleased with both platforms. But I also wanted to call out that they've been significant contributors to our very important specialty growth for many years. .

Your next question comes from the line of Eric Percher, Nephron Research. .

A question relative to some of the pressures that you faced from price reductions. And I'd like to better understand when you sit across from a manufacturer and you have a discussion whether it has been AMP or where we are this year with the price reductions and also as we think about GLP-1 reductions coming 1/1/2027. What is the basis for the discussion of value? Is it simply pick-pack and ship? Is it receivables or capital put to work? And how confident are you that you continue to be able to maintain absolute margin on lower prices?

Yes. Eric, thank you for the question. It's an important question, and I'll begin with the end of your question, which is we're very confident that we can maintain that dollar profit through these discussions and it's really because of the scope and scale and quality of the services that we provide to the manufacturers and the providers. And you listed a few of them, and you know them well. But our ability to run provide the quality and efficiency that we do as an industry, frankly, with the massive investments that we have in the distribution networks. And so that's the technology for ordering. It's the highly automated distribution that's there. It's the secure handling of those products across the board that is very efficient, very low cost and very high value and frankly, would be impossible to replicate outside of the system that exists here in particular, in the United States.

We often are able to talk about a study that the health care distribution alliance updates every few years, but it's probably worth mentioning that those services contribute about $80 billion a year to the health care system. In other words, without those services, the cost would be that much higher within the system. So Eric, it's not an automatic, right? And we do have to go in and we have to have a real conversation with a partner that has to see the value in what we do. But we are confident that manufacturers will continue to see the value in what we do for all of the reasons that I just described.

And of course, those are -- that's the base case, and we're always working to innovate to create new services and new solutions and new data and analytics opportunities that provide value. So again, it's a commercial relationship. It's something that we have to demonstrate our value all the time, but because of the investments that we've made over decades, we feel confident that, that will continue.

Your next question comes from the line of Charles Rhyee at Cowen. .

Jim, good luck to your retirement and best wishes. I guess maybe first to follow up a little bit on Glenn's question. Bob, I appreciate that Part B is the real focus, particularly when we think about specialty, but we -- and that in the Part D side, it's pretty much more of a revenue hit. But is it fair to think that we're still making some margin on these revenues. And certainly, when we think about your large mail order customer shifting and then moving that volume to their own sort of distribution business. When we think about sort of that impact in that faster conversion, was that -- how do we understand that kind of speed of conversion that might have been sort of outside your expectations?

And then when we think about the pipeline of future drugs, is that something that you are contemplating when you're in your long-term guide of what products you think will continue to be through your channel versus what might go through some of your customers' own internal channels? And then secondly, just real quickly, Jim, you talked about sort of the lots of the big OneOncology contract last year as well as the grocery store chain. Were there any other kind of movements? I know there are some other M&A activity going on in the space over the last year or so, and some of that work oncology. Just curious if the ones that you called out is the only one that's been sort of a headwind for you.

Charles, I'll take the biosimilar part of your question first. And so there's 2 or 3 things happening. One that we called out is the speed of conversion from the brand to the biosimilar was something that we hadn't necessarily planned for. So that's not something we'll always know. And as you know, traditionally, the speed from brand to generic within the PBML space hadn't always been quick. There have been products that, that transition took longer. So something that we weren't really aware that would happen that quickly. That's one.

Two, is, yes, we would have a small part of the margin, if that biosimilar stayed with the wholesaler, but I think it's important to say that, that would not be the norm. That's not what would normally happen. And again, if you go back over the models between the wholesalers and the PBMs and mail pharmacies over time is when a product went from brand to generic that was then in-sourced. So the wholesaler wasn't then generally going to be providing that generic, whether that was an oral solid generic or a biosimilar. So what we're seeing is what would be expected within the model. What we've called out here was that the pace of conversion was faster than we had anticipated. .

Great. And Bob, I'll take the last part of that question. And first of all, with regard to the brand conversion to the biosimilar at the large mail order customer. As you know, brand sales to this customer are low margin. And so the impact of the shift is impactful to the revenue line, but not a meaningful driver at all of operating income. And then with regard to the last part of your question, of course, we have called out the loss of the oncology customer in July of last year and then the grocery customer. And there's really nothing else size that would be meaningful for us to call out. And with regard to the oncology customer, of course, we've indicated that, that does have an impact on operating income. And of course, we disclosed that in the past. And then the grocery customer -- it's not something that we've called out as having an impact on operating income. .

Yes, Charles, I would just add from time to time, there are smaller customers who would be acquired or who would move that wouldn't be material enough for us to call out. And that's exactly what Jim is saying. And so any of those smaller activities have been contemplated in our guidance, but not anything to call out. .

next question comes from the line of Allen Lutz at Bank of America. .

First, Jim, congrats on your retirement. A clarification question here. On the 7% U.S. Healthcare Solutions EBIT growth, excluding OneOncology and the loss of an oncology customer. Can you also mention that there's a 1% headwind from COVID-19 and another 1% headwind from weather. So is it fair to assume that the starting point, excluding those would be 9% and then more broadly on the GLP-1 growth, you said that grew $1.9 billion in the quarter. How much lower are GLP-1s growing relative to your expectations? And I know they're not a big driver of profitability. But as that mix shift changes from injectable to oral, are you seeing or expecting any change in profitability there?

Yes, sure. So let me first say, the answer is yes to the first part of your question. We saw the $10 million operating income headwind related to weather and specialty practices due to some patient visit cancellations and delays. And as I said, have seen a rebound from that in March and April. So you're absolutely right. Our operating income growth would have been higher if it were not for that headwind and then the same thing as it relates to a headwind from COVID-19 vaccines That's, again, a $10 million headwind. And as a reminder, we had $15 million of COVID-19 vaccine contributions in the second quarter fiscal in 2025, and we were $10 million down from there.

And so if you add back for both of those things, our operating income would have been $20 million higher during the quarter. And of course, our growth rate would have been higher. And so thank you very much for asking the question.

Your next question comes from the line of Daniel Grosslight at CITI.

I'd like to focus on the international business and really the solid quarter that you the World Courier. You mentioned some nice new contract wins. And it looks like the overall just the macro environment for biotech is a bit better. As we look to the remainder of the fiscal year, I'm curious how sustainable that growth is. And I get that comps get easier in the second half of the year. But on a sequential basis throughout the year, do you think you'll continue to see World Courier growth?

Thanks for the question. Yes, we're really pleased with the progress that World Courier is making. And it's a combination of -- yes, I think the market is -- it's not getting significantly better, but it's not getting worse. And so I think that's a positive for us. And we've also been working hard at the business. We've been working hard at making sure that we're commercially rightsized. So that's sales process and pricing and making sure that we're as efficient as we can possibly be in the business. And as we said, we're really happy to see multiple quarters now of operating income growth and also volume growth within the business, which is an important thing that we track. So yes, we're excited and I'll pass it to Jim for the second part of your question. .

Sure. And so I'll just say that we have good confidence in our guidance for the fiscal year in our international business. We've been very pleased as Bob talked about with World Courier and we've been very pleased with our distribution business and our 3PL business and the international market also. And so thank you. It is nice to see growth in that business and our optimism for future growth.

Your next question comes from the line of Kevin Caliendo at UBS. .

Jim, it's been a pleasure knowing you over all this time even back to the MWI Day. So good luck with everything going forward. I want to focus a little bit on -- you made a comment ex all the onetimers and weather and everything else. Your EBIT growth would have fallen within your LRP, it would have been roughly 7%. That's still a core sort of ex all one-timers, a pretty material slowdown in core growth from what we've seen over the last several years. And so I just wanted to know sort of what exactly changed this quarter that you saw? And two, these changes in pricing and changes in GLP-1s and everything else. We would have expected to see a decline in gross margin, but that actually wasn't the issue. It was more that the G&A leverage was worse than what we had anticipated. And can you maybe -- is there anything in that occurred? Anything that changed there? I'd just love to get some additional color on that aspect as well as the core growth. .

Yes. Let me address both those things. First of all, to the first part of your question, and we were pleased to see the core operating income growth aligned with our long-term guidance despite the weather-related softness and despite the lower demand for COVID-19 vaccines. And so we were within that long-term guide rate before those headwinds. And so if you add back those headwinds, it would move us up within the long-term guidance range. And then with regard to your question about gross margin and operating expenses. We had high operating expense growth in the quarter. And it's important to look at our business, excluding MSOs so the shape of the MSO income statement is very different than the shape of the core distribution income statement.

And if you back out the MSO business, our operating expense growth rate in the quarter on a constant currency basis was about 5%. And so that is a kind of -- it is important to think about the business that way also, and I did mention that in my prepared remarks. Now I'll also say that the MSOs really bring up our gross margin, and they bring up our operating margin also. And so you saw a nice increase in operating margin during the quarter. And the biggest reason for that was the MSO business. But I think it's important as you're looking at our operating leverage, gross margin to operating expenses to think about the business without the MSOs. Thank you for the question.

Your next question comes from the line of Erin Wright at Morgan Stanley.

Great -- and Jim and I want to echo it's been great working with you. Yes, also going back to the MWI days, but appreciate all the support and insights over the years. On capital deployment, you mentioned you'll be back in the market potentially buying back shares. Do you still see the longer-term opportunities across the MSO assets that are out there I know you did the more recent South deal, but how do you think about that in the context of also the timing and magnitude of share repurchases? .

Yes. So we'll continue to have balanced capital deployment, which will, as it always had, include investments in the business and CapEx, which always have very good returns for us. It will include strategic M&A. It will include opportunistic share repurchases, and it will include growing our dividend and having a reasonable growing dividend over time, which we've been growing within our long-term guidance range for EPS growth. And we really are getting back into opportunistic share repurchases, we had paused for a while because of the acquisitions, but we've been very successful in paying down some of the term loans. We paid down $500 million so far this fiscal year, and our plan is to pay down $1.3 billion of term loans during the fiscal year.

And we've had good success there, and we anticipate that we'll hit our guidance of $3 billion in free cash flow. So that gives us the opportunity to do these important opportunistic share repurchases, and we're planning on doing $1 billion between now and the end of the calendar year. And with regard to the MSO business, we're very pleased to have announced the South acquisition, and we see very good bolt-on opportunities for our MSO businesses over time and feel that our strong platforms will be very attractive to physicians. So -- thank you very much for the question.

Your next question comes from the line of George Hill at Deutsche Bank. .

And Jim, I will echo everybody's well wishes we've been great to work with. Mine's pretty simple, Jim. Just as we think about pro forma for the acquisition of iSouth, is there any change you would give us what portion of the AOI in the U.S. segment now comes from physician administered or I'll call them Part B businesses versus the key businesses? And just because if we look back at the last year, I mean, I always talked about the loss of the grocery customers. There's been some smaller losses. We talked about what's going on with the big mail customer just been lots of acquisitions. Just trying to get a good sense of the apportionment of the business from an earnings perspective at this point.

And so I think what the question is kind of the earnings from Part B versus the earnings from Part D. And that's not the way that we present the financials now, but it's something that we're always evaluating what is the best way to talk about our business and present our business over time so that we can give the best visibility. So -- thank you very much for the question. .

Yes. And George, just to be clear, the current FY '26 guidance does not include any contribution from iSouth, as we stated in the press release announcing that deal -- and then we've given some of the pieces to disclose what the relative size of the different MSOs would be, obviously, we've lapped the RCA 1-year annualization and we're beginning on the OneOncology side, which will continue to ramp in the balance of the year. .

Thank you, Bennett. .

We've reached the end of the Q&A session. I will now turn the call back to Bob March for closing remarks.

Thank you, everyone, for your thoughtful questions and continued interest in Cencora. As we've emphasized today, we have conviction on our fiscal 2026 guidance, reflecting the strength and resilience of our pharmaceutical-centric strategy powered by a purpose, we're executing on our growth priorities and performance drivers positioning our business to deliver sustainable long-term value creation. Thanks, everyone.

This concludes today's call. Thank you for attending. You may now disconnect.

Okay. Good afternoon, everyone. Welcome to this session of the Leerink Global Healthcare Conference. I'm Mike Cherny, the healthcare tech distribution analyst. It's my pleasure to have with us the Cencora team, Jim Cleary, CFO; Ben Murphy who does IR, Treasury, strategic projects, and I've probably left off some stuff there. But really appreciate the team being here. We're going to jump right in the fireside.

But I mean, maybe, Jim, just -- anything you want to highlight from the last quarter that really stood out relative to just the underlying growth of what's been an extremely strong trend of the business?

Yes, Michael, thanks a lot for asking and also thanks a lot for having us here at your conference. And so we had a very good quarter in our U.S. segment. In the most recent quarter, we had 21% growth in the U.S. segment. So obviously, we were very pleased with that. And then I would also have to say kind of a big call out from the most recent quarter is we announced that we were going to be buying the portion of OneOncology that we didn't previously own.

And then when we announced our first quarter results, we announced that we had closed on that acquisition. And we feel really good about our MSO strategy now that we own both Retina Consultants of America and OneOncology and feel that, that will be very good for our business as we're really extending that it's really the natural evolution of a very successful part of our business, our specialty business and going from distribution to GPO and now into MSOs. So we're very pleased with the quarter, both from a financial performance in the U.S. standpoint and from the standpoint of the really strategic move that we made. And so as a result of the OneOncology acquisition, we also increased our guidance for the year, and we increased our guidance on a consolidated basis by 3.5% at the low end and the high end of the range. So we're now at 11.5% to 13.5% and by 5 percentage points in the U.S. So we're now at 14% to 16% operating income growth for the year as our guidance. And so thank you for asking that for opening, Michael.

That's great. And you touched on a couple of key themes, but a lot of it wraps around specialty, specialty distribution offerings, Specialty-as-a-Services offering, especially now with the MSO capabilities. Obviously, it's clear to see the market as a whole for specialty is healthy, but how do you view the push and pull and what you're able to out-execute on to drive the excess growth relative to the totality of your specialty services, specialty assets?

Yes. So we've been calling out for quite some time that really a driver of the growth of our business. has been the strength of our sales and specialty to both health systems and physician practices. And both of those customer groups are really driving our specialty growth. And as we talked about, one of our strategic drivers is prioritizing growth oriented investments. And so we have been and will continue to be investing in specialty and that it is, and of course, a growth part of the market and one where we've been executing very well and have a long track record in. As I said before, getting into MSOs is just a natural extension of that very successful part of our business.

And I want to get back specifically to some OneOncology questions. But specifically around specialty, you've been a longtime leader in specialty distribution oncology drugs, in particular. And so what is it that you're seeing right now in terms of underlying trends in the oncology market that both positions you to be successful, but then also sets you up to both first invest in and then consolidate with oncology?

Yes. I think Jim said it well that we've had really good long-term trends there and have good long-term outlook. As you noted in one of your notes that January was soft, particularly in the specialty side and I think a number of sell-siders attributed that to weather.

But as you think about the underlying market, there's really strong key organic growth drivers from an aging population in the United States, multi-therapy treatments, new innovations coming to market, biosimilars coming to market. All those things underpin the strong fundamentals of the business, strong outlook and as we look at oncology, we certainly -- that's the largest part of the physician administered part of the market. And with our acceleration of the OneOncology MSO that gives us even closer proximity to a really important piece of the puzzle.

So maybe just a little transition there. Obviously, I don't think anyone was shocked to see the OneOncology consolidation happen. You've talked nothing but positively about the initial investments that you made in a couple of years ago. When you think about now owning the vast majority of oncology, I know there's still a small stub piece, but what are you able to do to help drive better value of that business now that you weren't able to do without the control position before?

Yes. Thank you very much for asking the question. And there's a few things there that I'd call out. But I think one of the key things is that now, of course, we own both Retina Consultants of America and OneOncology. So we're able to help them drive synergies between those businesses. And when we only owned 35% of OneOncology, that didn't make as much sense for us because driving the synergies earlier just would have caused us to pay more for the business. And so now that we own both, they are just very good opportunities there. And we felt that the management teams are just so strong and we'll be able to execute on these opportunities.

And one of them is RCA has a leader in clinical trial sites and is involved in so many of the clinical trials in the retina market. And that's an expertise that OneOncology also has, but taking those skills from RCA and really enabling execution across our -- both of our MSO businesses is a really nice synergy opportunity. There's also back-office synergy opportunities and things like revenue cycle management IT where we can really be helpful and other things like staffing. So there's a lot of back-office synergy opportunities, too.

And then, of course, long term, one of the big plays is data and analytics. And so we're able to bring by helping execute on those synergy opportunities. I think we're able to bring a lot of value not only to our company, but to the physicians very importantly and extremely importantly, to the patients. And so we're very excited on those opportunities. And one good thing about Cencora as an owner is we have very much of a long-term perspective. So we're making these investments for the long term. Thank you for the question.

And along those lines, maybe if we can just take one step further. You talked about the clinical trial capabilities, site selection. Why is that so important? And how much of the data interplay that you mentioned can further enhance the value to be a participant within the clinical trial market?

Yes. Thank you for asking that. And there's a couple of things that I would call out. One is that in that the physicians are very actively involved in the clinical trials. It enables them to be even more successful as those products are launched. And so it really gives the physicians the knowledge base to be very successful once a product is launched. And of course, it's the physicians that are making those decisions.

And then I would say a second thing is that having the clinical trial sites really enhances the ability to attract young doctors coming out of fellowship programs because they just so much appreciate the opportunity, not only to practice medicine, but to participate in the clinical trials also. And as I've gone to RCA meetings, I've asked young doctors the reasons why they've joined and they all call out as the clinical trial site leadership is one of those key reasons. So it's a great -- it is a great opportunity for the physicians and ultimately for the patients.

And so I'm going to jump back to OneOncology, but maybe just sticking with RCA for a second because you have had full control ownership for longer. For everything we can see from the outside, whether just implied within the business or your commentary, it seems like that business is performing well to above your initial expectations. How would you think about what Cencora as a company has been able to do to make RCA a better business.

Yes. I would just say that it's, I think, really kind of the key thing is that we are investing for the long term. And it's -- I think if we compare ourselves to an owner that would be a financial owner owning for the short term, they can be great and do a lot of things, but we're really investing with a long-term perspective. And so things like IT systems that can really kind of help the companies be successful over the long term is -- I think, is a value that we add. One of the other values that we add is with our focus on specialty with our focus on being pharmaceutical-centric. We have the 2 different platforms. And as I said before, we're able to help them drive synergies between the different platforms.

And then one of the other things, and I appreciate you talking about the synergy dynamic and not want to get too far ahead of yourself, given the financial components. But unfortunately, for your sake, for financially, OneOncology was acquisitive in between the period of investment and consolidation. I know you know United Urology was a big deal. Should we view OneOncology going forward now as a further platform for further consolidation, either big or tuck-in small organic growth, like -- how should we think about where OneOncology expands from here relative to the space?

Sure. And what I'm going to say would be true for both OneOncology and Retina Consultants of America is both of them are leading platforms, and there wouldn't be anything of that size. But with regard to both OneOncology and RCA, I would expect to see bolt-on acquisitions over time that are, of course, highly consistent with our 2 strategies of strengthening our position in specialty and also continuing to be pharmaceutical-centric. So I would expect to see bolt-ons to those 2 platforms over time. But I wouldn't expect us to see ownership in other ologies unless they became pharmaceutical-centric over time, but it's those 2 that are really the pharmaceutical-centric ones.

Yes. The logic definitely makes sense there. Maybe turning back to some of the core distribution services. Your contracting team did a ton of work late in the year to year-end as we prepared for the first round of IRA negotiated drugs. You've come out and said you feel good about where the contracting came. Maybe can you give us a little bit of experience of why and how you were so effective and your peers have said something similar about ensuring that your contracting efforts led to the appropriate returns, appropriate unit economics for the value that you provide for the channel.

Yes. Thanks for asking. We had, of course, good foresight to know what the products were going to be, and we have a very strong strategic global sourcing team. And our goal is to maintain our gross profit dollars and we were successful in achieving our goal. And I think probably the most important thing to call out is we're very confident of our value proposition, everything that we're able to do in the supply chain from logistics to compliance and secure supply chain to managing the inventory and financing the working capital. And so as a result of that, we were able to really do a good job in maintaining our gross profit dollars.

And I know if you've seen 1 contract, you've seen 1 contract as they're running joke across the entire supply chain. As you thought about the negotiations, especially as you prepare for the next round of drugs because this isn't a 1-year thing. How do you think about -- or what have you been informed by in terms of the first round to make sure that you keep that effectiveness to keep that managing to a dollar profit level in case?

I do like that analogy because it is accurate. Each relationship is different. And our -- we did really well, better than we thought in some places, we did in line or a little bit fine on some other ones. I think as we look at -- our value proposition is quite defendable, as Jim said. As we look at the relationships with pharma, it's very clear, where we have very clear and transparent relationships with pharma and there's very clear and transparent economics that we derive from the buy side, and that is all predicated on the value that we drive for them and satisfying the ability to reach tens of thousands of end providers with varying degrees of credit quality and also very significant efficiency and security.

Those are great points and one thing I'll add that I didn't mention before is that we do have terms in our contracts that we've been working on for years to have this term that if there is a significant change in price, then we and the manufacturers will come to the table to start to renegotiate.

Got it. And so I guess, I mean, a lot of drugs we've seen so far are more traditional small molecule drugs that fall into Part D side, 2028, you'll start to see some potential changes in the Part B side. How are you thinking about the push and pull related to any differences in the Part B side and Bennett put you on the bother -- so I know you've -- I'm going to paraphrase you, you've said specifically that you've seen so many instances of any major changes, a focus on making sure providers aren't unduly harmed. So how does that factor in the work you're doing with your pharma partners, suppliers given broader regulatory changes?

Yes. I think it's important when bifurcating between B and D to take a second and reflect that. the gross to net spread that exists in the D side right now, that gross to net spread does not really exist in the Part B side. There isn't this delta between -- there's a massive delta that exists on that side.

As you think about -- so I think that has to inform your logic and how you look at what might or may not occur on that as you get to 2028, but I think certainly, the big drugs are -- will be a year beyond that. You'll have some biosimilar competition to come into place before that. And I think you'll a have a very clear as Jim said, with the manufacturers, we have a very strong value proposition.

As you look at some of the things that have occurred in the last few months, I would look at the globe demo project and focus on how that is -- how that is structured to get the relative pricing to achieve the relative pricing dynamic that the government wants without an unintended consequence to community-based providers. So I think that is helpful and a proof point in that discussion.

This may have been a more relevant question 28 to 30 hours ago, but I'm still going to ask it. Obviously, there's a lot of geopolitical strike going on. Oil, other commodities have spiked meaningfully. Your business is different than some of your peers or at least areas of your business because you don't have the other businesses that have more direct logistics, but you are a logistics company at heart. Can you remind us how you work through some of the at times volatility spikes that you see up and down on various different commodities?

Yes, sure. And so with regard to oil in particular. I mean it has an impact on our business, but I'm going to say it's -- in terms of the scope of all of our operating expenses and everything we do, it's relatively minor. We do have terms and contracts where we can make adjustments for things like that in contracts.

But I would say, overall, we would more lean to being very customer-centric and focused on our customers. And so those sorts of things have impacts, but given just the diversity of our business and the diversity of our expenses, any one change is relatively minor.

Thing and kind of maybe wrapping for now, at least the core pharma distribution business. There's been a lot of puts and takes. We talked about some of the negotiated drugs. I feel like generics, I don't want to say on autopilot, but it doesn't feel like there's been a lot of variability recently. Like what are you seeing across the generics market? I keep hearing the word stable, stable, stable, but why do you think that's the case? And how do you think about how the generics market evolves as we -- I think there's a decent step-up in brand generic conversions in the next couple of years?

Yes. So the answer to your question is going to be similar to the way you asked it, actually. There's really nothing new to call out. We've been talking about moderation of generic deflation for some time. And really, it's really the same as what we've been talking about for some time. And I think deflation has moderated as manufacturers have been prioritizing their portfolios.

There's been an increase in inspections and those sorts of things. And so it's really consistent with what we've seen for some time. And of course, as we look out over the next several years, there's going to be very good opportunity in generics that you mentioned. And there's also going to be great opportunities in biosimilars. And what we see in generics and biosimilars will create room for branded innovation. And so that's just one just very good thing about our business and our business model is that we will continue to benefit from generics, biosimilars and innovation.

Healthy trends, I'd like to hear that. And I guess, one other question on this front. The discussion doesn't come up a ton anymore is on the generic sourcing side. It's now been, I think, 12 years since you created a very sizable buying group. What do the new activities look like? Or are there new activities? Or is it just simply you have a mature business that has massive scale, and you just leverage it as best as you can?

Yes, I think, I mean, you just stated it correctly, it helps us maintain our competitive purchasing as you'd expected.

I'm trying not to lead the witness here, but sorry.

So I would appreciate you keep doing it. Especially if you say the things I want to say.

So I'm going to start now with shorter question open-ended. But let's turn to some of the strategic review of assets in particular MWI. Why is Covetrus the right home for MWI?

Yes. First, let me take a step back and say in November, when we announced our fourth quarter fiscal year results and the guidance for the first quarter, we indicated they were setting up a group of businesses in other.

So we have our U.S. segment, our International segment, and then we set up other and the businesses in other are very good businesses, but they don't bring competitive advantage to the balance of the enterprise, and they could be even more successful if they were with partners kind of focused on the business where they're particularly strong.

And so MWI has great business and by far, the largest business in other -- and we looked at strategic alternatives and we have entered into a transaction with Covetrus. And it really, I think, will be good for the overall animal health ecosystem because MWI has a very good presence in supply chain. It has very good customer relationships in both the companion and production animal market. It has production animal technologies and Covetrus has very good companion animal technologies. And so I think when you put those businesses together, we'll be able to drive a lot of efficiency and drive affordability in the animal health marketplace, which is important.

And you pursued a unique structure of the transaction. I mean, sure you evaluate a lot of different things, but you have a cash position, but then also some ongoing equity in the business. And so as you think about the strategic nature of the structure, what made it appealing to you to make sure that you keep an ownership position in the business going forward?

Yes. And so the deal structure that we have in place is the selling price is $3.5 billion, and it's really a merger because we'll get $1.25 billion in cash, $800 million of preferred stock and then have 34% of the common stock of the remaining business, and we have 2 private equity firms as our partners that will own the rest of the business who were previously owners of Covetrus and have a great understanding of the business and the market. And we felt that this was really the best alternative for the business to create a company that's going to be very strong in the animal health ecosystem that will really be able to benefit the upstream and downstream customers. And we feel like it's a very good financial opportunity for us as a result of the cash and the preferred stock and the common equity that we'll be able to make a profit on over a period of time.

This is a very quick turnaround from announced creation of this other segment to the MWI transaction, I can't say I'm shocked, given I agree with you on the quality of the business. How are you thinking about the pacing of any potential evaluations of the other assets that currently sit within other? And how do you balance that against fluctuations in performance that -- some of which are macro-driven versus performance driven?

Sure. So there are 3 other businesses that are smaller in other. And they're very good businesses. And one of them, for instance, we are now accounting for as an asset held for sale. And it is -- and I would expect that we would make progress on those over time because, again, they're very good businesses. But obviously, they're going to be slower than what we did in the Animal Health business. But it's something that we are focused on and I believe make good progress on.

Okay. And for some of the remaining assets that don't sit within other, I know mostly within international on the pharma services side, whether it's World Courier or some of the other businesses, what have been some of the puts and takes on demand curves on those businesses given some of the strategic reprioritization we've seen -- on the by pharma companies on businesses that impacted pharma services capabilities.

Yes. So I'll make a couple of comments there. Our Global Specialty Logistics business, which is the World Courier business, has been a great business for us for over a decade. As we talked about last year, it had a tougher year last year as there were some softness in its market. But as a management team, I think they've executed very well, and we talked about on our first fiscal quarter that we've really seen volume growth and start to see profitability growth. And so we're pleased with the execution there.

On the World Courier business. And then the kind of some other businesses in international, the manufacturer services business, probably our area of strength would be in 3PL in Europe, where a lot of the specialty products go to 3PL. So that's a key business for us. Anything else that you...

I think that was good.

And then how is Alliance doing organically? I mean it's -- I know there's been a lot of FX fluctuations, which are out of your control. But how are you seeing the performance of the business and it's been a few years on since you acquired it. What have been some of the results of global sourcing, other efficiency capabilities that you brought to the Alliance?

Sure. And so Alliance is, of course, our international distribution business. And it's in several countries throughout Europe and a developing country also. And probably the area of strength has been in kind of 3PL and growth in specialty markets through 3PL distribution. We also have a leading share in the U.K. where we're the distributor for boots in the U.K., like we're a distributor for Walgreens here in the U.S. We did have a down quarter the most recent quarter in international. And really, the driver there was in a developing market economy in the prior year, there had been a meaningful price increase in October.

And in this year, and so we got the benefit for a full quarter in the first fiscal quarter last year. And then this year, that price increase was at the very end of December. So we just got a week or 2 of benefit there.

Comps, yes. Because you mentioned Walgreens, we don't get into economics on contracts. That's not I'm going here. But obviously, they're no longer public. We do our best to track what they've been doing. As a newly owned entity within Sycamore, like has anything changed about your relationship? You have a really long-standing contract that we don't hear about as much from them anymore. But anything changed in terms of the way that you're working with them, given that they seem to have stopped their store closure pathway for one?

Yes. What I'll say is Walgreens is a very important partner we have a contract through 2031. And we want Walgreens, of course, to do what's best for the success of their business. And so for instance, on the store closure, point. They've announced that they're closing stores, and we want them to do what is best for their business. And I'm sure when they do close stores, it will be underperforming stores. And so we're just highly supportive of what actions they're going to take that's best for their business.

Got it. Anything to call out of note on the contract renewal side? I mean, Walgreens goes for a while, a couple of your other ones go for a while. Anything notable that you've seen and especially as you've thought about adjusting contracts or long-term renewals, anything about the IRA discussions you're having on the pharma side that's been translated into the ability to work more closely with your customers on the distribution side?

No. I think we're always looking for ways to do more with our existing customers. That's the best -- that's a really strong return there. I think as we talk about -- as we have talked about for going on 10 years now. The rebound of customer contracts is something that we started about 10 years ago and worked across that to make sure that we're getting the right level of profitability across the classes of drugs so that we can grow as our customers grow. And certainly, that's something that we would continue to ensure as mix evolves and as our customers continue to grow.

And along those lines, I think there's been at least 3, 4 cycles in my time covering distributors calling for the death of independent pharmacies. Last time I checked, the independent pharmacy market, it's not dead. What are you seeing in terms of behavior activities from your independent pharmacy customers? I know you're strong provider, partner with them? And are there any changes in terms of what they're asking you to do given some of the market machinations? I'm thinking anything regarding GLP-1s and their financial impact from GLP-1s, where you're able to further help them with additional services?

No. I think, honestly, I think it's an underappreciated part of our industry is that we have contributed to the sustainability of independent pharmacies across the United States. I think we've been -- there's been other industries where we haven't seen that type of dynamic. I think we've continued to evolve and bring services and bring purchasing scale to allow them to continue to benefit as they grow.

The biggest things that have changed on that market over the last 5 to 10 years is it's not one for one in terms of -- generally, it's not always one pharmacy, one owner. In some cases, it's one owner with several pharmacies because they're leveraging the different services and solutions that their distributor provides them, and it helps them to sought to serve the local community, but have the right level of profitability by having a multiple store footprint by leveraging some of those services and solutions. So I think it's something that is an underappreciated social benefit of the distributors and retail pharmacy across the U.S.

Last question for me here. I know we've never talked about unit economics on a specific drug class, but tying back to GLP-1s, given the mass growth of the market, you've been very transparent in both, a, giving us revenue from GLP-1s and b, noting that it's a immaterial profit contributor. Is there anything about the market development that could make this a more profitable industry before we get to potential generics?

Yes. So it is -- we've been consistent in our commentary that while it's a big growth business for us, and it is profitable for us. It's minimally profitable. And we don't expect any change, certainly in fiscal year '26. There might be some point down the road where there's more competition in the market and it's more profitable then, but we're certainly not calling that for any time soon.

Consistency works for me.

Okay. Thank you, Jim, Bennett. Thank you so much for being here. Appreciate it.

Thank you.

Good morning, everybody. Thank you for our next presentation. We're obviously excited to have Cencora here with us today. For those of you who don't know me, I'm Glen Santangelo. I'm the analyst at Barclays that covers the stock. We recently picked up the stock a couple of months ago, almost 3 months ago in December. But before that, I had covered this earlier in my career for over 2 decades. So I'm very excited to be back covering the company.

Let me just do some quick introductions. We have the CFO, to my right, Jim Cleary, who I think maybe -- many of you know; and to his right, Bennett Murphy, who's Senior Vice President, Head of IR and Enterprise Productivity. So I think he wears a number of different hats inside Cencora these days. So with that, why don't we sort of dive right into it. Jim, Bennett welcome. Thank you, guys, for joining us today.

Glad to have you back, Glen.

Okay. Excellent. Maybe as a good place to start, why don't -- Jim, I don't know if you just want to give us a quick level set on some of the recent fiscal first quarter results and kind of the guidance for the year and stuff like that. Just to set the table, then we'll dive right in.

Sure. Well, Glen, first of all, it's fantastic to be back here at your conference. And it's a great opportunity for us to meet with investors and for us to talk about our priorities and our strategic drivers.

We were pleased with our first quarter results, and we had nice growth. We had 21% growth in our U.S. segment and really kind of good performance across our U.S. segment. We're also very pleased during the quarter to be able to announce that we were going to do the OneOncology acquisition. And then we were also very pleased when we announced our quarterly results that we had closed that acquisition. And I'd say we feel very good about our MSO strategy and during the quarter, we not only were able to announce OneOncology, but we also had very nice performance in our Retina Consultants of America business.

We were very pleased once we announced OneOncology that we're able to increase our operating income guidance and increased it on an enterprise level by 3.5 percentage points at the low end and the high end of the range. So we're now at 11.5% to 13.5%. And then also in our U.S. segment, able to increase our operating income guidance for the year to 14% to 16%. And overall, we were very pleased with the first fiscal quarter results.

Good start to the year. All right. So why don't we dive right into that -- into your U.S. Healthcare Solutions business. I mean, I think you just said you posted 5% revenue growth, but more importantly, the 21% operating profit growth. And what I found surprisingly for a very short period of time, and it's always interesting kind of coming back into new coverage of the stock and where the expectations are, that people for a couple of hours at least view that 21% as sort of disappointing because it was slower than the 29%, I think you reported the quarter before that.

But as you know, there were a lot of moving pieces in there around M&A and sort of on the contracting front that may be screwing around with that quarterly cadence and the growth rate, which I think makes it harder for investors to sort of unpack all the pieces and actually get a better sense of what the underlying trend is. But -- so maybe if you could just shed a little bit of light on that 21% operating profit growth you generated in the quarter and maybe disaggregate a couple of the pieces and help us just think about the core underlying trends, not there, but...

Great excellent question, Glen. So we felt, as I said, very good about the quarter with that 21% growth in the U.S. And as Glen mentioned, when we announced that, the stock traded down for a bit. But swung back to where it was within 2 days. And what we see in that 21% is really broad-based good growth across our U.S. business. And even if we exclude the incremental quarter of RCA because we didn't anniversary the RCA acquisition until the beginning of our second fiscal quarter. So if we exclude the incremental benefit of RCA, we still grew at the high end of our long-term guidance. And that even includes the headwind that we have from the loss of an oncology customer that was acquired by a competitor.

And so we feel kind of -- as you unpack those sorts of things, we feel very good about the U.S. performance during the quarter, being at the high end of our long-term guidance range even in spite of the loss of the oncology customer.

And so we had great performance. Now it wasn't at the same level of outperformance that we had seen in the fourth quarter where basically everything went right. but we still feel great about that 21% growth rate.

Okay. So let's just wind the clock forward and looking forward through some of those moving pieces. You talked about RCA, and I think you closed that deal in January of 2025, right? So now that's no longer -- we've now comped that. And Florida Cancer, I think we still have as a headwind for the next 2 quarters. And now you've recently increased the acquisition of OneOncology, right? So help us think about sort of those headwinds and tailwinds as we think about the remaining sort of 3 fiscal quarters in your year?

Sure. So as you look at our -- so we're certainly have Q1 in the books, which had the stub period from RCA, which as Jim said on the earnings call in November, if you take the tailwind and then the Florida Cancer headwind, those two net out to a 1% headwind to our full year operating income.

As you look at the balance of our fiscal year, Q2 would be the lowest growth quarter because you think about the annualization of RCA on January 1, as you said. And then the OneOncology transaction closed on effectively February 1. So you get 2 months of one -- the initial 2 months of OneOncology, 3 months in each of the subsequent 2 quarters.

So that -- and then as you said, Florida Cancer 2 more quarters we begin to annualize that on July 1, which would then create a more normal trajectory in the fourth quarter.

Okay. Perfect. All right. Listen, the specialty deals, they always take all the oxygen out of the room. And what I wanted to do before we talk about those in a little bit more detail, it's just sort of focus on the core a little bit. Can we talk about sort of the volumes that you've been seeing in the underlying business and how they've sort of trended, right? People are starting to say is the job market starting to wobble. And how have you -- if you could just talk about the second half of calendar '25 and the outlook for sort of '26, what's sort of embedded within your guidance?

Yes, '25, certainly, we saw extremely strong growth, which, as we said on our November earnings call, we'd start to annualize and comp against higher contribution periods as I think about turning into calendar '26, certainly, IQVIA data showed softness in January, which a number of the sell-siders attributed to weather and things like that.

But I think as I think about our business overall and labor in the big picture, it's that Pharmaceuticals have historically been generally inelastic in terms of the demand for them because they are the most effective course of care. A lot of the users are on government programs. So there is more support, particularly Medicare, and then there is good commercial coverage. So we've seen over the various economic cycles over the past we've seen that inelasticity of pharmaceutical demand generally play out over cycles like this.

So I mean, I guess, the simple take is you haven't seen any sort of any volatility to that growth rate relative to some of the macroeconomic news that's transpired?

The macroeconomic -- there's a lot of macroeconomic, I think the truth holds that over cycles, we see general elasticity of demand.

All right. Excellent. Maybe if we could just focus on generic pricing for a second, that's always kind of important. And we've reported in our research that it feels like to us as we move from '25 into '26 that the generic pricing has gotten maybe one turn a little bit better as opposed to one turn a little bit late.

And for those of you who are here at lunchtime, we're hosting a panel with one of the consultants we like to use in the space to try to dig into the generic manufacturers and pricing in a little bit more detail. And so I don't know if there's any sort of high-level commentary you can make with respect to generic pricing and any recent trends that you might be seeing in that business.

Yes, Glen, great question. We don't really have anything new to call out there. We've been talking for some time now about the moderation of generic deflation, and that's still what we're seeing is manufacturers have been prioritizing their portfolios. There's also been some increased inspections and those sorts of things. And so we just kind of continue to see a moderation of generic deflation and that sort of price stability.

All right. And then maybe -- I don't know if there's anything else to call out on sort of the generics or sort of biosimilar pipeline.

One of the things that is new and differentiated, we think about our coverage is, we also cover some of the generic and biosimilar manufacturers. And for example, we hosted Teva this morning. They're already talking about 10 new biosimilars they plan to have in the market by 2027. And we look at the pipeline of sort of complex generics that we have a steady diet coming from now through 2030, which seems like it just is a natural sort of ongoing tailwind that just seems to sort of get blended into to everything else within your business.

But when you think about maybe what that pipeline of generics, complex generics, biosimilars, like how do you think about that sort of layering itself into your business over the coming years?

Yes. It's really a great opportunity for us. And it's one of the really strong things about our business model. As we look over the next several years will really benefit from generics and biosimilars but also, they create room for innovation in the market also. And so just a great thing about our business model is we'll benefit from innovation and at the same time, we'll benefit from generic and biosimilars. And we see that our sweet spot in biosimilars is in Part B and it's an area where we've been quite successful. And it's an area that also plays into our MSO strategy.

Yes. And as I think about what brings investors to our company or our industry often is that the ability to get access or exposure to specialty coming to market and then the added benefit of as products go generic or as products go biosimilar that not only being good for us from a commercial standpoint, but it's also good for patients and good for the health care system overall and that it takes cost out to make room for that innovation.

Okay. Excellent point.

All right. Maybe can we talk about sort of the IRA pricing issues? And when we were doing our work in the fall and we started talking with reengaging with investors on these names, it was pretty apparent to us that one of the things that people were concerned about, right, was the impact of lower pricing on certain branded pharmaceuticals from the IRA. And would these companies be able to renegotiate their fee-for-service agreements effectively enough to sort of make themselves whole.

And not only yourselves but your two other competitors have sort of commented that they sort of feel comfortable around that. I mean is there any sort of message or anything you want to deliver to the investors with respect to the IRA pricing changes scheduled for this year and next year and Cencora's sort of readiness to embrace those pricing changes?

Sure. Well, excellent question. And so we have terms in our contracts that indicate if there are meaningful reductions in price that we're able to renegotiate with the manufacturers, and we've seen very good success. We've seen very good success this year, and we have a strong strategic global sourcing department, and we were -- and what we really look at is maintaining gross profit dollars or so whether it was the negotiations that we went through this year or the insulin-related negotiations that we went through some time back we've seen good success maintaining gross profit.

Do you feel like you've had enough of a lead time to sort of have those conversations. Okay. Excellent. All right. Maybe just one more on sort of the core business is around the Publix loss this year. I mean I think people sort of always generally ask the question. Fortunately, we haven't seen many contracts move, right, in the last x amount of years. And so -- but people always ask, is there anything else on the contracting front, anything else that we should be mindful of when we think about contracting over the next kind of couple of years?

No. And I think -- I mean, that example will be something more tying back to Cencora's strategy and us and our priorities and focus areas. But as I look forward, no, there's no contract that we've disclosed expiring in the 12 months.

All right. Maybe let's shift over to specialty. Big investments in the last sort of 18 months in RCA and OneOncology Jim, you talked about the MSO strategy a little bit. Maybe for those that are maybe a little bit less familiar, if you could just maybe spend a minute, talk about those deals, talk about the MSO strategy and then we can maybe segue into where we go from here. But maybe just it's worth spending a minute to bring people up to speed on where we're at.

Yes. So as I said earlier, we feel very good about our MSO strategy. And it's really the natural evolution of the most successful part of our business. Of course, the specialty distribution has been a growth driver for us for quite some time. And then we got into businesses like GPO. And so getting into the management services is really the natural evolution of this business. And we feel very good about our experiences thus far.

We've owned RCA for over a year now and are very pleased with the business. are very pleased with all aspects of the business, the kind of the clinical trial site part of the business has exceeded our expectations. The growth in attracting top doctors has really exceeded expectations, and we had a very good quarter.

And of course, we made the initial 35% investment in OneOncology. And then we, of course, acquired most of the rest of it that we announced about February 2 when we announced our earnings. And we feel that the opportunities for synergy and working together between RCA and OneOncology is quite strong, whether it be in terms of clinical trial sites whether it be in terms of back office functions, such as revenue cycle management and IT and staffing, whether it be longer-term things like data and analytics. And so we feel very good about the way that we're prioritizing growth-oriented investments, and that's one of Bob's kind of four strategic drivers for the business is prioritizing growth-oriented investments. And this is just a great example for that. And it just is good for our company, but also we feel that these businesses are just excellent sites of care and very efficient sites of care and so really good for patients also.

Yes. I think the -- as you think about Cencora, if you think about pharmaceutical centric and you think about specialty. And that the MSOs that we've moved into are retina, which is predominantly pharmaceutical-centric course of care in oncology, which is also predominantly pharmaceutical course of care. And the largest part of the physician administered part of the market. And we think those are the right places for us to play. We think that's where we can be really good strategic partners. We have long-term distribution relationships. We have long-term GPO relationships. And this gives us -- this is an extension of those relationships into the MSO stream.

Bennett, those are such important points. that I think as you look at Cencora and what you'll see us do, kind of two of the key things are strengthening our position in specialty. And then also, you'll see that kind of all the key moves we make will be pharmaceutical-centric. And so that's what kind of makes kind of what we're doing with RCA and OneOncology just as so well aligned with those 2 things.

And just one other thing that I didn't mention is just how pleased our company has been with the strength of the management teams also.

And maybe that's a good segue into my next question because it seems like from my perspective, and Ben, I think you were sort of touching on this a little bit. When I look at sort of Cencora and McKesson, feels like you're pursuing somewhat similar strategies where it feels like Cardinal has done acquisitions that are maybe somewhat differentiated maybe from you're discussing. And maybe my question is not -- is one strategy better than the other? I'm not asking you to opine on that. But maybe -- do you believe that you guys are maybe heading in slightly different directions. And you sort of -- I think you and Jim were just sort of outlining why yours is more of a pharmaceutical-centric strategy. If you could maybe just draw that differentiation for people because I think that's important.

Sure. Having the position that we have in specialty means we have exposure to all the different therapy verticals that exist within the physician-administered market. There are a number of great customers across that landscape that we are very happy to serve as customers. As we think about where we want to extend ourselves into the MSO space, the retina and oncology being really the only two specialties that are predominantly pharmaceutical-centric gives us significant confidence strategically.

Yes. All right. We got 3 minutes left, so we're going to fly through the last three or four questions, if that's okay.

All right. The longer-term outlook for acquisitions in this market, I mean, you just announced a major deal last month. So I'm not asking when the next one is. But could you sort of comment on the market and how we should think about it even beyond fiscal '26. Are you starting to see upward pressure for acquisition multiples? Or do you think there will be ample opportunity in the future? Any high level thoughts?

Yes. So very quickly, we talked about this before, strengthening our position in specialty pharmaceutical centric. We now have two very strong platforms in terms of RCA and OneOncology. And so what I would expect to see as kind of bolt-on add-on investments there, but nothing of that size in the MSO market because we have two leading platforms now. .

Okay. Just shifting on to your other segment, a little bit of mixed emotion for you may be seeing the MWI business go. For those of you who don't know, Jim used to be the CFO of MWI when it was acquired by Cencora. And so -- Okay, well, that's kind of gone, but there are a couple of other assets in their pro forma some consulting businesses that are still maybe you're considering strategic alternatives. Any update on that other segment?

Yes. Let me be quick there. In November, we set up other and these are very good businesses, but they don't bring competitive advantage to the balance of the enterprise. And so we think that they'll be even better off if they're focused on the markets that they are in. And MWI, for instance, has performed very well for a long time, but we think by coming together with Covetrus, it can really kind of focus on the animal health space, have a lot more efficiency can bring affordability to the customer base. And so we kind of feel very good with the direction we're going in there.

The other businesses and other are much smaller, but you'll see us continue to do those sorts of things with that business to look at strategic alternatives so that they can be more focused on those markets.

And one of the businesses, our legacy U.S. consulting business, we're now accounting for as an asset held for sale because of the progress there.

Okay. The leverage on the balance sheet, it sort of ticked up post the OneOncology deal. I mean -- and I think you've talked about maybe suspending some share repo in the interim to bring that leverage back down to a range that you're more comfortable with. Can you just remind people, do you have any specific leverage targets in mind and how we should think about repo? And should we just assume it continues in fiscal '27?

Yes. And so the way to think about that is for a period of time, we're prioritizing deleveraging. We have very strong relationships with the rating agencies. And then over time, we'll get back to balanced capital deployment, which we've always focused on, which is really continuing to make the investments in the business looking at strategic acquisitions, and we talked about the MSO strategy there. We'll always look at opportunistic share repurchases that we'll get back to after we prioritize the deleveraging and then also have a reasonable growing dividend rate.

You touched on the guidance. You raised the operating profit guidance in the U.S. business on 1Q. It's hard to believe that we're almost halfway through your fiscal year 2026, right? I mean any sort of high-level thoughts with respect to the guidance or anything you want to you want to share with people on maybe what motivated you to raise that guidance at the time given it was just your fiscal first quarter?

Yes. We raised the guidance because we had closed the acquisition of OneOncology. And then what I'll also say in the past 6 months, we've raised our long-term guidance twice, which is 7% to 10% organic operating income growth 3% to 4% a year from capital deployment and so a 10% to 14% long-term guide.

All right. Well, listen, we're out of time, but I want to give you guys the last word. I mean, there seems like there's some things are clearly moving in the right direction. I mean, in the core trends, you have the strong growth in specialty. We talked about the steady stream of generics and biosimilars. What sort of last word do you want to leave our investors with today? And anything else that we didn't cover that you think you just want to conclude with?

Glen, I think that we covered it well. Your questions were excellent. We feel good about the first quarter. We were pleased to increase our long-term guide twice in a months, we feel very good about the execution of our teams, particularly across the U.S. segment. And so we're pleased with the progress that we've been making in many areas, including the MSO strategy which we talked a lot about.

Jim Cleary, Bennett Murphy. Thank you guys very much. Really appreciate it.

Thank you, Glen.

Thank you.

Hello, everyone, and thank you for joining the Cencora Fiscal 2026 First Quarter Results Call. My name is Lucy, and I'll be coordinating your call today. [Operator Instructions] It is now my pleasure to hand over to your host, Bennett Murphy, Senior Vice President of Investor Relations and Enterprise Productivity to begin. Please go ahead.

Good morning, good afternoon. Thank you all for joining us for this conference call to discuss Cencora's fiscal 2026 first quarter results. I am Bennett Murphy, Senior Vice President, Investor Relations and Enterprise Productivity. Joining me today are Bob Mauch, President and CEO; and Jim 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.cencora.com. We've also posted a slide presentation to accompany today's press release on our investor website. During this conference call, we 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 to today's press release and our SEC filings, including our most recent 10-K. Cencora assumes no obligation to update any forward-looking statements, and this call cannot be rebroadcast without the permission of the company. You will have an opportunity to ask questions after today's remarks by management. We expect you to limit your questions to one per participant in order for us to get to as many as possible within the hour.

With that, I'll turn the call over to Bob.

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 the first quarter of fiscal 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 U.S. Healthcare Solutions business as we executed our pharmaceutical-centric strategy and work 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 3 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 to 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 health care leaders at the forefront of innovation. While much focus today will be appropriately on completing the acquisition of OneOncology, in January, we celebrated the 1-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 through its clinical trial and research capabilities, contributing to more than 1/3 of all retina clinical trial research conducted in the United States, and we see significant potential extending this offering across our MSO platform.

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 that enable 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 physicians' leadership advancing clinical practice is RCA's research Chair, Dr. Charles Wykoff and team performing the world's first procedure of a new FDA-approved cell-based gene therapy for MacTel Type 2, 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 its 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 and continues to execute at a high level. We're advancing our strategy and strengthening our position as a leading health care 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?

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 U.S. 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 U.S. for GLP-1 products, which increased by $1 billion or 11% over the prior year quarter.

Turning to gross profit. Consolidated gross profit was $3.0 billion, up 18%, primarily due to growth in the U.S. 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 U.S. 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 paydown and anticipate our full year diluted share count to be approximately 195.5 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 the first quarter of fiscal 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 U.S. Healthcare Solutions segment, U.S. 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 the second quarter of fiscal 2025 and the fourth quarter fiscal 2025 loss of an oncology customer as a result of it being acquired.

U.S. 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 continue 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 Profarma and offset in part by a revenue decline in our legacy U.S. hub consulting services. Operating income was $91 million, down 6%, primarily due to a decline in operating income in our U.S. Hub Consulting Services business resulting from the fiscal 2025 loss on manufacturer program, partially offset by operating income growth at MWI Animal Health, where 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 U.S. 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 the U.S. Healthcare Solutions segment, our guidance reflects 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 U.S. 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 Profarma 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 U.S. 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 12 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 U.S. 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 nonoperating 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 2 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 Profarma resulting in our noncontrolling interest line being relatively small in fiscal 2026. While these items are helpful call-outs 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 Instructions] The first question comes from Glen Santangelo from Barclays.

Bob and Jim, I just want to talk about operating income growth for a second for the balance of the year. I think with so many moving parts like around RC, the Retina deal and Florida Cancer and now adding OneOncology. I think what the market's kind of confused a little bit about is the deceleration, Jim, that we saw in that in the U.S. segment from the September to the December quarter. 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?

Sure. Glenn, thanks a lot for asking that question. And I'll start out with the December quarter. And during the December quarter, as you know in the U.S., 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 U.S. is 7% to 10%. And we've increased that twice in the last few months. And the reason I bring that up, if you look at the first quarter and look at that 21% operating income growth in the U.S. If you back out RCA, and RCA had a very good quarter.

But if you back out RCA, our performance in the U.S. was still towards the higher end of our long-term guidance range. And that's even with the headwind from the oncology 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 in the U.S. 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 U.S. 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, in the U.S. 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 again, that very good performance 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. It 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 feel very good about our long-term guidance and very good about even when you ex-out things like RCA and OneOncology, we're performing solidly within that long-term guidance range that we've increased a couple of times in the last few months. So thanks a lot for the question, Glenn.

The next question comes from Elizabeth Anderson of Evercore ISI.

I 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've owned RCA for about a year. You obviously have just rolled up OneOncology in terms of closing that. Where are the 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?

Elizabeth, thank you for the question. I'll just -- I'll take a step back and just kind of re-explain a bit kind of why the MSOs fits 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've talked about and we restated 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 within the MSOs that can become even stronger. That's a value driver.

And then things around 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 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 in 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 talk more about once they become more apparent.

The next question is from Lisa Gill of JPMorgan.

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? What's in the numbers today and what the future opportunity is?

And then, Jim, can you just help us understand the cadence of earnings? I just want to make sure I know you don't give quarterly guidance, but anything to call out as we think about the next several quarters?

Lisa, yes, thank you for the question. We certainly are focused on 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 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 as I mentioned in my prepared remarks, we spend a lot of time understanding those customers, these health systems customers, understanding their strategy how they want to grow.

And then we bring the capabilities of Cencora to help them do that. And so 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 want to be a leader in the sites of care where all of our customers are, and we're doing that. So certainly, in the physician space, the health systems, but then others as well. We want to make sure that we're the right partner for those providers. Thanks for the question.

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 2 quarters, that will 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.

And 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.

The next question comes from Michael Cherny of Leerink Partners.

Maybe if you can talk about the market construct a little bit. Obviously, the first range of IRA price negotiations hit the market start this year. Can you just give us a sense as you prepared for calendar '26, any changes or discussions relative to the supplier side in terms of how you go to market? And any changes in terms of the contracting relative to any of the list pricings that were absorbed?

Yes. Let me make a couple of 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 reductions 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 in the supply chain. So we were very successful in maintaining our economics and our gross profit dollars. And so we were pleased with the way that, that turned out.

And we had talked about for some time, the insulin example and how we have 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 thing I'll comment on is just in general what we saw at the end of the year in terms of brands and any price increases and those sorts of things was very much in line with our expectations. Thank you very much for the question.

The next question is from Erin Wright of Morgan Stanley.

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? And then what gives you confidence in that ramp? What are you seeing in like World Courier, for instance, in other areas as well?

Yes. Thank you. I 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 will 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, the 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 2 quarters is really volume growth in that business. And so we're executing well as a team there. And we're 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 income 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.

The next question comes from Stephen Baxter of Wells Fargo.

I was hoping to spend a minute on the revised U.S. 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 business to kind of consider? And then in terms of organic guidance revision, is there any organic guidance revision in the segment a lot to point to there?

Yes. Thanks a lot for the question. And of course, in the U.S., 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 U.S. Healthcare Solutions segment for all the reasons that we've been talking about. And as I said before, if you 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 3 quarters, if you back out RCA and OneOncology, again, 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 -- and we got into a little bit of detail in my prepared remarks is there are some OneOncology benefits that happened 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 these were covered, but just to quickly go through them, we expect approximately $30 million of income in our Other income and loss line for the full year fiscal 2026, and that's primarily related to earnings from a 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 UUG. And just to size it, this add-back will largely offset the noncontrolling income we eliminate from Profarma and 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.

The next question comes from Eric Percher of Nephron Research.

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

Yes. Thanks for asking that follow-up question. And so the increase in guidance from 9% to 11% to 14% to 16% in the U.S. is largely driven by OneOncology, and it's also as a result of the continued strong performance in the U.S. And what you'll see is in the other income line for the first 4 months of the fiscal year, we have 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 8 months. And so it's really just kind of 8 months there, that drives the increase from 9% to 11% to 14% to 16%.

And 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 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 will, of course, continue to ramp in future years. Thanks a lot, Eric.

The next question is from Allen Lutz of Bank of America.

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 3 quarters, you're within that range. How should we think about what's embedded in that core business for the rest of fiscal '26? Should we exclude RCA and OneOncology, should we just assume it's basically within that? And then what gets you within U.S. Health Care Solutions on the EBIT side, what gets you to the low end and the high end of that range?

Yes. And 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 in 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 U.S. business. And so it's really just kind of all those sorts of things, and it's a range because, of course, it's very strong performance, and it's just kind of what's that level of strong performance within the range.

And then, of course, our business has been good for so long that we have strong comps that we're comparing against. But also, 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.

The next question is from Charles Rhyee of TD Cowen.

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 guys did say that you wouldn't be consolidating 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 called it out this time, but is it right to think that this $30 million amount is an ongoing kind of NCI piece that we should be modeling? And then -- and I guess then -- how much of that -- so I guess, really, how much of total what OneOncology are you owning going into the future? Is this like a 10% piece that will remain kind of staying outside? Or is it less?

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 it would seem like you would have ability to do both, both pay down debt and buy shares. I would love to understand maybe your thinking why you necessarily have to pause if there's any kind of covenants or anything like that?

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 referred to, they are specifically related to OneOncology's, UUG subsidiaries. And they will continue to be there over time, and we'll 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 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, we're pausing share repo and focusing on de-leveraging. But I will add that our long-term capital deployment priorities remain the same, which are, of course, investing in the business, strategic acquisitions that you've seen, share repurchases that you've seen over time and then having a nice growing dividend, which we grew at 9% this year. So thanks a lot for the question.

The next question is from George Hill of Deutsche Bank.

Jim, I'm going to ask another one on MSO accounting. So first, I guess my question is, could you unpack a little bit of the revenue guidance change in the U.S. business? It's about $5.7 billion. And I'm interested 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 RAC price reductions, whether or not that played a point at all? I recognize that you guys have offset it at the earnings line. I'm surprised there's kind of no impact on the revenue line at all and maybe growth of GLP-1?

And then my quick follow-up would be, I 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? Like are there any significant puts and takes between the AOI line and the EBITDA line for OneOncology?

Yes. So there was couple of things there in that question. The first was on revenue and revenue guidance. And 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 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 we don't count the revenue twice that we -- of course, we sell to MSO 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 look at our revenue growth this year, of course, 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 pleased with the increase in guidance because it just shows the underlying strength of our business when we have the increase in revenue guidance. And then 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 call out other than, of course, the depreciation and amortization. Thank you for the questions.

The next question is from Steven Valiquette of Mizuho.

So 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 U.S. might be impacting pricing in Europe or U.K. Any impact on that one way or the other? Or is it just kind of business as usual in Europe aside from your one call out in that developing country?

Steve, thanks for the question. I'm going to take this so we can give Jim a break and he can take a sip of water here. But no, we haven't seen any real changes in the markets from MFN. So as Jim said earlier, and you just restated, we did have a timing issue in one market. Overall, the international business is performing within our expectations, and we expect to move our fiscal '26 commitments there. But no changes based on MFN.

We're also seeing, Steve, which maybe a sub-bullet of your question kind of within -- we talked about the World Courier business improvement, but I do want to state how strong, our growth is in our global 3PL platform. So again, part of our specialty strategy and within that specialty strategy in Europe, those products are delivered through 3PL not necessarily through wholesale, and we have a pan-European market-leading service there. That also includes, obviously, the United States and all of North America, so -- which is performing very well. But full circle, no real changes in pricing that we're seeing in that market.

The next question comes from Kevin Caliendo of UBS.

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 don't want you to -- I know you're not going to 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, had a good quarter. I'm just wondering strategically how it fits long term for you guys?

Yes. Thank you for the question. As you said, we're certainly not going to comment on any rumors. But I will reiterate what we've said very specifically last quarter and really have been working on over the past year or so. And that is our strategy is being 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 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 on strategic focus and then we believe growth rate benefit from doing that. But I'll hand it over to Jim and talk about some of the potential short-term impacts, if any, divestitures were to occur.

Yes. 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 pleased that it continues to perform well.

With regard to one aspect of your question is any potential dilution from a divestiture. From some divestitures, there could be potential dilution. But as Bob was saying, we think it's the right thing to do for both 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 -- it could enhance growth and enhance returns over the long term. Thanks for the questions.

The next question is from Daniel Grosslight of Citi.

It sounds like RCA is performing better than initial expectations, which has been the case for the past couple of quarters here now. I think when you initially announced that you were thinking around $0.50 of accretion from RCA in the first full year. There was that kind of accounting change, so I'm accounting for that. Now that we've passed that 1-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 outperformance for us? And then maybe provide a little bit more detail on the sources of that outperformance?

Yes. Yes. We've continued to see very strong performance at RCA, and we've seen good performance organically, and we've seen good tuck-in acquisition opportunities. So we've been just really pleased by the performance of the team there, and we've exceeded the expectations that we had in 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 just one follow-up I want to make on the OneOncology. Some of the below the operating income line items that I was referring to, I just want to make it clear that 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 onetime. 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 this year or in the future years because 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, and thank you for the RCA question also.

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

Thank you very much. In all seriousness, I 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.

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

Good morning, and thank you for joining us. My name is Lisa Gill, and I head up Healthcare Services at JPMorgan. It is with great pleasure this morning that we have with us Cencora. Presenting for Cencora will be CEO, Bob Mauch. In addition, we have Jim Cleary, CFO, who will join me for the Q&A session. With that, I'm going to turn it over to Bob.

Thank you, Lisa. Hi, everyone. Thank you for being here. Thank you for your interest in Cencora. I'll pause here for our cautionary note regarding forward-looking statements. And if you would like additional information, please go to our website at investor.cencora.com. So Cencora is a global pharmaceutical services health care company. We ship more than 1 billion medications yearly through our MSO investments. We have the #1 retina research network, 51,000 purpose-driven team members. And in the past year, we were fortunate to increase our revenue by 9% year-over-year and 16% for both our adjusted operating income and our adjusted diluted EPS, all while generating $3 billion in free cash flow.

Most importantly -- or yes, most importantly, actually, we're a purpose-driven company, and we're united in our responsibility to create healthier futures, and that drives everything we do and is the leading indicator of those outcomes I just described. We're very focused on being strategically disciplined and continuing to do that. We have 4 strategic drivers where we're focused. One is our digital transformation, optimizing our business process, leveraging advanced analytics and AI to improve business performance and outcomes for our customers and their patients.

We're very focused on talent. We want Cencora to be a place where someone can come and grow their career, stay with us for the long term, and we will demonstrate to you how Cencora will invest in your career and make sure you accomplish what you want to accomplish within that career.

We're also identifying capabilities for continuous improvement. And one of the best examples of that is a refocus on productivity. As a company that's very focused on pharmaceutical distribution, you can assume that we're highly efficient, and we are highly efficient. At the same time, we see real opportunity to continue to focus on ongoing capability of productivity to make sure that we are not only efficient today, but we're leading in efficiency tomorrow, next month and next year.

One of the big areas of focus over the past several months, and you saw this in our designation of an Other segment is prioritize our growth-oriented investments. So we have an ongoing process where we're looking at our businesses. We're looking at our capabilities and assuring that they align with our strategy going forward. They may have been terrific contributors and aligned as we look backwards, but we want to make sure that we're doing that on an ongoing basis in the future.

So you saw us designate our Other segment. And within that is our MWI Animal Health business, an investment in Brazil that we have called Profarma as well as our legacy U.S. patient hub services business as a part of our PharmaLex business. All within this, as we're focused on building higher growth, higher-margin businesses, our global distribution services are the foundation of everything that we do.

Recent highlights, evidence of execution of the strategy is just about a year ago we completed the acquisition of Retina Consultants of America, which we're very excited about. The business is performing excellently. Most recently, we announced our intent to accelerate our acquisition of OneOncology. Really, then we'll be able to pull together our overall MSO platform and drive additional value. Internal investments are also incredibly important to our performance as we go forward and look to the future.

And we recently announced our plans to invest $1 billion in supply chain infrastructure through 2030, both expanded capacity overall and specifically cold chain capacity. We've also invested in expanding our global specialty logistics and 3PL offering. And when you think about Cencora, I hope you think about specialty and when you think about specialty in Europe, you should be thinking specialty logistics and 3PL, and we continue to make investments there.

We're very proud that we were able to raise our long-term guidance for operating income and adjusted diluted EPS to reflect the strength of our U.S. Healthcare Solutions segment and the expected contribution of OneOncology. Our U.S. Healthcare Solutions segment, again, foundation in pharmaceutical distribution, significant leadership in specialty pharmaceuticals, and that's specialty distribution, our wraparound GPO services and then the next natural step, which is our MSO services.

This is the fastest-growing part of the market, incredible innovation within specialty, and we're very proud at Cencora to not only be well positioned from a solutions and capability set, but also with the manufacturer relationships and the downstream provider relationships that have allowed us to grow the way we have within this reporting segment over recent times and expect to continue to do that with our updated long-term guidance.

When you think about the MSOs, this is really the next natural step. I mentioned the specialty distribution. I mentioned GPO. The MSO is really the next natural step. It helps us streamline back-office services for the provider. It enhances our access to the innovative treatments in clinical trials that then the physicians can use with their patients. And importantly, it strengthens our relationships with pharma.

And when you think about the back-office services that we provide and you think about them broadly, I hope you hear what that does is it allows the physicians to have more time to care for patients. The MSO will take care of the back-office services and the clinicians can then, therefore, make the best decisions they can for patient care. We're very excited, as I mentioned earlier, we have the acquisition of RCA. We've announced our intent to accelerate the full acquisition of OneOncology.

And when we do that, we'll have an overall platform in the pharmaceutical-centric specialties where we will continue to be focused, both in retina and oncology. Our International Healthcare Solutions segment is also foundationally based on pharmaceutical distribution. We have a significant pan-European pharmaceutical presence. I mentioned the global specialty logistics. So that is both in the business that we call World Courier, which is very high-end specialty logistics clinical trial support, but also the 3PL services that we provide in Europe, also in the United States.

That is the primary route of specialty distribution in Europe. We also have a good mix of the higher growth, higher-margin businesses within our International Healthcare Solutions segment. So when you look forward and think about Cencora, I hope you see us as a long-standing health care solutions partner.

Really, our performance is driven by innovation in the pharmaceutical industry, but also the demographics that we see in the aging populations and a long legacy of leadership in specialty. As we enhance our value proposition, we're investing to advance our pharmaceutical-centric strategy, furthering solutions to support both providers and pharma and focusing our portfolio on those that are highly aligned with our strategy and allowing us to accelerate growth.

We'll continue to generate strong free cash flow, maintain our high return on invested capital and achieve our long-term guidance. So once again, I hope that was helpful information for all of you. Thank you for being here today, and thank you for your interest in Cencora.

Thanks very much. So Bob, why don't you come, I'll sit in the middle. That will probably be easier that way.

So thank you very much for the presentation today. So let's start with volumes, right? Volumes across pharma have been incredibly strong, both specialty as well as traditional pharmaceuticals. You've increased your long-term operating profit targets twice since October. What gives you the confidence to increase the long-term targets, one? And then secondly, what are you currently seeing today in the overall utilization environment?

Yes. So Lisa, continuing trends, and I'll start and I'll hand it over to Jim, but continuing trends that we've seen throughout the last years actually. And what gives us confidence is, one, our positioning in that specialty space. So our capabilities that we have; secondly, the customer base that we have and the innovation that is happening in the pharmaceutical industry is remarkable, frankly. So we're in the right space. We're well positioned there. We have the right customers. And we have the financial flexibility to continue to invest, which you see us deploying capital, not only on acquisitions, but also the internal investments that I mentioned.

Thanks, Bob. I'll just add a bit to what Bob was saying. And as Lisa said, we've increased our long-term guidance twice in the last 2.5 months. And the first time we did it was in early November when we were announcing our fourth quarter results and introducing our guidance for fiscal year '26. And we increased our operating income growth guidance, long-term guidance from 5% to 8% to 6% to 9% and another 3% to 4% from capital deployment.

So we increased our EPS guidance from 8% to 12% to 9% to 13%. Basically, the reason that we did that is we've been outperforming our long-term guidance for quite some time. And it was really driven by the fundamental factors in our markets and our execution that Bob talked about. So given the fact that we've been outperforming, we decided to increase our long-term guidance when we announced our fourth quarter results in November.

And then after the acquisition of -- when we announced that we will be acquiring OneOncology on December 15, we raised our long-term guidance a second time. And so we raised the 6% to 9% to 7% to 10% with another 3% to 4% from capital deployment. So we raised our long-term EPS guidance to 10% to 14% and that was really driven by the announcement of the OneOncology acquisition.

As Bob talked about, this is a real growth part of the market. Our growth has been driven by our strength in sales of specialty products to physician practices and health systems. It's driven by our distribution. It's driven by wraparound services like GPO, and now it's driven by the MSOs, which is the natural extension of the very successful part of our business. And so in that this MSO platform is going to be -- it's going to drive additional growth because of the acquisition, the announced acquisition. That's the reason why we raised our long-term guidance for the second time in the last 2.5 months.

And Bob or Jim, the acceleration of the second step here for OneOncology made a lot of sense to us. As we think about the MSO, can we maybe spend a minute and talk about contribution and profitability from the MSO? What organic growth looks like for this business? And why you decided to complete the transaction now rather than at some point in the future?

Yes, Lisa. I mean we're super excited to be able to once approved to accelerate this. The reasons are practical in a lot of ways. We have this investment in OneOncology, which has performed incredibly well since our investment. It's in one of the fastest-growing parts of the overall business within Cencora. And then when you look about -- think about just management, the people and synergy, it really made sense for us to try to do it sooner.

And that becomes a financial question, right, at that point. And does it make sense? And as we've talked about, we had a structured process and a deal with TPG, our partner in there. But we found that it also made financial sense to accelerate it. So now that we have announced it and hopefully, we'll close relatively soon, we'll have the ability to really focus on synergies that we can help drive within OneOncology, but also the synergies across between RCA and OneOncology.

And maybe just coming back to like that profit and growth question. Can we talk about like how we see organic growth in the MSO? And then maybe just dovetail a little bit back into what the synergies are between RCA and OneOncology and where you see some future opportunities.

Jim, do you want to...

Yes, sure. A couple of questions there. And I'll start with the second one, and then I'll go to the first. So the -- with regard to synergies, we think there are very good synergies between RCA and OneOncology. And that's one of the key reasons why we did the acquisition earlier. And it probably doesn't take those of you by surprise who have heard us at investor conferences over the past several months, we indicated that we really like OneOncology and wanted to own the business as soon as possible.

And I put those synergies into 3 buckets. One is clinical trials. And RCA is really the leader in clinical trial sites in the retina market and OneOncology is strong also. But by putting that skill set and learnings together, we feel that there's synergy opportunity in clinical trial sites. Kind of the second bucket of synergies that I referenced, I'll call back-office support.

And I'll just give a few examples. One would be revenue cycle management. The second would be staffing and recruiting. And even though the medical markets are different, there's still a good synergy by having that common staffing and recruiting staff. And then a third area in the back office support would be management of IT.

There's kind of good synergy opportunities there, we feel in management of IT across the 2 businesses. And then the third bucket of synergies, and this one is longer term, but perhaps the most exciting is data and analytics and to have those data and analytics skills and capabilities that could have a lot of value over the long term. We feel that, that's another bucket of synergies. And this gets to one of the reasons why we wanted to acquire the business earlier is, of course, it didn't make sense for us to be executing on synergies now in the OneOncology business if we didn't own all of it because it would just cause us to have to pay more for the business over the long term.

So it was just better to do the acquisition sooner. And then from a growth standpoint, one of the things that I'll call out is we've been talking for quite some time about a key driver of Cencora's growth is sales of specialty products to physician practices and health systems. And one of the key things that's really been driving that growth is our sales to OneOncology. OneOncology has been growing so well over time, both organically and inorganically that it's been a real driver of our growth in specialty.

And then also one of the things that you'll see now that we own the business and you look over the intermediate to long term, you'll see an improvement in our margin structure in that part of the business because, of course, the MSOs are a higher-margin service business. Thank you.

Yes. So as we think about that business, we get a lot of questions around MFN, IRA pricing, what it means to Part B drugs, which is what we're talking about here. Do you view this as a potential headwind or potential opportunity with your GPO? And how do you think about your ability to purchase under some of these changes on the pricing side of the pharmaceutical would be the first question.

Yes. Thanks, Lisa. We spend a lot of time, as you would expect, monitoring, studying scenario planning and importantly, a lot of time in Washington, D.C. and making sure that we're having the right meetings with the right people to make sure that there's an understanding of what the impact would be of any given policy change.

And I think we've seen that play out pretty well over the past year or so. And I would say manageable for the industry broadly, we've said that if there were WAC decreases that we felt like we would be able to have conversations with manufacturers and come to a reasonable agreement there, which is generally what's happened. I think on the demonstration projects or the CMMI initiative, I think we'll see how that actually plays out. But what we see so far is what we would expect is that there's no intent there to have that have an impact on physician reimbursement.

And that's one of the things that we hope continues and we stay really focused on is making sure that as we're thinking about overall health policy and pharmaceutical pricing policy that, that doesn't impact physician reimbursement because if it does, that's ultimately going to impact patient care. And the community setting is the most cost-effective and most accessible site of care for patients. So we're confident that there's not an intention in Washington, D.C. to impact that. So we're going to stay close and continue to monitor, but okay about it. Jim?

Yes. If I could just add one thing there, and that is our experience in the recent past as it relates to any WAC price decreases. We have a very strong strategic global sourcing department at Cencora. Our contracts with manufacturers indicate that if there are meaningful reductions in price that we have the ability to renegotiate. We talked about for some time the kind of case study on insulin where there was a reduction in WAC pricing, and we were able to maintain our gross margin dollars. And we had a similar experience in the last several months when there were the WAC prices related to IRA, we went and we renegotiated with manufacturers. And again, our strategic global sourcing team at Cencora did a very good job at maintaining gross margin dollars.

And I think that's important. Just going back to CMMI and the initiative that they have, are physicians within OneOncology participating in that demonstration?

To be determined.

To be determined?

Yes.

So we just talked about WAC and talked about the impact from changes there. Very dynamic generic market right now. And it's been favorable trends in the last couple of years, right? For a number of years, we had a lot of price deflation. It feels like it's been somewhat stable in the last few years. What do you attribute that stability to in the market? And is that sustainable going forward?

Yes. And so really nothing new to call out. As Lisa said, what we've been saying for the last few years is that generic deflation has been moderating. And really, there's nothing new to call out today. And it's probably driven by a number of things, but probably one of the really key things it's been driven by is prioritization of portfolios by the generic manufacturers. So again, nothing new to call out. The trends of moderating generic deflation are the same as what we've seen in the last couple of years or so.

Jim, there's a few things that you called out when we think about the guidance for fiscal '26 within the U.S. Healthcare Solutions, including the loss of the bladder Cancer care specialists, adding a quarter of RCA contribution. Is there anything else to consider as we think about the cadence of earnings for '26 versus '25?

As we look at fiscal year '26 and we look back at fiscal year '25, in fiscal year '25, we had tremendous outperformance. It was driven by the things that Bob talked about in his presentation, the utilization trends that we've been seeing, the strength of our sales of specialty products to physician practices and health systems, just the broad-based performance in our U.S. businesses, particularly our largest businesses in the U.S., the RCA acquisition, which is working out really well.

And so Bob had up on his slide 16% adjusted operating income growth in fiscal year '25. In fiscal year '26, we expect to have continued strong performance. But what's in our guidance is that it won't be the same level of outperformance that we had in fiscal year '25. And so our adjusted operating income growth that we're guiding to on a consolidated basis is 8% to 10% growth. And in the U.S. part of our business, it's 9% to 11% growth, driven by the same trends that we've talked about a couple of times now.

As we look at kind of things that will impact cadence, we have the extra quarter of RCA, which was our first fiscal quarter. There's an oncology customer that we no longer have because it was acquired by a competitor, and we'll have 3 quarters of headwind as a result of that. So if you look at the net of those 2 things, it will be a net operating income headwind of 1%, and that's, of course, included in our guidance.

Other kind of things you'll see in the first quarter, we were tracking COVID sales. It's not nearly as big an impact as it was in the past years, but that's kind of the sorts of things that we're tracking in the first quarter. And so other things that we'll see that will impact cadence over the course of the year will be the stuff that I just talked about. The incremental quarter of RCA helps us in the first fiscal quarter. Once we lap the oncology customer that was bought by a competitor, that will cause our growth rate to accelerate in our fourth fiscal quarter. So it's those sorts of things which will impact the cadence of the year. But we feel very good about the performance of the business and very good about our guidance.

As we think about fiscal '25 or actually calendar '25, there were a number of changes that happened with Medicare Part D and the out-of-pocket cost for the senior. Many of the managed care companies and others have called out the fact that they anticipate in the fourth quarter, they'll continue to see an acceleration in utilization by that senior population. I know it's difficult to talk about a specific quarter. But when we think about Part D, did you see an acceleration in '25? And how do we think about that going into '26? Was that part of the contribution? Because you didn't name Part D specifically.

Yes. And there's a reason there. And so we've been talking about the strong utilization trends for quite some time. And that probably -- the out-of-pocket caps is probably one of the things that's benefited our utilization trends that we've seen. But I think the key thing to keep in mind is the specific question on the out-of-pocket caps relates to Part D. And where we really see the benefit from an operating income growth, as we've been talking about is Part B, the specialty sales to physician practices and health systems. And so the Part D utilization benefit we're seeing there is more of a revenue benefit.

It is an operating income benefit, but a much, much smaller benefit than Part B. And the reason is in Part D, a lot of those sales are in the mail order channel, which are shipments of pallets of products to a few locations around the country. So those would naturally be lower gross margin sales.

When we think about gross margin sales, you've talked a lot about GLP-1s and that they carry a lower margin because of cold chain and the time to deliver. As we think about oral drugs coming to the market for GLP-1s, will that carry a better margin?

Yes. And so there's really nothing new that we'll be calling out today on that. And it's still early. Those products have just recently come on the market, and we've just recently been shipping those products. And what we've said historically on GLP-1s is, of course, they're a big driver of top line growth, and we publish every quarter what our growth is in GLP-1 sales.

But we've also consistently said that they're minimally profitable for us. And as we see the oral product come on the market, there's really nothing new in our commentary to call out there. Still a big driver of our top line sales, but minimally profitable for us. They are probably a little bit less expensive to ship because not having the cold chain and not having expensive shipping costs, but that isn't material enough to really change the way that we're talking about GLP-1s.

Over the last 18 months, Walgreens has closed a number of stores. It's a little less visible now that they're privately owned to know what the future is. Has there been any meaningful impact to you from a volume perspective? And then secondly, what are some of the future opportunities to work with Walgreens as we know that they've been working in the last few years even before going private around trying to manage their cost basis?

Yes, Lisa, I'll take that. I think first and foremost, Walgreens is a really important customer of Cencora and not only Walgreens in the U.S., but Boots in the U.K. And not only important to Cencora, community pharmacy is really important to health care, and that includes Walgreens and everyone. So we are, as we always have been, very focused on helping them in any way that we can implement their transformation, whether that's as a public company or a private company.

You'll notice we haven't called out any changes based on the store closures. And I think, one, they're pretty good at this, and we support them in doing it, right? So I think that they're able to capture the volume that they expect to capture as they're closing stores. And we have really incredible commitment to helping them do whatever it is they need to do. One of the things that Cencora works really hard at doing is understanding our customer strategy and then bringing the resources of Cencora to help them implement that strategy. That's true for many of our customers, and it's certainly true for Walgreens.

When I think about the operating profit structure for Cencora for, say, a Walgreens, which is a large customer with a lot of buying power versus, say, a community pharmacy, our understanding has always been that the community pharmacy is a better economic value to Cencora. So did you see volumes that shifted from Walgreens? So maybe you don't need to call that out because if you were making -- make up a number, $1 at Walgreens, you're making $1.15 from the independent, and therefore, it more than offset it even if the volumes were less. Is that a way to think about it or...?

Yes. I think I wouldn't necessarily speak to kind of a delta in profitability, but I think the reality is...

You still maintain the scripts.

As a store closes -- yes, we have a lot of customers that they -- that could have picked up those prescriptions. And we certainly do see independents picking up prescriptions from store closures from Walgreens and others.

Yes. I think over the years, for many, many years, we have talked about the independent pharmacy. And I know a lot of you in this audience have heard me say this that one of my first jobs at JPMorgan when I started following the industry in 1998, I cringe when I say that, was to make a prediction around how many independent pharmacies there would be in the next 3, 5 and 10 years.

And at the time, you may recall that you had Walgreens and CVS building new stores at a rate that was double digit. And we predicted -- and at the time, just to put the numbers in perspective, it was a little more than 20,000 independent pharmacies that were in place in 1998. And we predicted that within 10 years, there would be about 8,000 of them would be gone, and we'd be down to about 2,000. As we sit here today, there are more than 20,000 independent pharmacies. Obviously, not the same independent pharmacies from 1998, changed hands, right, new people open.

So putting that into context, really 2 questions here. One, do you see any changes in the independent pharmacy business? Two, when we think about businesses like you have like, for example, your GPO or your Good Neighbor Pharmacy that I think have really helped the independents in the marketplace. Maybe talk about some of those opportunities and if you do see any kind of changes that are happening in the independent market.

Yes. Lisa, I mean it's such an interesting observation. And as you may know and others may know, so I grew up in independent pharmacy, my parents owned independent drug stores. So I've seen this kind of up close for a long time. And it's amazing to me the resiliency and the grit that you see in that because it's not easy. Reimbursement is not getting easier. I mean there are significant challenges for community pharmacy, yet we continue to see these entrepreneurs find the right business for their community.

And I've talked in the past about our entire executive team going out and visiting some Good Neighbor Pharmacy stores. And it's just amazing the diversity of services, the things that they're able to do that attract patients that just continues to work for them. And I believe, and this could be a little bit of a bias because of where and how I grew up. But I do think there's a segment of the population that needs to have a really tight relationship with the pharmacists. If you have multiple diseases and multiple medications, you need a relationship with a pharmacist, not just pharmacy...

#1 touch point, right, when you think about health care...?

That right. And I think the independents do that particularly well.

Just kind of shifting back to specialty because it's so incredibly important. As we think about Part B drugs that will lose patent protection and have biosimilars coming to the market, maybe spend a minute talking about which drugs you're most excited about? And then secondly, help people to understand biosimilar versus the traditional drug when we think about the opportunity for Cencora.

Biosimilar launches and penetration in the market is really important for health care, really important for patients, really important for all of the payers involved. And within Part B in particular, we've seen incredible uptake in...

A number of oncology drugs, right, over the last several years...

As well as retina. So we're seeing. That -- in both of the specialties that we're very close to, we see biosimilar adoption on the higher end. As you know, in Part D, it's more variable, but we do expect that biosimilar adoption will continue to accelerate. And also believe it's part of a healthy market. So it's only the biosimilars that we need for a healthy market. We also need the incredible innovation that's happening. So the new innovative products that are coming to market at the same time, we have biosimilars. That's what creates the right ecosystem and the right economics for the channel.

We haven't really spent a lot of time talking about international. You kind of touched on it a little bit earlier. How do we think about the long-term opportunities within the international segment? Fiscal '25 saw some softness. But what is the time line to recovery look like? And when we think about longer term, how do we think about that market?

Sure. I will start out. And as you know, as we look at our overall operating income, U.S. is about 80% and international is about 20%. Our guidance for this fiscal year in International is 5% to 8% operating income growth, and our long-term guidance is 5% to 8% adjusted operating income growth. Fiscal year '25 was a softer year in our International segment and was really driven by 2 things. One is our global specialty logistics business, which was impacted by some softness in clinical trials and then also our global consulting business.

One thing I will say is in our fourth fiscal quarter, we saw volumes increase year-over-year in our global specialty logistics business, and so that was great to see. And in the fourth quarter, we just -- we saw operating income growth in every business in our International segment, except for our global consulting business, our PharmaLex business. We feel good about the long term, and we feel it's important to have that international business so we can provide services to manufacturers across territories.

We feel good about our distribution business. In particular, we feel good about our 3PL business because specialty products in Europe are distributed 3PL. And we just expect to have better performance than we had in fiscal year '25. And I'll just call out a few things. One would be an improvement in volumes in our global specialty logistics business. A second thing is that it's a more focused portfolio because we moved some of the underperforming parts, parts of our PharmaLex business into other and have the parts remaining where we feel like we have the ability to win. And also just the year-over-year comps are easier in fiscal year '26. Thanks, Lisa.

Just along that, the time line to evaluate strategic options for those businesses you moved into the other category, is there anything that investors should think about or keep in mind around the cadence of the other businesses in fiscal '26? And like I said, the time line for that evaluation?

Sure. And so businesses we moved into Other include the MWI Animal Health business, which is performing very well. It includes our legacy U.S. patient services business, Lash, and it includes in -- the international business includes our equity investment in Profarma in Brazil and then parts of the PharmaLex business where we decided to kind of put those parts in other and then keep other parts in the International segment.

And as -- from a timing standpoint, as we look at strategic alternatives, that will vary from business to business. And so there's nothing I'm going to specifically call out from a timing standpoint. And then I'll also say, as we look at kind of cadence over the course of the year, the comps get a little bit easier in the second half of the year because of a customer that we no longer do business with in our U.S. patient services business.

But what I'm going to say overall is that there are a lot of very good businesses we have in other. And these are businesses that can continue to grow, and we just feel like they will be better performing under different ownership that has more focus on these businesses. And again, this is all really consistent with one of the strategic objectives that Bob put up on the screen, which is prioritizing growth-oriented investments like our specialty business.

We only have about 30 seconds left together, but you paused the share repurchase due to the acquisition of OneOncology What's the time line for resuming share repurchase? And anything else that we should think about from a capital deployment perspective?

Yes, sure. And so we typically have paused share repurchases after large acquisitions, and we do this for a period of time so that we can prioritize paying down debt and maintain our strong investment-grade credit rating. And then we go back to doing share repurchases. And this will be a similar story here. And if you look at it over the long term, we'll really have balanced capital deployment between investing in the business, strategic acquisitions, opportunistic share repurchases and having a reasonable growing dividend. In this most recent year, we grew our dividend by 9% at the low end of our long-term guidance growth rate range for EPS. And this is something we've done consistently is growing our dividend.

Thank you so much, Bob and Jim, and thank you, everyone, for joining us.

Yes. Thank you, Lisa.

Everyone, thanks for joining us for the Cencora fireside chat. Hopefully, everyone is now well fed and well entertained by Dan Marino, but I have some better entertainment here today for you guys. Obviously, very thrilled to have Jim Cleary, Cencora's CFO here with us today; and Bennett Murphy, Head of IR, jack of all trades with us as well. For those of you who don't know, I'm Daniel Grosslight, the health tech and distribution analyst here at Citi.

I'm going to start off with some stats and it's really some stats to butter you up. You finished off a very strong fiscal year, fiscal '25, EPS and adjusted operating income were both up 16%. Your stock is up about 55%. And here's some trivia for you. When is the last time Cencora had a down year?

A long time ago...

Almost 7 years, almost 7 years. You've compounded your stock price at 25%, which is just amazing. So the #1 question that I -- I told you I was going to butter you up. The #1 question that I get from investors, which is a high-quality question I get is, have I missed this trade? So that's the goal of this fireside chat is to determine have we missed the trade or can this train keep on going?

So I guess we'll start with your '26 guide, which was again very strong. And I think even more important, your long-term guidance outlook, which you raised. You raised your long-term operating income guidance to 6% to 9% growth. And your '26 guide calls for U.S. health care operating income growth even higher at 9% to 11%, and that contemplates a 1% headwind from the loss of Florida Cancer and slightly offset by an extra quarter of RCA, which we'll get into.

But I was wondering if you can maybe start by helping bridge that gap between the strong near-term outlook and the still strong, but a bit lower long-term guide. What specific drivers are giving you this exceptional near-term growth? And how do you see that normalizing post fiscal '26?

Yes. Well, Daniel, first of all, thank you for having us here at the conference. And thank you for the great work you do covering our company and industry. And as Daniel said, I'm joined today by Bennett Murphy, and Bennett leads our Investor Relations and also leads productivity at Cencora and the productivity capabilities that we're building to always be more efficient.

And so yes, we've had a very good track record, and we introduced our guidance in November when we announced our fourth quarter results. And as Daniel was saying, on a consolidated basis, we're expecting operating income to grow 8% to 10%. In the U.S., we're expecting operating income to grow 9% to 11%. There's a 1% net headwind built into that as a result of an extra quarter of RCA, an acquisition that we did in January of last year. And then it's -- that's offset by a customer we have in the oncology market that was acquired by a competitor. So if we exclude that 1% net headwind, I'm actually talking about 10% to 12% operating income growth in the U.S. And our long-term guide, we also increased by 1 percentage point at the low end and the bottom end. So for organic operating income growth, we were at 5% to 8%. Now we're saying 6% to 9%. And if we include growth from capital deployment, we're expecting EPS to grow at 9% to 13%, and it had been at 8% to 12% for our long-term guidance.

And basically, the things that we've been benefiting from and we've been saying this for quite some time are the things that will continue to benefit from. We've seen very good pharmaceutical utilization trends. We've seen very good sales of specialty products to physician practices and health systems. And so kind of those are some of the things that have been causing us to have outsized growth. And what we've done is we're really kind of building upon our highly successful specialty business. We're a leader in doing distribution. We're a leader in wraparound services like GPO services, which are services that are very much appreciated by our customer base and by manufacturers. And now we've extended our specialty position and really the next natural evolution of our specialty business was to get into MSOs, which we're doing in both the oncology space and the retina space.

One thing that you'll see in our company is we're pharmaceutical-centric. So as we make investments and grow in these areas, everything that we will do is pharmaceutical-centric.

We have a high degree of confidence in our long-term guidance. It's really driven by a couple of macro things, innovation in the pharmaceutical market is one thing that will -- that will drive it, and then demographics also. And so we expect to have a very good long-term growth rate. And as we do our long-term guidance, we just aren't expecting the same level of outperformance that we've had for the last few years. But having said that, we have a great deal of confidence in our business and our industry in the future. And one thing is that it's hard to -- there's going to be so much innovation in pharmaceuticals, and it's hard to tell what pharmaceutical company is going to win if you look 5 years out. But in that, we're such a leader in distribution and lead with market leaders, we know we'll be a natural beneficiary of that innovation.

Got it. So it sounds like the secular tailwinds are kind of here to stay. One of those tailwinds, as you mentioned, was utilization. As I look at the horizon and really kind of into '26 and '27, there may be a couple of bumps just in terms of coverage headwinds, insurance headwinds, namely who knows what's going to happen in the exchanges. Some of the big insurers are projecting 40% to 60% reductions in exchange -- in exchange enrollment because of the enhanced subsidies going away if they do indeed go away, if there's some fix, we will see. MA seems to be still a little bit challenged from an enrollment standpoint. But as we look to the next couple of years, what impact, if any, will some of these, call it, policy-induced headwinds have on your business, not just your core distribution business, but maybe some of the other downstream assets that you alluded to?

Yes. I think it's always hard to pull apart policy change impacts. If you were to go back and look at our transcripts from when the Affordable Care Act came to fruition, it was hard for us to quantify the pickup at that time of the increase in insured population. I think the key thing to remember is, one, as you said, there's still a significant amount of information to be determined. But two, pharmaceuticals are the most efficient form of care and access to them is critical for tamping down health care spend, because if you think about the implications of a patient not being able to get on their medication, that typically results in them being either readmitted to hospital or interfacing again with the doctor.

So I think there's a good awareness of the efficiency of pharmaceuticals. I think the key thing is always patients having access to them for a number of the -- and then what are the -- where is the bolus of utilizers of pharmaceuticals, a lot of it is the older population on multiple therapies.

So I think there's a lot to be determined, as you said, on some of the coverage pieces. I still think there is good -- good employment data, good health care coverage data and continued good proof points on the value of pharmaceutical access. So I think we'll still see that, and I think we'll have some, hopefully not have some -- any disruption on people being able to get access to their pharmaceuticals.

Yes. Yes. We shall see. But hopefully, there's no disruption. Let's turn to the MSO business, you alluded to that as being one of the key growth drivers and I think we talked about this last year too at the conference. It's become a big part of your story. And it's interesting, it's not just the MSO assets itself, but also the wraparound services that you can put through the MSO. You made -- a couple of years back, you made an investment in OneOncology. Since then you've expanded your MSO footprint through smaller tuck-in acquisitions, but also, as you alluded to before, the acquisition of RCA, which significantly increased your -- or got you into the retina space in terms of MSO.

Can you just talk about how you see this business evolving from here? Obviously, your competitors are doing a similar thing with the MSO business. How do you differentiate what you're doing vis-a-vis your competitors? And what ologies, other than retina and oncology, ophthalmology, what other ologies could you potentially expand into?

Great. Well, thank you very much, Daniel, for asking that question. And of course, as I said earlier, the specialty market, particularly in Part B has been a big growth driver for us. And so we're a leader in distribution and then a leader in wraparound services like GPO. And then what we started to do in 2023 is expand into the MSO business, which is a natural evolution of our strong specialty business. And so this is the opportunity to provide additional management services, even higher value services to physician practices that we've had relationships with for not only years, but in many cases, decades. And so we're doing practice management services and other back office and administrative services for the physicians so that they can focus on practicing medicine.

And as I said before, as we do this, and this is a differentiator in some ways for us is we'll continue to be pharmaceutical-centric. You'll see in every strategic move that we make, we'll stay pharmaceutical-centric because that's our area of expertise. And that's why we're focused on oncology and retina, which are the 2 most pharmaceutical-centric specialties. And so as you look at future growth in this area and these 2 MSO areas, we'll see both very good organic growth and acquisition growth.

And I'll give you examples of both. I'll start out with organic growth. We acquired the RCA MSO in January of 2025. And it's been growing through acquisitions and organically. And one of the ways it's growing organically is it is the leader -- we are the leader in clinical trial sites. And so we're involved in all the clinical trials in the retina market. And so that's one of the services that RCA does. And this is a very good, very important and also profitable business. But one of the great things about it is it's very helpful in attracting top graduates out of schools because as they finish their fellowship programs, they like to go to work where they can both practice medicine and be involved in clinical trials.

And as I've gone around to meetings of RCA doctors, I always like to ask the young doctors why they decided to join RCA, and they always indicate because it's a place where they can really kind of practice medicine at the very top, but also be involved in clinical trials. So that's just an example of what we'll see in organic growth in the market. And again, just 1 example.

And if we look at growth through acquisition, both RCA and OneOncology are growing through acquisition, both larger practices and medium-sized and small practices. And one of the things that will really be a key component of our capital deployment over the years is that we presently own 35% on OneOncology, and we're partnered with a private equity firm and the physician practices that own the other 65%. And so from a capital deployment standpoint, over the next period of time, it's really, a lot of our capital deployment is spoken for is we'll acquire the other 65% of OneOncology. And we have a put-call structure in place to do that, and we're very pleased with the business. And so we look forward to ultimately owning 100% of that business.

Yes. And that put-call structure, I think becomes exercisable soon in the next few months -- or I guess, it's June, so 7 months. Are you thinking about exercising it in '26? Or is there -- I think there's another time where you can also exercise in '27. How are you thinking about that?

Yes. And so there's really kind of a 2-year period when that put and call is in place from June of '26 through June of '28, and we published kind of the terms of the put and call. But what -- we very much like the business and very much look forward to owning 100% of the business. It's a -- it's very strategic and will really help to drive our long-term growth. And once we own 100% of the business, we'll really be able to drive the synergies also between OneOncology and RCA.

And one thing I should add, and this is on the -- this is on really the oncology specialty. As I've talked about how it's really kind of helping to drive our distribution growth, and the OneOncology MSO is one of the reasons we've been growing so fast in the distribution market is because of the organic and acquisition growth that they've experienced, it's also helped our distribution business.

Yes. Yes. And what are the other synergies between RCA and OneOncology that you can -- I guess you'll have to wait a couple of years to really start to realize, but what are some of those synergies?

Yes. I think that -- and it's really kind of too early to fully say. But I think, for instance, there'll be some synergies on the clinical trial front. And just in terms of fully developing that expertise and then also some back office synergies also.

And I think there's just some -- each of them is a leader in their space, and each of them has some best practices that there's some value that we can do just by combining those under one roof and allowing that to kind of...

Yes, yes. But you have to wait until you own the full thing out, right, before...

Yes, right. We would obviously want to wait until we own all of it in order to make sure that we fully get the value there.

Yes, yes. Okay. Okay. Let's -- actually, before we move off of the MSOs, I do want to just ask about potential headwinds to drug pricing. Obviously, a lot of these practices are paid based on ASP. And if we do see a reduction in ASPs because of IRA or rather just things in the market that could impact the physician revenue and your revenue by extension. So how are you thinking about your pharmaceutical first approach and potential pricing headwinds?

Yes. So I think we've seen this come up -- this topic come up a number of times over the past 15 years. I mean, I think we've done a really good job over that 15-year period of being a strong advocate for community providers and not having an unintended consequence of some type of proposed changes to actually occur. I think the -- it's important -- as you get into the details and really understand how the system works, the community-based provider is the most efficient site of care, better outcomes, better cost. And the last thing we want to do is have something that artificially pushes people into other settings that are more expensive or make them move great distances to go seek care elsewhere.

So I think that's why you've seen pretty good outcomes when the changes have been talked about, including the bonafide service fee change that was disclosed a couple of months back in our 10-K. So I think that clearly, that message resonates when you get into the discussions and start to understand like what would the actual impact be? And what is the actual -- the real focus and then try and avoid some of the unintended consequence that could hurt community-based providers.

Yes, makes sense. Okay. Let's switch over to different but related topic, biosimilars. This morning, Dr. Martin Makary was giving a fireside chat. And one of his big focuses is streamlining the adoption of biosimilars to improve affordability. I'm wondering if you can just talk about how biosimilars specifically has been a tailwind for you guys if it has? And relate that for me to your MSO acquisition strategy and how there's kind of this virtuous cycle between your MSOs, your GPOs and your biosimilars?

Yes. That's a -- that's a great question. And biosimilars in Part B is something that has been benefiting us and will continue to benefit us from a distribution standpoint, and from a GPO standpoint, and biosimilars are a higher margin for us than brands. And so we expect to continue to benefit from biosimilar trends in the Part B market. But I think overall, and you talked about being virtuous in terms of the overall cycle. And that's one thing that is a very good thing about our business and our industry is we'll just continue to benefit over time from innovation in pharmaceuticals, and then also launches of biosimilars and then also generic launches as patents go off -- excuse me, as products go off patent.

And so we'll always be kind of going through that cycle and benefiting from the innovative products, the biosimilars and the generic launches. And the biosimilars in the MSO space, whether it be oncology or retina has been a benefit for us.

And I think, it has been very different experiences, Part D and Part B. So I can tell you that in preparing for our May of 2020 earnings call, we were ready to start talking about biosimilars being a pickup in the quarter. Instead, we spent most of that earnings call talking about a virus that was traveling across the globe, but it's been in there -- it's been in our numbers since then. As you look back to then, you started with Neulasta and over time, you have Avastin, Herceptin, Rituxan. You saw pretty strong utilization of those biosimilars right out of the gate.

And similarly with the Pavblu, you've seen good utilization. The part of the market where the doctor is able to -- if the doctor is comfortable that's the right course of treatment that they can move people to the biosimilar, you've seen that happen. Where you have seen it not happen so fast is in the Part D space. And that's a lot of that is going through mail order and mail order has some different challenges, but the doctor space, going back to the efficiency of that site of care, the doctor space move people pretty quickly.

So Part D, not a lot of margin for you guys, maybe -- I don't know, there's some things that PBMs are doing with their own kind of private label there, which kind of also takes out your margin. But Part B, that's where the margin is. So as we see more adoption of biosimilars, safe to say, potentially a revenue headwind, but from a gross profit perspective, gross profit dollar perspective, tailwind?

Yes, biosimilars and as they're launched, that should be a tailwind for us. And of course, there's a lot of things that can kind of moderate our revenue growth, but at the same time, enhance our operating income growth, and this would be one example. And as a company, what we're really focused on is, of course, the operating income growth as well as our free cash flow and return on invested capital.

Yes. And you're seeing that revenue dynamic play out right now, right? As you look at our calendar 2025 revenue cadence that you're seeing some of that Humira's volume going biosimilar. And while that impacts our revenue line, it's not a material profit driver that we've called out.

Yes. Speaking of that, a similar dynamic happens with GLP-1s, obviously very important from a revenue standpoint, minimally profitable. But I'm wondering how this dynamic changes as new drugs come to market, Lilly was just presenting a couple of hours ago, and they're very excited, obviously, about their orals and their portfolio of drugs here. So I'm just curious if as orals come to market, they probably don't need the amount of handling that the injectables do. How does that change the profitability dynamic within the GLP-1 space?

Yes, that's a great question. And as we've commented on -- since the products have been launched, GLP-1s are a big driver of our revenue growth, but they're minimally profitable for us. And from a revenue standpoint, we're quite transparent. And every quarter, we announced how much revenue growth we're getting from GLP-1s.

Now that orals will be launched, what we will see is a moderate decrease in our operating expenses because, of course, there won't be the cold chain, and so it will be less expensive for us to handle the GLP-1s. And so as a result, there will be a moderate increase in our operating income from GLP-1s and our operating margin. But I'm going to say they'll still be minimally profitable, and it's not a huge driver of our operating income growth as we look at fiscal year '26. There'll be some incremental benefit there, but it's not the big driver of our growth.

Makes sense. Okay. One other dynamic, which is playing out in the GLP-1 market, but I suppose this is not just specific to GLP-1s is the growth of the DTC channel. Again, Dr. Marty Makary was talking about that as being an important driver of affordability. But I'm wondering how the DTC channel, either Lilly Direct, NovoCare, the other Trump Rx, how that potentially impacts you guys, if at all?

Yes. So one of those is an interface to other programs. But then the -- as you think about what the DTC programs are in the market, a lot of them are generally just using the existing channel. In many cases, the programs that are being launched by manufacturers, what they're trying to do is solve for, one, a lack of access to a prescribing physician, so telehealth solution and then a knock-on digital pharmacy fulfillment of a prescription, which with those digital pharmacies or online pharmacies, they'd often be buying from a distributor in their normal course of business. So we'd still be leveraging the channel. And I think most of them, to the extent it's not solving for a physician interface problem, it's solving for a price -- direct-to-consumer price. But it's still, in many cases, you're going through the normal channel because of the efficiency that's there.

There are some anecdotal evidence where the volume is small enough where it might be direct to a mail order pharmacy, but generally a lot of them are just using the existing channel for the actual physical movement of the product.

Okay. And in that case, same economics for you, you don't differenciate where it comes from?

That's correct.

Okay. Okay. Let's switch over to your large client relationships. Obviously, Walgreens went private. I'm wondering if that transaction has impacted your relationship at all, what your relationship is like with Sycamore, who bought Walgreens, any changes in that since the company went private?

Sure. So as you know, Walgreens has been an important customer for Cencora for quite some time. We've had the relationship with Walgreens since 2013, the relationship with Boots since 2021 when we acquired Alliance Healthcare. And we do publish every quarter what our revenues are to Walgreens, which you'll see in our 10-Qs and our 10-Ks, and it's a very important customer, and we always want to work with them to help to improve their business and have even more efficient operations, and we have the contract with Walgreens until 2029, and we have the contract with Boots until 2031.

Yes. And other than price, which is, I assume locked in via the contracts. What other things are you doing to strengthen that relationship with Walgreens?

Sure. And so one thing I will comment on, as I said, we published the revenues for Walgreens every quarter, it is a very high revenue business for us. But of course, our operating margins on Walgreens are much, much lower than they are on the balance of -- of our business, a substantially lower margin business for us. But we're always looking for operational things that we can do to further improve our efficiency. And one of the things that we've worked with them on over the years is they operate a lot of micro fulfillment centers, which help to improve their operations, and we will work with them to help facilitate their micro fulfillment centers, which is just one example, Daniel.

Got it. Okay. Let's switch over to your other largest relationship with Cigna. They're about -- they're a little bit of a unique beast because they do own a specialty distributor as well, CuraScript, which does I think the last time they disclosed this a few months ago, about $25 billion of distribution business goes through that. It's growing double digits. And they recently highlighted a new strategy to leverage CuraScript, particularly for biosimilars, which, as we mentioned, are kind of a big growth driver for you on the Part B side, Part D is different. Given this, how do you kind of reconcile their increasing reliance on CuraScript to drive specialty distribution with your strong relationship?

So it's not much different than -- actually, it's not different than how the relationship has been. If you go back in time, one, CuraScript has been there the whole time for at least 10 years. If you think about the way the relationship has always worked, it's -- when a product is on patent, they're generally buying -- they're generally buying it from us. And once it goes off, then they've generally gone direct. So it's the same dynamic here. It's just -- it's a biologic. But it's not a new dynamic. It's certainly something they're talking more about. But I would say it's more really -- it's more kind of normal course for the relationship. There's not a material change there.

Okay. So more of a change in how they're talking about it, nothing that would economically impact you in terms of that relationship?

Yes, no change.

Got it. Okay. Let's switch over to the international side of the business, which I think has been a little bit weak recently, and you're making some changes there to focus on the stronger areas. But let's start with the core distribution, which actually has been quite strong there in the international distribution business. Is it the same dynamic that has driven the strength in the U.S. kind of core distribution over there? Or is there something unique about international distribution that's driving that?

Yes, it's a great, great question. And let me just take a step back and say that if we look back to fiscal year '25, we did have just outstanding growth in the U.S., but we had a much weaker year in our International Healthcare Solutions segment. And if we look at overall at Cencora, from an operating income mix standpoint, 85% of our operating income is in the U.S. segment and 15% of our operating income is in the International segment. And really, the kind of the issues that we saw in international in fiscal year '25 were driven by a couple of businesses that are smaller than our biggest business. They are our global specialty logistics business and our international consulting business, which were impacted in part by subdued clinical trials. But our core distribution business is performing better. It had a solid year in fiscal year '25. And probably the biggest growth driver there is the 3PL market. That would be kind of the faster-growing part of our distribution business internationally.

And from an international standpoint, specialty products, which are the growth driver for us in the U.S., they're distributed principally 3PL in Europe. And so as a result of that, our 3PL business is our fastest-growing business. But one thing I do want to add is from an international standpoint, we did see a turnaround in our global specialty logistics business in the fourth quarter, and we have both revenue growth and profitability growth there. And so we do feel much better about the international business in fiscal year '26 and are guiding to operating income growth there.

Yes, let's stick on that, World Courier, the Global Logistics business. Obviously, you had -- you're coming off a difficult year, so it's an easier comp year. But as you mentioned, it does seem like there's really kind of durable tailwinds there, at least in the near term. What are you seeing on the clinical trial front, on the biopharma funding front, which is so important to this business?

Yes, that's a great question. And World Courier has been a fantastic business for over a decade. It's really had terrific growth. And fiscal year '25 was a down year for us. As I said, we saw improvements in volume, both volumes and profitability had good volume growth and profitability growth in the fiscal fourth quarter. And so we are seeing some market improvements there, which give us some optimism. We also have seen some internal improvements that we've made. And so it's been a great business for almost the entire time that Cencora has owned it with fiscal year '25 being the exception. And we have optimism for that business going forward because of the market, and we're also well positioned given the -- given the specialty distribution that we do related to clinical trials as the cell and gene market grows, we think that World Courier is very well positioned to participate and lead in that market.

Yes. Yes, makes sense. And one of the other more challenging or challenged areas of the international business, that doesn't seem to have recovered quite yet is the PharmaLex business. Can you just maybe give us a little bit more detail on what actions you're taking there to kind of streamline the operations. And I know that you're going to be taking -- keeping the more attractive parts of that business. How have the more attractive parts performed relative to your expectations to kind of separate those 2 out for us?

Yes, absolutely. And I'll take a step back and say that Bob Mauch, our CEO, became CEO about 14 months ago, and Bob established 4 strategic drivers. And one of those strategic drivers is prioritizing growth-oriented investments. And that's why you'll see our investments in specialty and MSOs. But what this meant is we really looked across the portfolio to determine what were going to be the best businesses long term that really had competitive advantage or brought competitive advantage to the balance of the enterprise. And so what we did is we set up the other segment, and we've moved some businesses into the other segment, which we're evaluating strategic alternatives.

And these are good businesses, but they don't necessarily bring competitive advantage to the balance of the enterprise. And what we did with PharmaLex and PharmaLex had underperformed during the year as we determine what parts of PharmaLex, where do we have the right to win and where are we going to have good growth and what parts of PharmaLex do we feel are okay businesses, but we don't have the ability to win. And so what we did is we decided there in consulting and that consulting business, we're really going to focus on pharmacovigilance, market access and regulatory affairs, which were the bigger part of the businesses performing better where we thought we had an ability to win. And so we have taken that action and kind of we're very pleased with the position that we're in moving forward.

And in those 3 businesses that you're retaining, are they -- did they grow in fiscal '25? Or do you need -- is there some kind of operational change? Or do you need that to turn around as well, and it just fits better within your portfolio?

Yes. Those businesses are both the better performing parts of PharmaLex and the parts where we think we're well positioned for growth and have a right to win.

Got it. Okay. And on that other segment, you're evaluating strategic alternatives?

Yes.

Any time line for when we could potentially see a transaction there?

Yes. We don't have a specific time line. And I want to emphasize, again, that many of the businesses in Other are very good businesses. And by far, the biggest business in Other is our MWI, Animal Health business, and that business has performed very well in its market. But again, we determined it didn't bring competitive advantage to the balance of the enterprise. And so we'll evaluate strategic alternatives, and that would be by far the biggest business in Other. And again, it's a very attractive business in its market. And the other businesses and other are our Profarma distribution business in Brazil, which we own part of. And then the PharmaLex businesses and then also our legacy U.S. consulting business. And again, we're evaluating strategic alternatives, but haven't established a specific time line.

Got it. Okay. Let's end our conversation on capital deployment because it is such an important part of your business given the amount of free cash flow that you guys throw off. You remain committed to returning cash to shareholders. You increased your dividend recently. You're buying back a bunch of shares all the while investing organically and inorganically. So how do you prioritize some of those areas of capital deployment?

Yes, that's a great question and a really important question because, as Daniel was saying, one of the very good things about Cencora is we have really strong free cash flow and we also have very strong return on invested capital, 2 things we're very focused on. And so how well we invest that free cash flow is very important. And we have had and will continue to have balanced capital deployment and we'll really kind of be doing 4 different things. One is continuing to invest in the business. And this year, we'll have capital expenditures of about $900 million, continuing to invest in the business. This will be in infrastructure and technology, and it's higher this year than in past years because utilization trends and volumes have been so strong that we'll be putting money into infrastructure, including some of our specialty infrastructure for distribution.

We'll continue to do strategic acquisitions. A lot of the strategic acquisitions for capital deployment is spoken for, given the OneOncology put-call where we'll ultimately buy the other 65%, and we very much look forward to the opportunity to do that. And then we'll continue to do strategic -- excuse me, we'll continue to do opportunistic share repurchases. And you'll see -- as you've seen over the last few years that we've done opportunistic share repurchases. And then we'll also continue to pay a dividend and grow our dividend. And this year, we increased our dividend growth rate to 9%. And again, our guidance that we put out there, long-term guidance for EPS growth is 9% to 13%. And so we wanted to make sure that our dividend growth rate of 9% was within that range.

And so again, capital deployment is just so important to us given our level of free cash flow, and we'll continue to have that sort of balanced capital deployment, Daniel.

It sounds like you're keeping Bennett busy with all of these things. What was the new title?

Investor Relations and Enterprise Productivity.

Enterprise Productivity. All right. Well, I think we're just about out of time. Jim, Bennett, thanks so much for joining us this afternoon. Very interesting stuff. Thank you.

Thank you.

Thank you.

Thanks, everyone.

Good morning, everybody. Thank you so much for joining us in the room and online. I am Elizabeth Anderson. I am the healthcare services analyst here at Evercore. Very happy to be joined by Cencora. We have James Cleary, Executive Vice President and Chief Financial Officer; and Bennett Murphy, Senior Vice President, Investor Relations and Enterprise Productivity. So thanks so much for joining us this morning.

Glad to be here.

Maybe jumping into the first question. OneOncology has obviously been a great acquisition for you guys and an important growth driver for the business. Given the put/call structure, which Jim, you've been very helpful in calling out and reminding us about this year, thank you and the potential buyout of the remainder, how much capital do we think about that requiring? And then how do we think about the financial algorithm once that business has been consolidated? Let's start there.

Great. Well, Elizabeth, first of all, thanks very much for having us to the conference, and thanks for the excellent work you do covering our company and industry. And I'll very much get to your question. I'll start out by saying, of course, we were really pleased at the beginning of November to announce fourth quarter results and really kind of excellent results for fiscal year '25 and introduce our guidance for fiscal year '26, which includes 9% to 11% operating income growth in our U.S. segment and of course, also included an increase to our long-term guidance.

And really, one of the important things as we look at Cencora is our strength in specialty. And one of the things that really drove our performance in fiscal year '25 and really impacts our guidance for fiscal year '26 and our long-term guidance is the growth in the specialty market and our leadership position in that market, and our results have really benefited, amongst other things, from our sales of products to specialty physician practices and health systems. And so this MSO strategy that we've been pursuing really is the natural evolution of one of the most successful parts of our business. We're strong in distribution to specialty practices and health systems. We have the wraparound services, including GPO. And now we have the management services capabilities, which is really kind of an extension of this highly successful part of our business.

We've been really pleased with the acquisition of RCA and the impact that, that had on our margins and operating income growth in fiscal year '26. And getting to your question now, we really look forward to the acquisition of OneOncology when we're able to do that. We invested in the business starting in fiscal year '23, and we own 35% of the business and the other 65% of the business is owned by a private equity firm and the physician practices. We do have a put/call structure in place to ultimately acquire the rest of the business and we really look forward to that. Right now, OneOncology doesn't have a big impact on our net income because it shows up in other income, and it's really 35% of the net income of the business and in that it's owned by a private equity firm.

It's a leverage business. And so it has a relatively small impact on our results now, but will have a much bigger impact when we own 100% of the business. And we put out there publicly kind of what the kind of put/call pricing is and so we very much look forward to owning all of the business. It will have a positive impact on our operating income and we think it will make strategically a lot of sense because we'll have all these services that we're offering to one of our most important customer groups, and then we'll also start to be able to get synergy between the OneOncology MSO and the RCA MSO.

One of the areas where RCA leads is clinical trials. It's the biggest provider of clinical trial sites in the retina market. And so kind of expanding that and making that an even bigger presence for OneOncology is just kind of an example of the types of synergies we think we can get in addition to the back-office synergies.

Got it. And is that also an example of something that maybe you can't really start on until you have that full ownership? Like I'm just trying to think of what you're able to do sort of with the current stake versus full ownership and how much of a difference that makes in terms of that synergy capture.

Elizabeth, that's an excellent question. And of course, we can start to work on some of those things now, but we really don't want to drive the full synergies until we own the full business. And that's one of the reasons why we very much look forward to being able to acquire the other 65%.

Got it. And at that point in time, whenever that exact -- the execution of that put/call structure happens, -- is that when you think about you might update the sort of algorithm for the incorporation of that? Or is that still something that you're going through the decision-making process about.

Yes. I think once we're fortunate to acquire the other 65% like we do when we acquire businesses, we'll kind of update on the impact that, that will have, for instance, to our operating income.

Got it. Okay. And then maybe thinking about the MSO platform more broadly, you've obviously just talked about extending the clinical trial capabilities across OneOncology from RCA, which is very interesting. How do you think about like where we are on the physician adoption curve in terms of that full MSO model? I assume that everybody has sort of something at this point, but just -- it's a little bit hard to -- from the outside perspective to understand how much of something they have and sort of what the broader opportunities are maybe within practices as well?

Yes, that is a great question. And we think this will be a growth opportunity for us for quite some time in both the oncology market and the retina market. And from the standpoint of Cencora, as you know, everything we do is pharmaceutical-centric. And so the reason that we've really been focused on oncology and retinas, they're, by far, the most pharmaceutical-centric MSOs. And as we look at the growth opportunities, there's going to be very good growth opportunities, both inorganically and organically. Inorganically, we've seen good growth in new physicians joining the RCA practice.

And one of the reasons is because not only can they practice medicine, but they can be involved in the clinical trials, which is very attractive to the younger doctors getting out of school. But then we also see in that market good inorganic growth opportunities. There is a lot more room for acquisitions in that market. And so we see very good opportunity there as we really kind of analyze what is available from an acquisition standpoint in that market. And really, that's the same thing in the oncology space. There's probably been more consolidation of the larger practices in oncology, but there's still some opportunities there, but a lot of opportunities for acquisitions into the MSO of smaller practices there in that market.

And then, of course, the types of services we're providing are the practice management services, the administrative services, all of the back-office services, which make it better for the physicians because they can really focus on the practice while we do the back office sort of things. And again, it's a real natural extension of a strong part of our business because we're doing the distribution services, the GPO services and now all of those back office services also.

So it gives you some more organic momentum behind that, too. Is there anything I think from that group of services that can be transferred into your health system business, like obviously, that's a different model and a bit of a different thing. But is there any sort of leverage on that side? Or should we continue to think of those as sort of very separate from that perspective?

One of the really good things about Cencora is we lead with market leaders. And in the health systems, we have a very strong presence with the NCCN hospitals that have very strong presences in oncology. And so we -- a number of the kind of benefits that we can bring given our strengths kind of can extend from physician practices to health systems. And I don't want to overstate this, but kind of one of the examples would be GPO kind of the GPO capabilities that we have in specialty physician practices. That is an example of what we have done to extend that into the health system space.

Okay. That's super helpful. And you've obviously talked about the priority of purchasing the remaining stake in OneOncology. But with the projected free cash flow of maybe $15 billion to $20 billion by decade end, how do you prioritize that? Okay? So that happens. And then sort of how do we think about the rest of the priorities?

Great. Well, of course, one of the really good things about Cencora is we have very strong free cash flow. And so capital deployment and how effectively we deploy capital is critically important to us, and we'll continue to have balanced capital deployment. The first component of it is investing in our business. And this year, we've indicated that we'll have about $900 million of CapEx which is higher than we've had in the past. And the reason why is utilization trends in our market have been so strong that we're really making some additional investments into infrastructure across our distribution businesses, but particularly in our specialty business. So investing in the business always has a good return on invested capital for us. Then there'll be strategic acquisitions.

And the biggest example will be buying out the other 65% of OneOncology. And so that means that a good deal of our capital deployment from an acquisition standpoint is already spoken for. Then we'll continue to do opportunistic share repurchases, and we've done opportunistic share repurchases through the years as you've seen over the past few years. And then we'll return capital to shareholders through dividends also. And we recently increased our dividend growth rate. We grew our dividend most recently by 9%, and our long-term guidance for EPS growth is 9% to 13%. And so that's why we increased the dividend growth rate to 9%.

Okay. No that makes sense. Obviously, with the reclassification that you guys just did, part of, I think, if we think about international, how do we think about the part of PharmaLex went into other? How do we think about sort of the revenue and maybe the AOI split among Alliance, World Courier, remaining PharmaLex and sort of let's talk about some of the underlying drivers of those businesses.

Sure. So the remaining international segment is still the largest piece of that would be Alliance, which includes the Alloga 3PL business. And then you'd have World Courier and Animar, the Canadian operations and then PharmaLex and there's an order of magnitude on the operating income side. The Canadian business is more like distribution. So it's a little bit -- it's more representative of the -- on the revenue side, but still Alliance is the biggest on the revenue side. So I think the drivers there still consistent that you have general pharmaceutical distribution demand as an underpinning for the segment because of Alliance's distribution business.

But then as a greater proportion of its operating income coming from those higher-margin parts of the business that have higher growth opportunities over the long term, which would include Alloga's 3PL business, World Courier, which certainly had a challenging 2025, but we think has a good long term -- will return to a good long-term growth algorithm. And then the Canadian business has been a consistent performer and could grow over the years. And then the PharmaLex is more -- we've adjusted the size of PharmaLex and it specified its offerings to be more targeted and aligned with where we think there's really good opportunities for us to compete but it's much smaller now with the carve-out of some of that into the other segment.

And of course, our international business is about 15% of our operating income.

Yes. And maybe just to double-click on 1 thing that you said. The 3PL business you said is sort of specialty is really driven by that in Europe. And maybe for some of the more U.S. or North America focused investors, why is that -- is that just a structural difference of the market there? Is there anything you can sort of just to understand that sort of difference there why that's such an important driver?

Yes, it's a structural difference. So those types of products would typically go straight from the manufacturer to a health care facility to be administered there, not an independent doctor here even like a clinic here. And for that channel, it would -- for that market, it would generally go through the 3PL service provider who would be taking title.

Got it. No, that makes sense. And I think you've obviously in fiscal '25, talked about sort of World Courier and PharmaLex being impacted by sort of more muted clinical trial activity, but it seems that, that started to improve in the fourth quarter. Could you sort of talk about the underlying drivers for World Courier and then the PharmaLex business? And then where you're seeing those as we start to move through 2026.

Yes. So we did see stabilization in the fourth quarter for World Courier with unit and profit growth. And it wasn't enough to put the segment back into profit growth for the quarter, but it was good nonetheless to see that and we expect that to continue to pick up as the year goes on. But the big thing for those 2 businesses is generally how many products are advancing into later phase at clinical trial activity. Neither one is necessarily in that early part of the clinical development side, where it will be more in the testing side because you get more into their businesses as you get into getting ready to move testing samples across the world and then eventually getting ready to commercialize therapies across the world.

Got it. And why would you say that World Courier seems like it may be inflected a little bit further? Is that sort of just differences in the operations of those 2 businesses? Or do you think that's maybe too nuanced to point and we should just sort of think about them both sort of on the recovery trend at the respective pace, but maybe roughly similarly.

Yes. I think it's differentiated between the 2. I mean, of course, both of them were impacted by the macro over the past year or so. But if we look at the World Courier business, I mean, it has been an excellent business for over a decade that Cencora has owned the business. And it had a down year in fiscal year '25 but rebounded and had profit growth in our fiscal fourth quarter, as Bennett was saying, and it should be a very strong business over the long term being a market leader, always helps in a market that should perform well over the long term, being the leader in doing logistics for clinical trials, and it has the capabilities as the cell and gene market grows to be strong there.

And so we just feel that's a very well-positioned market leader for the long term. And the PharmaLex business had been impacted by the same macro things. And as Bennett said, that was a situation where we decided which parts of PharmaLex were the areas that we have the right to win, and we determined that those stronger parts of PharmaLex were pharmacovigilance and market access and regulatory affairs. And then we put -- took the other parts of PharmaLex smaller parts and put them into our other segment, which we recently established and for the businesses in the other segment, where evaluating strategic alternatives.

That makes total sense. And obviously, the regulatory environment and the changing regulatory environment has been a big theme of the last 12 months. I think maybe just sort of going through some of the different things. One thing that was sort of new this year, at least in terms of some of the things on the physician fee schedule was the bona fide service fees. So as they continue to sort of think about that? How do you think about the potential impact of that? Obviously, very detrimental for your customers which are the cheapest cost of care in many cases. So how do you sort of think about the potential for the emergence of that, what you guys are doing in your business and sort of how you see that developing over the next couple of years?

Yes. I think it is the most efficient site of care, certainly, and that sometimes gets underappreciated. It's also highest quality site of care. And I think we spend a lot of our time advocating on behalf of community-based providers, along with many others in the industry. And that -- it's really important that we bring that voice and open that door to then have thoughtful strategic discussions on what potential changes are being considered and how they could have intended impact or how they could have unfortunately unintended consequences. And I would say that change is reflective of that conversation certainly resonating to avoid some unintended consequences.

And we continue to do that on behalf of community providers in the future as well. And that's something we've done for a long time. And as you can imagine, it's an important dialogue because those unintended consequences typically would -- could lead to less patient access, lower quality of care and just more difficulty in servicing a part of the patient base that is dealing with very complex life threatening issues. And the last thing you want to do is add more complexity or variables to their care.

Yes. No, that makes sense. So it seems like almost -- and it's not like that's something that changes over the next dynamic. So probably something we should expect to not have as much of maybe not even a peer or not be an impact going forward in a future year either?

Yes. I mean it's a topic that comes up every year for the last 15 years? And I think clearly, the underlying message resonates well once you get to the -- what is the actual quality of care and then what is the efficiency of that side of care.

Yes. No, that makes sense. And then maybe turning to IRA. CMS implements price negotiations, how do we think -- how should investors think about the impact on drug distributors? And can you talk about maybe some of the differences between Part D and Part B?

So -- and just for IRA specifically?

Yes.

Yes. So it will depend. We've seen some manufacturers take some on the Part D side, take some actions and to the extent that there are things that have -- that impact us then we go back and seek to renegotiate. I think there's still some TBD to-be-determined things on the Part B side. But it's -- we think we are very defendable value proposition. And certainly, there's -- the focus is something else. So clearly, we stand by that value proposition and continue to work with the key stakeholders to make sure that we continue to drive that value. But still some TBD on the Part B side, but certainly on the Part D side, a lot of that has to do with pricing dynamics that occur outside of the distribution channel anyway.

Yes. And I think you made the good point also earlier when we were talking that there's some changing in maybe the list price on the Part D drugs, but obviously, you guys have successfully navigated changes like that before in terms of the insulin without seeing impact on the gross profit. So it seems like something could happen again? And then part B, to your point about the physician reimbursement, if that same strategy were to be employed on the Part B side, then that would also negatively impact the physician reimbursement so like may not be the viable strategy in that channel.

Right. So what are the actual mechanisms for adjudicating will be the key determining if it has that necessarily unintended consequence or not. But we've had good dialogues and good conversation to make sure that stakeholders are aware of the impact on community providers.

Got it. Anything else on sort of the drug pricing policy front? I know this is something that changes frequently. So not to make a blanket statement forever. But anything else you guys are focused on? Or do you think those are sort of the main potential endpoint.

No, I think -- we've been pretty consistent in how we've communicated around it. And while the underlying message has sometimes change from 1 day to another, our message has not changed. And I think that continues to be a focus on access to pharmaceuticals, particularly on the generic side, a focus on affordability for patients, which is typically something that is once again occurring outside of that WACC price discussion. So no, there's no change to how we're talking about it. And I think clearly, while it's been -- there's been a lot of noise over the last year, I think we feel that the key messages are coming through and what we're seeing happen, and that's not disrupting supply, which would have been our biggest fear on some of those items.

That makes sense. So maybe turning to other parts of your business. In terms of hospital and health system outperformance, you've consistently cited strong hospital and health system performance. If we exclude in your core business, some of the COVID or Florida cancer center, RCA, like your core AOI growth in terms of U.S. health care has been probably north of 20%, well above your long-term 6% to 9% target utilization so has obviously been strong, but we haven't seen sort of the same outperformance necessarily from everyone across the industry. So how do we think about that -- the sources of that outperformance? And how much would you say is sort of hospital maybe IDN penetration? Or what would you characterize as the other main contributors there?

Yes. Interesting is we have had outperformance for quite some time. And when we explain it, we're mostly just repeating the same thing because it's really been driven by consistent things for some time, and we talk about strong utilization trends, we talk about strong sales to physician practices and health systems. And also, we talk about broad-based performance across our U.S. segment. We really have had broad-based performance. And one of the things that's really driven our strong results is that some of our very biggest businesses are growing the fastest. And that's sales of specialty products to physician practices and then also sales of specialty products to health systems. And again, getting back to leading with market leaders, we have some of the largest NCCN hospitals as customers.

And so their use of specialty products is very high, and we have other wraparound services, as we talked about that we also offer to those hospitals. And when we introduced our guidance for fiscal year '26, our guidance for the U.S. segment is 9% to 11% operating income growth and as we referenced a little bit earlier, that has a net 1% headwind included in it, and that's an extra quarter of RCA because we acquired it at the beginning of our second quarter last year and then also not having 3 quarters of an oncology customer that was acquired by a peer and so if you back out those 2 things, it's a net 1% headwind. So without that, our growth in the U.S. segment for guidance for this year is 10% to 12% growth and so we expect to continue to have very strong performance, but we just are not guiding to the level of outperformance that we've had in the past.

Yes. But I mean that goes back I mean, to the extent that's one of the reasons that many investors like distributors because you're so consistent in the performance, but it goes also back to, I feel like what I've been hearing you guys say for 15 years is you align yourself with sort of the fast-growing customers, execute well, et cetera, and then that sort of takes care of itself. Is that also fair?

Yes. Leading with market leaders. And then when Bob Mauch became CEO about 14 months ago, he established 4 strategic drivers and one of the strategic drivers that he established is prioritizing growth-oriented investments and that meant being very intentional and looking across the portfolio about what parts of our business could grow fastest over the long term. And that's one of the reasons why we established the other segment, which includes businesses that are very strong, but we really wanted to focus on growth-oriented investments and also investments that really bring strategic advantage to the balance of the enterprise.

Yes. Maybe talking about the core pharma distribution business a little bit, I think one thing investors have been a little bit increasingly focused on over the last few months is sort of the next wave of oral solid generics and obviously, that's an important contributor to your core pharma distribution, nonspecialty business. How do we think about the opportunity there? Any big differences you're seeing in this upcoming wave versus what we might remember from sort of the 2010 to 14-ish type of wave. And you guys have evolved your pricing model a little bit since then. So maybe could you double click on that a little bit and help us to better think through that?

I'll start out and then Bennett don't hesitate to add. And so yes, there really will be a very nice wave over the next several years of generic launches and will certainly be a beneficiary of that, and it's something that we're certainly looking forward to. As we look at the impact it will have on Cencora, it will certainly be a positive impact. It won't have as much of an impact as it would have had, say, a decade ago because what we really did over a period of time once generic deflation started is we really rebalanced our contracts so we make a very fair profit on brand, specialty and generic products. And so it will certainly have a positive impact, but it wouldn't be as positive as it was a decade ago because of the rebalancing of our contracts, which is something we always do.

Yes. No, that makes sense. And then obviously, we have the upcoming more Part B biosimilars on the other side, which are a nice also a profit tailwind. That's a different bit of a market. And I learned a new nuance from Bennett's comments, we were just talking earlier in terms of the reference products. So if we're thinking about that market today, how do you think about that opportunity as sort of we look at the pipeline going out into '28, '29 for the rest of the decade?

For which piece of it?

For the Part B biosimilars.

I think it will be positive, certainly for us, certainly for our providers and most importantly for patients in the U.S. health care system as you make room for new innovation that's coming. As you think about that space, you have the strong underlying demographic trends setting up for long-term demand, you have new innovation coming to market that will -- that could become standard of care. You have existing innovative products in the market that are the standards of care that are going to move into -- move out from under patent protection. It's a good part of the market for us for the innovator side, is a good part of us for the non-innovators side, and then you have that underlying organic growth driver from demographics. So it sets up to be a really good part of the market near term, intermediate and long term.

Yes. No, that makes sense. And I guess that nuance about being able to potentially change some of your economics slightly with the innovator drugs as the drug goes biosimilars, a little bit of a difference on versus the like what we think of the branded and oral solid market too, right?

Yes. That's right.

Okay. That makes sense. Maybe going back to 2026, I think your fiscal '26 U.S. health care revenue guidance is lower than your AOI growth. So can you talk about what's driving that sort of revenue versus profit mix shift?

Sure. And I'll comment on a couple of things on the revenue front and then also on the GP front. And so from a revenue standpoint, some of the things that causes our revenue growth to be slower than our operating income growth is we had a large grocery customer that we no longer have, and that was a very low-margin customer. So impacts revenue but does not negatively impact adjusted operating income. And another thing would be the conversion in Part D to biosimilars that will cause our revenue growth to be lower but doesn't cause our adjusted operating income to be lower.

And then really, a third thing would be MSOs and RCA is a lower revenue but higher adjusted operating income business. So that causes adjusted operating income to be higher. And one of the things about RCAs, we've always had them as a customer but we don't double count the revenues. We don't count -- double count our sales to RCA and then RCA sales. And so it doesn't have a big impact on revenue growth but has a significant impact on operating income growth.

So then should we think about as we get into longer term than 2026 and obviously not asking for specific '27 guidance at this point, but just within the longer-term framework like how do we think that mix. Should those generally get a little bit closer as we go forward? Like how does that mix work sort of over the longer term?

Yes. And of course, there are always so many moving pieces there. And so it can -- there are so many things that can move it around and there could be, for instance, GLP-1s, which would cause one thing to happen and investments in MSOs, which would have the opposite impact. One would cause our margin percentage to go down, one would cause our margin percentage to go up. And the interest -- and those are something we track, and there are so many moving pieces, but I think probably an underlying comment to make is one of the really just great things about our business is we have a very strong return on invested capital, and that return on invested capital can come from high revenue, lower margin percent, but good gross profit dollar products or it could come from higher-margin businesses, but that's going to focus on return on invested capital is something that we really benefit from and a lot of it's driven by our working capital profile.

That makes sense. And just on the grocery so the grocery store customer, we have how many quarters of that left?

One.

One. So that's almost done. And then as we for GLP-1s that you just mentioned, we think about the upcoming drivers of the -- some of the oral pills that potentially coming about should we think about that and potentially shifts in the economics there going forward?

Yes. And so -- of course, we've consistently said that GLP-1s are a real driver of our revenue growth, but they're minimally profitable for us. And as the oral solids come out and gain share. They'll be a little bit more profitable for us because we won't have the same handling costs because, of course, they won't be in the cold chain. And so the handling costs will be lower and the operating income will be a little bit higher, but I would say there's still, as we do, looking at our fiscal year '26 plan, there's still what I would describe as minimally profitable for us. And it's something that we've always been very transparent about each quarter. We indicate how much gross -- excuse me, how much revenue growth we're having from GLP-1 products.

Got it. No, that makes sense. And maybe one last one on sort of the MSO business. Like obviously, PE has been rolling some of those MSO assets up. You guys have a very drug-specific -- drug focused strategy on that front. Why is it in your view that distributors are better owners of MSO assets versus private equity?

Well, I would say we're the best position of really any of the players because obviously, you have other players in the market that have bought MSOs. Certainly, versus private equity we were longer-term holders, but I think holistically, if you get down to it, we have aligned incentives. We are -- specifically on the pharmaceutical side, we're picking those -- as Jim said, we're picking those specialties because they are pharmaceutical-centric standards of care. And we think that we -- with our pharmaceutical strategy with those specialty providers being -- having that -- the course of treatment that they're typically utilizing being pharmaceutical, we have the opportunity to be a really important strategic partner for pharma long term and also helping to contribute to positive outcomes from -- for patients in the near term, long term.

And I also say that we're -- because we're of who we are. We're not necessarily inclined to go into the clinical side to then -- to disrupt the clinical decisions between doctors and patients. And letting both RCA and OneOncology, are doctor-led organizations, and we intentionally picked -- align ourselves with those and we continue to expect they make really strong decisions that are in the best interest of their patients. And sometimes with other types of MSOs, there's been challenges there, but for other parts of the industry. But for us, we think that that's a really good strategy and that makes us positioned well for the long term.

Yes. Bennett, I'll just add 1 thing. I mean, everything you said is absolutely right. And another thing is that I talked about Bob Mauch's 4 strategic drivers. One of them is digital transformation. And so I think you'll see us with MSOs making really important investments in systems because the systems and data and analytics over the long term will be really important. And so you asked how we would compare to other owners. And I just think with someone like us focused on digital transformation being a long -- very long-term owner would kind of do those sorts of things as opposed to a short-term owner, which will ultimately -- what we're going to do have based on benefits for physicians and patients.

Yes. No that makes sense. And then maybe turning to some of the direct-to-consumer models or Trump Rx which has been in the press recently, we're seeing increasing momentum behind these from manufacturers, digital pharmacies, et cetera. Given your position as a wholesale distributor, and you guys are the logistics backbone for many of these products, like how are you evaluating the risks and opportunities of this DTC shift?

Like is there -- do you sort of see it? It's just like, okay, this is another growth avenue and is that sort of the thing? Or are there sort of different like services or mix that you could provide that also create an additional opportunity in addition to the growth?

Yes, I would say that they're generally solving -- attempting to solve for either a problem with accessing a prescribing physician or a problem with accessing affordable price. But generally or consistently, they're using the existing pharmaceutical supply chain is just solving for one of those 2 problems, or both of those 2 problems. To the extent it's -- and much of it is -- well, prior to the government discussion was singularly focused on trying to add new scripts to people who were not able to get on either due to that lack of physician interface or the affordability side because of the nature of their benefit designs.

So I think to the extent that it's really trying to add more scripts to the system that aren't getting written or filled because of some of those challenges. It's just something that's occurring, and we're part of it in a number of situations because, like I said, a lot of these programs are direct in name, not direct in physical movement.

Right. And so you would probably argue that most of those scripts are additive to the system in general as opposed to a transfer from a more traditional channel?

Yes.

Okay. You're not Okay. Perfect. All right. So maybe just in our last couple of minutes, if we sit here and we're sitting here in December 2026, what are you going to be most excited about that sort of happened over the past 12 months and then what are you sort of excited about going forward at that point? I'll start with you, Jim, and then Bennett.

Yes. And I'll go back to the 4 strategic drivers. Prioritizing growth-oriented investments, I'll be really pleased by kind of what we're doing in the specialty market and kind of growth in the specialty market through distribution or services and in particular, MSOs. I'll be really kind of pleased. One of the other strategic drivers is productivity, and we're a highly efficient business but we want to even get more productive and not it to be just initiatives, but for it to be a capability throughout the company. And one of Bennett's responsibilities as we put him in charge of our global productivity efforts.

So I want to see us just continue to get more efficient, which is really going to be good for our customers and ultimately, for patients also. I'm excited for what we're going to do with regard to digital transformation that I talked about. And for talent and culture. And so it's kind of those sorts of things I'm excited about and then what that's going to translate to into continued strong results, which will ultimately benefit all of our stakeholders, our shareholders, our customers and our team members.

Yes, that makes sense. Anything from your side.

No, I think that was fulsome. I mean clearly, we play a really important role in the health care supply chain and the patients getting access to their pharmaceuticals contributes to their short-term and long-term health and I think we'll continue to see that positive utilization trends.

Okay. Well, thank you guys so much for joining us today, and thanks for everyone listening online and in person.

Thanks, everyone.