Cencora Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Elizabeth Anderson - Evercore ISI - Analyst : Maybe I just wanted to dig into the strength in the [AOI] of the U.S. health care business. Given that strength that we saw in the quarter, how do you kind of see that playing out for the rest of the year? And then if we talk about some of the drivers on a longer-term basis, how do we see the sort of continuation of those over the longer period?

Question: Michael Cherny - Leerink Partners - Analyst : Again, congrats on another strong beat and raise. Maybe Bob to parse through Elizabeth's question a little bit more, and particularly dive in more on specialty. Cencora has a long history of being a market leader on all things specialty oriented. As you think about the contributors of specialty to growth, how much can you unpack in terms of what you see as market growth versus share gains versus additional value-add services and add-ons be able to build out. You're very much -- we'd agree with the fact that you're in the right place on a go-forward basis relative to where the market is growing. But curious, as the market continues to grow in various different pacing where you see the best opportunities for outperformance beyond that.

Question: Lisa Gill - JPMorgan - Analyst : Congrats on the quarter. I wanted to focus on DC and the thoughts around tariffs. It's believed that the Trump administration will come out with something in the next week or so. Can you just remind us on each side of your business? My understanding would be on the branded side, kind of similar to what we saw on the flip side with insulin when prices go down, your economics kind of stay the same. Is there any variability if we were to think that prices go up? And then there's been a lot of questions on the generic side. If we think back to when there was generic price inflation. And again, a tariff could add some kind of inflationary component to this. How do we think about each of those components and how it impacts your business and how you're thinking about it for your customer?

Question: George Hill - Deutsche Bank - Analyst : I've kind of got a two parter. Number one, James, if you could kind of quickly walk through the RCA impact on gross margin expansion in the quarter, I think that would be helpful because there are some moving pieces there relating to the way the equity -- the non-owned equity stub is being treated and the eliminations from the sales into the practices. And then my second part would be just kind of the growth where you guys have set yourselves up in specialty is amazing. I was just hoping you might give us any quantitative color on how much of the US drug business is now like the Part B business versus the Part D business and maybe kind of the growth characteristics you're seeing in each of those kind of trying to think of the business in kind of the two big segments from a distribution perspective.

Question: Charles Rhyee - TD Cowen - Analyst : Yes, congrats on the quarter. I actually want to ask about international real quickly here. Obviously, the guidance is taken down a little bit here. And -- just wanted to maybe dive a little bit into more about the -- your comments about softness in the specialty logistics business. You mentioned that trial activity is subdued. Can you talk a little bit more about what you're seeing here? Obviously, there's a lot going on in the pharma market, particularly with potential tariffs and a lot of things that the administration is undertaking here currently. Maybe you can give us a sense for what you're hearing from clients from pharma companies in terms of sort of what they're seeing currently and how they're approaching sort of sort of business development here and clinical trial starts in particular. And when you're saying it's subdued, does that mean you're just seeing a lot of delays. Maybe you could just kind of give us a little bit more details on that, that would be great.

Question: Eric Percher - Nephron Research LLC - Analyst : Appreciate the detail on RCA. And I'd like to ask a question kind of about the MSO operations more broadly. I know that each of them looks quite different and the share of income can be quite different. But can you help us with your view of the profit stream. And we've talked a lot about the opportunity. When we think about how much of that opportunity is tied to drug versus medical or government versus commercial can you provide a general framework for that, both to think about the opportunity and the risk of some of what is occurring in the market.

Question: Steven Valiquette - Mizuho Securities - Analyst : Congrats on these results. You had a question that was kind of similar to Charles, just on the international solutions and your comments about the clinical trial activity remaining subdued. The only kind of follow-up question there were just -- I can't recall at the top of my head just how fragmented versus how concentrated your customer base is in that business. So where there may be just some customers where activity clinical trials was subdued or was a definitely a widespread phenomenon across the majority of your book? And then is there any chance are you able to put a number just on the approximate percent decline in clinical trial activity you're seeing across your book? I mean we're talking single-digit decline double digit. Just wanted to get just some rough sense for that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 12:30PM, COR.N - Q2 2025 Cencora Inc Earnings Call

Question: Allen Lutz - Bank of America - Analyst : Congrats on the really strong results here. Bob, you called out really good growth in the specialty provider channel. Can you talk a little bit about growth in your different verticals there? Was there any standout as we think about growth in oncology versus retina? Are there any other specific areas to call out? And then as you think about the utilization rate from 2024 into the first quarter of 2025, was there any deceleration, any acceleration either at the top level or within any of the specific verticals you operate in?

Question: Daniel Grosslight - Citi - Analyst : Congrats on the quarter here. I had a similar question to [Don], but maybe I'll ask it in a bit of a different way. health system seems to be getting a lot more airtime this quarter than in previous quarters. So I'm just curious why that is? Are you seeing anything particularly strong in health systems this quarter on the provider side? And as we think about the investments that you need to make to support health systems, is there anything that you would call out as kind of a near-term investment in that channel?

Question: Kevin Caliendo - UBS - Analyst : I just had a quick first one, which is just trying to understand the math on the EPS guide increase. So $0.14 came from [HCA]. And can you just -- or RCA, excuse me, and can you remind us when you said that there was a better than sort of the loss of COVID was half. What was the expectation? Like what did that actually mean in terms of EPS? And I apologize I couldn't find it in my notes. And then the actual -- the real question is of the remaining sort of upside to guidance. I know you keep saying better specialty and the like, are you actually getting better economics anywhere through the portfolio than you had been before? Is it a reflection of your fixed costs and the fact that you've kept your operating expenses ex RCA flat? I'm just trying to understand or is it simply mix? I'm just trying to understand where the upside is coming from. If it's specific to, hey, what we're actually generating better economics on similar drugs or if's it our cost base is lower and utilization is higher and we're able to run that through or our overall mix is better such that the margin is better.

Question: Erin Wright - Morgan Stanley - Analyst : I understand you don't have future share buybacks in the guide and the focus on -- is on deleveraging near term. But just as you think about the rationale behind and other potential MSO type deals, I guess, will the RCA deal help to explain your future focus from an M&A standpoint as we think about your learning so far there? And then a second part of my question, maybe this is somewhat related to Kevin to, but like in terms of the economics, is there any sort of change from a GLP-1 perspective? I mean, you mentioned the dynamic into the second half, which should be just more of a revenue dynamic from my understanding. But any sort of potential in terms of improved economics are like presumably oral solids could be more favorable for you as well. But how are you thinking about that segment, too?