Cencora (COR) Q4 2026 Earnings Call Transcript

DATE

Nov. 4, 2026

CALL PARTICIPANTS

• Senior Vice President, Investor Relations and Enterprise Productivity - Bennett S. Murphy
• President and Chief Executive Officer - Robert Mauch
• Executive Vice President and Chief Financial Officer - Eva C. Boratto

TAKEAWAYS

• Revenue -- $337.4 billion for fiscal year 2026, representing 5.0% growth driven by volume increases in both the U.S. Healthcare Solutions and International Healthcare Solutions segments.
• Adjusted Diluted EPS -- $17.97 for the full fiscal year, a 12.3% increase from the prior year reflecting operational growth and contribution from the OneOncology acquisition.
• Q4 Adjusted Operating Income -- $1.2 billion, up 22.1% year over year due to momentum in specialty distribution and focused execution across pharmaceutical distribution businesses.
• Specialty Distribution Revenue Guidance -- approximately $100 billion for fiscal year 2027, as management anticipates specialty products will remain a central driver of long-term growth.
• GLP-1 Q4 Revenue Impact -- $2.8 billion increase year over year, reflecting continued high demand for medications labeled for diabetes and weight loss.
• Manufacturer Price Reductions -- $2.8 billion headwind to revenue growth in the fourth quarter, driven by list price declines for certain brand pharmaceutical products.
• Adjusted Free Cash Flow -- $3.8 billion for fiscal year 2026, exceeding prior guidance due to favorable year-end volume, product mix, and timing.
• FY27 Adjusted Diluted EPS Guidance -- $19.40 to $19.75, representing headline growth of 8% to 10% or 10% to 12% when excluding the anticipated impact of the MWI merger.
• FY27 Capital Expenditures Guidance -- approximately $1 billion, directed toward U.S. supply chain infrastructure, digital transformation, and MSO platforms.
• Share Repurchases -- $1.25 billion in targeted repurchases for fiscal year 2027, following $1.5 billion returned to shareholders through repurchases and dividends in fiscal year 2026.
• Quarterly Dividend -- $0.66 per share, representing a 10% increase and the 22nd consecutive annual increase for the company.
• MSO Operating Income Contribution -- 10% of total enterprise operating income in fiscal year 2026, driven by the acquisitions of Retina Consultants of America and OneOncology.
• OneOncology Financing Debt -- $3 billion in senior notes and $1.5 billion in term loans issued to fund the acquisition, leading to a projected interest expense of $490 million to $510 million in fiscal year 2027.
• Specialty Pharmaceutical and Provider Services Guidance -- 18% to 21% operating income growth for fiscal year 2027, benefiting from the wraparound contribution of the OneOncology transaction.
• Pharmaceutical Distribution and Services Guidance -- 2% to 4% operating income growth for fiscal year 2027, including the impact of a previously disclosed customer volume shift and currency headwinds.
• Adjusted Effective Tax Rate Guidance -- approximately 20% for fiscal year 2027, compared to 19.5% in fiscal year 2026.
• Divestiture Revenue Impact -- 150-basis point headwind to fiscal year 2027 revenue growth expected from the sale of ProPharma and the anticipated merger of MWI Animal Health.
• MWI and Covetrus Merger Impact -- $0.35 per share headwind to fiscal year 2027 earnings based on an assumed mid-fiscal year closing.
• International Healthcare Solutions Q4 Operating Income -- $152.1 million, a 16.4% increase on an as-reported basis driven by strong program win rates in Canada.
• U.S. Healthcare Solutions Q4 Revenue -- $78.3 billion, a 5.4% increase reflecting unit volume growth in specialty products to health systems and physician practices.
• Specialty Logistics and 3PL Performance -- double-digit operating income growth in the fourth quarter, resulting from investments to manage increasingly complex pharmaceutical pipelines.

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RISKS

• Mauch noted that strategic divestitures of businesses in the other category "can cause near term financial headwinds" while the company redirects resources to higher-value areas.
• Boratto warned that segment operating income growth expectations for fiscal year 2027 include an "approximate $20 million headwind related to our European distribution business resulting from the strengthening of the U.S. dollar."

SUMMARY

Cencora, Inc. (NYSE:COR) reported fiscal year 2026 revenue of $337.4 billion and introduced a new operating model to consolidate its specialty pharmaceutical services and physician provider support under a single leadership structure. Management reported that this transition, which creates the Specialty Pharmaceutical and Provider Services and Pharmaceutical Distribution and Services reporting segments, is designed to enhance strategic execution and provide greater visibility into high-growth specialty areas. The company stated that the divestiture of noncore assets, including ProPharma and MWI Animal Health, aligns its capital allocation with its pharmaceutical-centric strategy, despite causing near-term financial headwinds.

• CEO Mauch noted that specialty biologics now account for over 50% of all pharmaceutical spending in the United States, having grown 80% over the last 5 years.
• Management expects more than 100 new oncology products to launch through 2030, necessitating specialized clinical logistics and distribution support that the company has built at scale.
• CEO Mauch stated that the new operating model consolidates specialty assets under one leader to "elevate the voice of our customers" and improve strategic execution.
• The company reported delivering over 100 million packages and shipping nearly 5 million units daily, using this scale to drive differentiated value to health systems and pharmacies.
• CFO Boratto confirmed that the long-term growth algorithm remains 7% to 10% for operating income and 10% to 14% for EPS, with the specialty segment targeted for mid-teens growth.
• Management highlighted that OneOncology and Retina Consultants of America have supported over 130 pharmaceutical partners with clinical trials, participating in 40,000 research-related visits annually.
• The company introduced AI-powered tools at its ThoughtSpot trade show to help independent pharmacies improve efficiency and patient care opportunities.

INDUSTRY GLOSSARY

• 3PL: Third-party logistics; the outsourcing of ecommerce logistics processes including inventory management, warehousing, and fulfillment.
• GLP-1: Glucagon-like peptide-1; a class of medications used primarily for the treatment of type 2 diabetes and obesity.
• GPO: Group Purchasing Organization; an entity that leverages the purchasing power of a group of businesses to obtain discounts from vendors.
• MSO: Management Services Organization; an entity that provides administrative and management support services to medical practices.
• WAC: Wholesale Acquisition Cost; the list price of a medication as set by the manufacturer for sale to wholesalers.

Full Conference Call Transcript

Operator: Hello everyone. Thank you for joining us and welcome to the Cencora Inc Fiscal 26 Fourth Quarter Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Bennett S. Murphy. Bennett, please go ahead.

Bennett S. Murphy: Good morning, good afternoon, and thank you all for joining us for conference call to discuss Syncora's fiscal 26 fourth quarter and full year results. I am Bennett S. Murphy, senior vice president, investor relations and enterprise productivity. Joining me today are Robert Mauch, president and CEO, and Eva C. 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 in today's press release, which is available on our website at investor.cencora.com. We have also posted a slide presentation to accompany today's press release on our investor website.

Alongside these materials, we are providing recast financials in our new segments for fiscal 25 and fiscal 26, in Form 8-Ks that will also be available on our Investor Relations 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 tax. 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, refer you to our 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 will have an opportunity to ask questions after today's remarks by management. We ask you to limit your questions to 1 per 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.

Robert Mauch: Thank you, Bennett. Hi, everyone, and thank you for joining Cencora's fiscal 26 fourth quarter and full year earnings call. I want to begin by thanking our team members. Throughout the fiscal year, their commitment to our purpose, and dedication to our customers fueled our performance as we delivered adjusted operating income growth of 14% and adjusted diluted EPS of $17.97. up 12%. Our fiscal 26 performance demonstrates the strength of our business and the progress we have made with leadership in specialty and a portfolio increasingly aligned to the areas where we can create the greatest long term value. We enter fiscal 27 with momentum and greater operational and strategic focus.

The outlook reflects our confidence and is aligned with our long term targets when excluding the businesses and other. This morning, I will focus on 2 areas. The strategic progress delivered in fiscal 26 and how our updated operating model strengthens execution, customer focus, and visibility for investors. I will begin with the strategic progress delivered in fiscal 26. 2 years ago, we introduced a refined strategy to lead with market leaders strengthen our position in specialty, and enhance patient access to pharmaceuticals. In fiscal 26, we advanced each priority.

Delivered another year of record results, and expanded capabilities that support patient access to innovation in the specialty pharmaceutical market, where growth has been 2x that of the broader market, over the past 5 years. Our MSO platform is 1 important example. In February, we completed our acquisition of OneOncology. Expanding our position in 1 of health care's fastest growing areas. Together, 1 Oncology and Retina Consultants of America, deepen our relationships with community based specialists and strengthen our ability to support pharmaceutical centric care closer to where patients live. During the fiscal year, we continued to build the MSO platform.

Including the announced acquisition of iSouth Retina business in March and most recently, our agreement to acquire a majority interest in American Oncology Network. These additions will expand the capabilities reach of the platform built to help independent specialty practices thrive. Improve patient access to high quality care, and create opportunities to support pharmaceutical companies across the product life cycle. Fact, at RCA, we participate in the vast majority of retina clinical trials. Completing over 40 thousand research related visits annually. And OneOncology has supported than 130 pharmaceutical partners with their clinical trials to date. As we have invested in the businesses aligned with our pharmaceutical centric strategy, we have also taken decisive action on businesses that do not align.

Concentrating our capital and leadership attention, Cencora is most differentiated. Over the course of the year, we entered into agreements or completed divestitures for all the businesses within other. These actions can cause near term financial headwinds, they allow us to direct our resources towards the areas where we can create the greatest value for customers and shareholders over the long term. The same discipline guiding our portfolio informs how we operate. This morning, we introduced an updated operating model aligned with our strategy and the customers we serve. Our pharmaceutical centric strategy is focused on strengthening our leadership in specialty and delivering greater value across pharmaceutical services.

As the needs of manufacturers and providers evolve, adapting our organization to better support them. While preserving the benefits of Cencora's scale, infrastructure, and expertise. I believe this operating model will make Cencora more effective in 3 ways. Enhancing our strategic and operational execution, further elevating the voice of our customers, and providing increased visibility for our shareholders. Informed by our updated operating model, we have created 2 new reporting segments. Specialty pharmaceutical and provider services, brings together our specialty capabilities an integrated growth platform supporting innovation, from pharmaceutical manufacturers to physician providers. Pharmaceutical distribution and services organized around our broad portfolio of customers and the services we provide.

While leveraging our scale to deliver sustained growth and strong cash flow generation powering investments across the enterprise. Now I will share a bit more about each segment. Starting with specialty pharmaceutical and provider services. Are connecting capabilities across clinical trial logistics, commercialization, specialty distribution, GPO, and practice management to support innovative therapies from development to delivery to the patient. That role is becoming more important with specialty biologics now accounting for more than 50% of all pharmaceutical spending in the United States, up 80% in 5 years. With over 100 new products expected to launch through 2030, Oncology illustrates the growing need for specialized clinical logistics, distribution, and provider support as the pipeline expands and therapies become more complex.

These are capabilities Syncora has built at scale through focused investments. With specialty logistics operations across more than 50 countries, multinational 3PL solutions in The United States and Europe. We can support pharmaceutical partners as they bring complex therapies to patients across markets. Our role does not end when a therapy reaches its destination. As more specialty care is delivered in community settings, providers are managing increasing clinical and administrative demands. Through our MSOs, we help independent specialty physicians manage clinical and administrative complexity. Expand access to research, and remain focused on patient care. Our agreement to acquire a majority interest in Aon extends the platform through a physician led network and a longstanding Cencora partner.

Bringing these businesses together deepens our relationships with manufacturers and providers while giving investors a clearer view of the growth potential of our specialty platform. Within pharmaceutical distribution and services, our scale provides us with deep understanding of trends across the health care ecosystem. We use to drive differentiated value to customers. We deliver over 100 million packages annually. Shipping nearly 5 million units each day. Giving our leaders firsthand insight into the needs of manufacturers, providers, pharmacies, and patients. Combining our scale, our sourcing expertise, and customer centric partnerships, with pharmacies and health systems large and small, we strengthen their operations support their growth, and ensure continued patient access.

2 recent customer events illustrate how their perspective shape our priorities. At our health systems national summit, health systems leaders discussed how connecting pharmacy, supply chain, technology, and care delivery leads to better decisions for patients, and their organizations. These are all areas where our Accelerate Pharmacy Solutions help our health systems customers. At ThoughtSpot, our annual trade show, for Good Neighbor Independent Pharmacies, who came together with more than 3 thousand attendees introducing novel solutions, including AI powered tools designed to help pharmacies run more efficiently free up time for patient care, and create new growth opportunities.

At both our Health Systems National Summit and ThoughtSpot, I heard customers emphasize that specialty is becoming a larger and more complex part of patient care. Reinforcing the importance of specialty growth and solutions across both reporting segments. The scale of this opportunity is increasingly visible in our results. We expect specialty distribution revenue to reach approximately $100 billion in fiscal 27. Combined with our broader manufacturer and provider capabilities, this makes specialty a central driver of Cencora's long term growth. In summary, we exit fiscal 26 with record results and a stronger platform for growth. Supported by our scale, specialty capabilities, and an operating model aligned to how we create value.

With that, I will turn the call over to Eva. To discuss our fourth quarter and fiscal 26 results as well as our fiscal 27 guidance. Eva?

Eva C. Boratto: Thanks, Bob. Good morning, everyone. As Bob highlighted and we shared in our press release this morning, we have introduced a new organizational and financial reporting structure designed to strengthen our execution and provide additional performance visibility to our shareholders. Through our new segments, we will highlight the significant opportunity we have to utilize our end to end specialty capabilities to deliver value up and downstream while driving sustainable growth powered by our scale and efficient pharmaceutical distribution foundation. In addition to reiterating Cencora's long term growth algorithm of 7% to 10% operating income growth and 10% to 14% EPS growth We are introducing targets for our new segments.

For the pharmaceutical distribution and services segment, we expect long term operating income to grow in the mid single digits. And for the specialty pharmaceutical and provider services segment, we expect long term operating income growth in the mid teens. Now I will provide an overview of our fiscal 26 fourth quarter and full year results and our fiscal 27 financial guidance. Unless otherwise stated, my remarks will focus on adjusted non-GAAP financial results. For further discussion of our GAAP results, please refer to our earnings press release and presentation.

Beginning with fourth quarter, consolidated revenue was $88.4 billion up 6%, driven by growth in both reportable segments and in other, which I will describe in more detail when discussing segment level results. Consolidated adjusted gross profit was $3.6 billion up 23% primarily due to growth in the US Healthcare Solutions segment. Consolidated adjusted gross margin expanded by 57 basis points to 4.04%. Largely due to our acquisition of 1 Oncology in February. Consolidated adjusted operating expenses were $2.3 billion an increase of 23% again, largely driven by the impact of the February 2026 acquisition of OneOncology. Excluding both, 1 Oncology and RCA, operating expense growth was less than 3% as we lapped an easier expense comparison.

Consolidated adjusted operating income was $1.2 billion an increase of 22% compared to the prior year quarter, with another quarter of double digit growth across both reportable segments and other. Moving now to below the line items, net interest expense, was $136 million, an increase of $58 million compared to the prior year quarter primarily due to debt raised to finance the 1 Oncology acquisition. Our effective tax rate was 20.2% compared to 20.6% in the prior year quarter. Finally, diluted share count was 191.7 million shares, a 1.8% decrease compared to the prior year quarter. Largely due to the $1 billion of opportunistic share repurchases we completed in the June quarter.

Taken together, this resulted in a adjusted diluted earnings per share of $4.66 an increase of 21%. Turning to our segment results for the fourth quarter. U. S. Healthcare Solutions revenue was $78.3 billion an increase of 5%. Strength in specialty sales to health systems and physician practices, and continued growth in GLP-1 which increased by $2.8 billion year over year drove the growth. The growth was partially offset by manufacturer list price reductions that represented a $2.8 billion headwind to revenue growth as well as lower sales to our large mail order customer. Consistent with the past 2 quarters. US Healthcare Solutions segment operating income was $998 million, up 22% representing our strongest growth quarter of the fiscal year.

This was driven by continued momentum in specialty across both health systems and physician practices the contribution from OneOncology, and focused execution across our other pharmaceutical distribution businesses. The quarter also benefited from an easier expense comparison. Turning now to our International Healthcare Solutions segment, Revenue was $7.8 billion up 5% driven by growth in all business units. International Healthcare Solutions operating income was $152 million up 16% on an as reported basis and up 19% on a constant currency basis. In the quarter, our Canadian business delivered excellent performance driven by high program win rates. Our global specialty logistics and 3PL business continued to drive strong performance with double digit operating income growth.

As Bob mentioned, we have been investing in these businesses to capitalize on the increasing complexity in the innovation pipeline and have been winning in these areas. Moving to other, which reflects the businesses for which we are pursuing strategic alternatives, Revenue in Other was $2.3 billion up 10% largely due to growth at ProPharma and MWI Animal Health. Operating income was $101 million up 36% due to operating income growth at MWI Animal Health also including the benefit from being accounted for as held for sale. This completes the review of our fourth quarter results Now I will turn to a discussion of our full year fiscal 2020 results.

Our consolidated revenue was $337 billion up 5% driven by US Healthcare Solutions segment growth of 5% and International Healthcare Solutions segment growth of 8%. Consolidated operating income was $4.8 billion an increase of 14% driven by growth in both reportable segments. In the US health care solutions segment, we benefited from strength in specialty volume, and our strategic investments in MSOs. In the fiscal year, MSOs represented approximately 10% of enterprise operating income. When excluding the impact of our 2 large MSO acquisitions and the loss of an oncology customer, our core US segment growth was about 13%, nicely ahead of our long term growth algorithm.

In the International Healthcare Solutions segment, we were pleased with the businesses return to growth this fiscal year driven by operational improvements at our global specialty logistics business and increased demand. Finally, as it relates to free cash flow, and our balance sheet, during the fiscal year, we generated $3.8 billion of adjusted free cash flow, stronger than our guidance due to a combination of year end stronger volume, mix and timing. We ended the year with a cash balance of $4.9 billion Our strong free cash flow generation gives us significant flexibility to pursue our balanced capital deployment strategy while maintaining our strong investment grade credit ratings.

During the fiscal year, we were pleased to return $1.5 billion to shareholders through a combination of opportunistic share repurchases and our dividend. And this morning, we announced a 10% increase to our quarterly dividend. Our 20 second consecutive increase. Turning now to our fiscal 27 expectations, there are a few items I will highlight before we get into the details of our guidance. First, our guidance excludes the acquisitions of iSouth Retina business and American Oncology Network. Which we will incorporate upon the close of each transaction. Second, our guidance contemplates a mid fiscal year close of the MWI merger with Covetrus.

The operating income headwind is expected to be partially offset by 2 below the line income items associated with the transaction, which would be approximately $40 million in the second half of fiscal 27. This contribution is expected to bring our other income loss line to $90 million compared to the approximate $26 million in fiscal 26. Third, as we announced this morning, we reached an agreement to sell our equity stake in ProPharma with the close expected to occur in our fiscal first quarter. Given the nature of our ownership, we consolidate the full ProPharma income statement and eliminate our non controlling interest in the company. Making it a much less meaningful contributor at the EPS level.

Which is fully reflected in our revenue, operating income and EPS guidance. With that as context, we expect adjusted diluted EPS to be in the range of $19.40 to $19.75 reflecting headline growth of 8% to 10%. Excluding the assumed $0.35 impact of the mid fiscal year merger of MWI and Covetrus. Adjusted EPS growth would be 10% to 12%. We expect consolidated revenue growth to be in the range of 3% to 5%. Operating income growth is expected to be in the range of 4% to 6%.

The businesses and other are expected to have an approximate 5 percentage point negative impact on our growth, largely due to the assumed mid fiscal year closing of the merger of MWI and Covet Excluding the businesses in other, our guidance would reflect adjusted operating income growth of 8.5% to 11%. Ahead of our long term targets. We expect interest expense to be in the range of $490 million to $510 million reflecting debt we raised in connection with the 1 Oncology transaction. We expect to pay $1 billion on the remaining OneOncology term loan at the end of fiscal year 27. We expect our effective tax rate to be approximately 20% for fiscal 27.

We expect full year diluted average shares outstanding to be approximately 190 million shares. This reflects the annualization of opportunistic share repurchases we completed in the third quarter of fiscal 26 and an expectation of an additional $1.25 billion in repurchases in fiscal 27. We expect capital expenditures to be $1 billion in fiscal 27 which reflects continued investments in our supply chain, digital, and MSO infrastructure. We expect adjusted free cash flow to be approximately $3.5 billion That completes the review of our consolidated fiscal 27 expectation I will now turn to segment level expectations. In the Pharmaceutical Distribution and Services segment, we expect revenue growth to be in the range of 4% to 6%.

We expect pharmaceutical distribution and services segment operating income growth to be 2% to 4%. Which includes the wraparound impact of a certain customer's volume shift as previously disclosed. The segment operating income growth expectations also include an approximate $20 million headwind related to our European distribution business resulting from the strengthening of the US dollar. Moving now to the Specialty and Provider Services segment, we expect revenue growth to be in the range of 9% to 14% and segment operating income growth to be in the range of 18% to 21%. Ahead of our segment level long term operating income growth expectations of mid teens.

Reflecting the wraparound contribution from the 1 Oncology acquisition that we closed in February 2026. Moving now to other, we expect revenue in other to be approximately $3.5 billion and operating income in Other to be approximately $200 million. We are pleased with the significant progress we have made to simplify our portfolio, allowing us to better capitalize on growth opportunities aligned with our pharmaceutical centric strategy. Before turning to my closing remarks, as you think about quarterly cadence, we expect adjusted diluted EPS in our first quarter to be approximately $4.55 In closing, fiscal 26 marked a year of significant progress on our strategy as we delivered strong financial performance.

As we look to fiscal 27 and beyond, we are well positioned to deliver on our long term targets and drive sustainable shareholder value creation, supported by our differentiated footprint in the high growth specialty market, scaled and efficient foundation in pharmaceutical distribution and strong free cash flows. I will turn the call back to Bob for some closing remarks before moving to Q and A. Bob?

Robert Mauch: Thank you, Eva. Our fiscal 27 guidance reflects our confidence in the strength of the business in our team, our strategy, our ability to deliver sustainable growth and long term value for customers and shareholders. With that, we will open the call for questions. Operator?

Operator: We will now begin the question and answer session. Please limit yourself to 1 question. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Elizabeth Anderson. With Evercore ISI. Your line is open. Please go ahead.

Elizabeth Anderson: Hi, guys. Good morning. Thanks for all the quest. Details about the operating performance. I guess my question is maybe a little bit more philosophical in nature. Can you talk a little bit more about like why the resegmenting at this point makes sense? You have you have obviously had many specialty assets on the medical side, for a while, but, you know, why is this the right opportunity to kind of do that? And what does that what does that provide for the business that the old setup did not?

Robert Mauch: The Elizabeth, thank you very much for that important question. It starts with market. As you mentioned, we have been in the specialty market for a long time. We have significant capabilities that we have been building over decades. Frankly. But when you look at the growth in the market, you know, the 80% growth that is happened in biologics over the last 5 years. In fact, there is going to be 100 new oncology products between now and 2030. That says to us that we need to be even more focused on that area.

And so the first place to start there is our operating model and the way that we approach our business, the way that we approach our customers both upstream to manufacturers and downstream, to providers. And while we do that very well, our specialty services assets were in different parts of the company. And under different leaders. And so what we have done with the operating model change is taken all of those assets and put them under 1 leader. By doing that, that allows us to discuss a new external segmentation, but it is driven by optimizing our performance.

The 3 things that I called out in prepared remarks that are advantages that I see is 1, which I just mentioned, is our enhanced ability to execute both strategically and operationally. It brings us closer to the customers for all of the reasons that I just described. And last but not least, it provides increased visibility to shareholders, which we also think is important So the specialty pharmaceutical and provider services business puts everything under 1 leader. As I said, all the way from manufacturer to physician. and they will deal with 1 team at Cencora. Which will make things easier and faster. For the customers.

It will also allow us to innovate even more quickly, which will be important as we go into the future and as products get more and more complex. Importantly, our pharmaceutical distribution and services segment that is the foundation of all of this. it is servicing health systems, pharmacies, alternate sites, wholesale in Europe, with significant scale demonstrated efficiency over decades and cash flow that allows us to invest across the enterprise. So while we are separating the 2, it is an important takeaway for everyone that both are critically important to the growth platform of Cencora. So I think that is the rationale Elizabeth.

I appreciate the question, and we are excited to be able to talk about it today.

Operator: Your next question comes from the line of Lisa Gill with JPMorgan. Your line is open. Please go ahead.

Lisa Gill: Thanks very much. Good morning, Bob and Eva. Bob, I want to follow-up on specialty just from a couple of different perspectives. 1, I absolutely appreciate the visibility that you are giving us and shareholders around the specialty business. And clearly, this is an important growth engine as we move forward. I want to understand really a couple of things. 1, when we think about specialty going into next year, Eva laid out the numbers Can you talk about what the organic growth rate is? I know there is a number of transactions that impact the number. And then secondly, you talk about health systems, you talk about the MSO, community practices, etcetera.

How do you think about changes in reimbursement and the impact that, that has in 2027? Or even on a go forward basis. We obviously had a big election last night You know? And any incremental thoughts on how you see the future around reimbursement and any impact it would have on you as you continue to serve these you know, from a specialty perspective serving these practices?

Robert Mauch: Thanks, Lisa, for the question. Yeah. But maybe I will start you know, start with the end. And as you mentioned, we did have election last night. it is it is most important to note that, you know, through multiple cycles of administrations and leadership in congress and leadership in the regulatory agencies. We have a long history of advocacy and making sure that Cencora is present and educating everyone about the services that we provide, the value, the very high quality, low cost services that we provide. At Cencora. But also importantly, we have visibility end to end to the pharmaceutical supply chain.

So we are someone who can advise on what the outcomes might be, the consequences might be of any policy changes. So, you know, the way things you know, look today, there will be lots of opportunity for conversations. As we get the new congress and senate in place, and we will we will be right there to help them with that. I think a second piece Lisa is just the overall scale of our specialty business. And, you know, we broke out the specialty pharmaceutical and provider services. But it is also important to note that there is significant specialty distribution products that go into the pharmaceutical distribution and services segment.

So the number that we had in our prepared remarks that more than $100 billion is the combination of the 2. So, very importantly, whether an oncology product, for example, is going into a community specialist setting or it is going into a clinic within a health system. Cencora is very well positioned to support that patient wherever they may present and support that clinician in caring for that patient. So I will I will pause there and hand it over to Eva to answer the other part of your question. Answer the other part of your question.

Eva C. Boratto: Sure. Good morning, Lisa. The specialty in pharmaceutical Distribution and Provider Services segment, as you saw in our materials expected operating income growth of 18% to 21%. that is above our long term growth algorithm, and I would remind you we have the wraparound of OneOncology for the first 4 months of the fiscal year. So outside of that impact, our underlying growth would have been in line. With our algorithm of mid teens growth. That we outlined today.

Operator: Your next question comes from the line of Glen Santangelo with Barclays. Line is open. Please go ahead.

Glen Santangelo: Yeah. Thanks for taking my question. I also wanted to follow-up on specialty Bob, when I think about that mid teens sort of long term growth rate specialty, in your prepared remarks, you just suggested there is 100 new oncology products coming between now and 2030. So is it really volumes that are the primary driver of that mid teens growth? I just want to separate organic from inorganic. And then just sort of related to that, you generated a 3.7% margin in specialty this year. How do you maybe help us think about the puts and takes on that given all the upcoming biosimilar conversions? Thanks so much.

Eva C. Boratto: Sure, Glen. Good morning. it is Eva. I will start with the specialty pharmaceutical and provider services. First, if you take a step back, this segment consists of end to end specialty businesses. From our specialty distribution to practice management platform to global clinical trials, multinational 3PL businesses. So that is what is encompassed in that segment. And as you think about our long term growth algorithm of mid teens, 1, it reflects the fast paced growth in the market, and as Bob outlined, 2, continued growth at our MSOs through both organic physician acquisition as well as tuck in M&A on these platforms.

Operator: Your next question comes from the line of Charles Ryee with TD Cowen. Your line is open. Please go ahead.

Charles Rhyee: Yes. Thanks for taking the question. Maybe I could ask the other side. In the pharmaceutical distribution services, in the assumptions you kind of give for long term growth, can you talk about how you are thinking about the cycle of small molecule generics coming over the next several years, how much do you incorporate that? And obviously, small molecule generics were a huge driver of growth back in the 2000s and the 2010s. When we look at this next cycle coming up, it looks significantly bigger in terms of dollar volumes.

Maybe you could help us understand have there been changes in that part of the market that should either make us be more excited, maybe we be a little bit more cautious on it. Just trying to get a better sense on the dynamics in this part. What looks to be a big cycle, particularly as we get the back half of next calendar year. Any comments there on helping us size that would be helpful. Thanks.

Robert Mauch: Thanks for the question, Charles. I will start and I will hand it to you if she wants to add anything as I as I finish up. So I think just take a step back. Whether it is a small molecule generic or whether it is a biosimilar, we keep a very close eye on all of those. Those launches of both types would be contemplated in our guidance. But I think the takeaway is just the reminder that is positive for Cencora. So whether it is a small molecule generic or biosimilar that is positive, You know, they are different in different segments.

You know, the part b biosimilar is the sweet spot for us. that is where the services that we provide allow us to earn a higher margin. Within Part D it is much less impactful. That would be you know, a revenue impact and not really a profit. Profit gain. And oral generics, small molecule oral generics, are positive. They absolutely are. So to the extent that we have we have more or less launches, that has an impact. But you will note Charles, you know, not. You have mentioned that the historical driver of generic launches know, they are not they are not that.

So we are not we are not calling either a significant increase or a decrease in launches as a as a driver of our performance. So I think the takeaway is that the assumptions are contemplated in our on our guidance, and we keep a very close eye on it.

Operator: Your next question comes from the line of Alan Lutz with Bank of America. Your line is open. Please go ahead.

Allen Lutz: Good morning and thanks for taking the question. Bob, you spoke a lot about upstream services in your prepared remarks. RCA and OneOncology are active in clinical trials. Also own the World Courier business. Can you take a moment to expand on the synergies between those 2 businesses? And then more broadly, as we think about the segmentation, how should we think about capital deployment and the strategy? Is there any evolution here as you have done that resegmenting? Thank you.

Robert Mauch: Yeah. Thanks for the thanks for the question, Alan. You know, I will speak to strategic synergy. You know, part of the purpose of bringing those businesses together. Was to be more effective, to be more efficient, and I am sure some of that will come. But that is not the you know, financial synergy was not necessarily the thesis for putting them together. it is really a growth thesis. And what we have as you said, so if you take the pharmaceutical company facing view, we have the very specialized global logistics to support them in clinical trials. We have commercialization consulting services.

That can help them think about how they are going to bring their product to market In multiple countries. As they are getting ready to launch, we have 3PL services that are going to be important as they launch in Europe. And then we have our specialty distribution and full line distribution in The United States. And then as that continues to go downstream, as I follow that through, then you have as I as I kind of transition from specialty distribution, you have the GPO you have the MSO, all of that supporting the physician.

And the purpose of all of that is to make sure that the physician has optimal opportunity to care for patients, to make the right clinical decisions, and to care for patients. So there is a strong thesis there of value from the manufacturer all the way to the provider and to the patient. And the purpose of putting these businesses together inside the specialty pharmaceutical and provider services segment is for us to continue to build that platform and innovate over the long term.

Eva C. Boratto: And Bob, I will take the capital allocation part of the question. I would say there is no change in our capital deployment strategy. We remain focused in 4 key areas. Internal investments in the business, strategic M&A, opportunistic share repurchases, and maintaining a reasonable and growing dividend. And I think you have seen us to deliver on that. This morning, we announced we are increasing our dividend 10% for fiscal year 2027. And a $1.25 billion in share repurchases. And I think the portfolio optimization that has been done with some of the divestitures will enable us to execute on these priorities.

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

Eric Percher: Thank you. Wanted to dig a little bit deeper into the pharma distribution and services new segmentation, and thank you for that segmentation. So in '2027, 4% to 6% growth, we would assume that there is a headwind from IRA and GLP ones. And then seeing the profit growth at 2% to 4%, think we have been taught by you that the reductions to top line do not necessarily translate at the op profit line. can you just help us on factors impacting top line versus the op profit headwinds? We are seeing for 2027 specifically?

Eva C. Boratto: Yeah. Sure. Sure, Erin. Good morning. As you say, I am gonna start at the op profit line. As you as you look at the 2% to 4% growth being below the long term algorithm that we provided today, I would highlight 2 things. 1, we have the wraparound impact of a customer volume shift that we talked about earlier. In the year, as well as about a point impact from FX now that our international distribution is part of that segment. Outside of those impacts, we expect to perform within our long term targets.

On your on your revenue question, I am going to go to the consolidated revenue at growth of 3% to 5% What I would say, the differentiator, as you look at 27, fiscal guidance versus the 5% we delivered in fiscal 26 is really the headwind from the pro pharma divestiture that we announced today as well as the assumed midyear merger of Covetrus. And those 2 combined drive about 150-basis point headwind to growth. I would say the WAC decreases and, you know, as is pretty comparable is our estimate. You get a little bit more from the wraparound impact, but pretty comparable to what we experienced. In 2026.

Operator: Your next question comes from the line of Erin Wilson Wright with Morgan Stanley. Your line is open. Please go ahead.

Erin Wright: Great. Thanks. So a competitor of yours recently announced a transaction in the infusion space with Option Care. I guess is that an area that is of interest to you? Did you look at that asset? How do you think about I guess, other areas outside of, on oncology and retina? I mean, you are really weighing in on oncology, obviously, but you know, are you still entertaining those other ideas, or how do you think about that in terms of the context of what you were just talking about from a capital deployment standpoint? Thanks.

Robert Mauch: Yeah. Hi, Erin. Thanks very much for the for the question. You know, I will start with where it is it is clear that we are focused because I do wanna emphasize that. We have made it very clear that we are going to be focused on expanding our specialty capabilities. We have made it clear that we are going to focus our portfolio in areas that we can create long term customer and shareholder value And you are seeing us do that.

That is our investments in the MSOs the builds of the MSOs that we are doing, and we are going to continue to do that. it is important to note something that we have said a few times, which is our pharmaceutical centric strategy keeps us focused in the MSO space. On right now on oncology and retina, and we do not see other therapeutic areas as areas that would be pharmaceutical centric and therefore would have us interested in expanding into a different MSO outside of those 2. Getting to your to your question, which is infusion specific, we support infusion customers across our portfolio. We have that in our health systems business. We support infusion customers.

We expect to continue to support them as customers, but that does not mean that we need to own that capability. We are we are a strong provider to them, and we will continue to do that for the question, Erin.

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

George Hill: I am going to delve a little bit more into the new specialty segment a little bit. I am wondering if there is a chance that you guys would either would tell us maybe the dollar percentage contribution from, like, the MSO segment versus wholesaling versus GPO. Would you talk at all about are there any significant margin differences by therapeutic category? And should we think of, like, what is a target margin profile for this segment given that operating earnings growth is expected to outpace revenue growth? In the long-term algo? Thanks.

Eva C. Boratto: Good morning, George. it is Eva. So on your first question around breaking out the MS contribution. For 2026, we indicated the MSOs were about 10% of our consolidated operating income. So that should give you a framework to think about that. On the margin, margins on the margin side, right, our specialty is our higher margin, higher growth business. I would point out that you know, it is not just the specialty distribution. We have the World Courier, the 3PL, the MSOs. And the consulting businesses in there. So they are carrying a higher margin profile. And I would remind you that we consolidate RCA so think about that as additive. To margin.

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

Eric Coldwell: Thanks. I was hoping for a little more framing on the CapEx. I understand the drivers of the heightened CapEx the $1 billion target. I am hoping to put that in context of a figure that, you know, is effectively a double or more than a double over the last couple of years. And the 3% to 4% growth in the long term growth targets, should we read that as start at a billion and then grow that 3% to 4% per year thereafter? I assume that is a forward looking basis. I just wanna make sure that there is not a bit of a onetime spike, if you will, in fiscal 27. Thanks very much.

Eva C. Boratto: Yeah. Good morning, Erin. This is this is Eva. Regarding our CapEx, as you said, we expect to spend approximately a billion a billion dollars. And you are right. The dollar spend is elevated to recent years. As a percentage of gross profit, it aligns with historical periods when we have made significant investments in our infrastructure. So I would just remind you we are making investments in our US supply chain infrastructure. We are continuing to make investments in IT to support our digital transformation as well as well as SAP, as well as some investments in our in our MSO. And the 3 to 4% that you are referring to, I believe, is on capital deployment.

It was not intended to be CapEx growing at 3% to 4%.

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

Kevin Caliendo: Thanks. Thanks for taking my question. Good morning. Just a couple of things. I just wanna understand the inputs into 2027. 1, oncology profitability that the run rate that you had for fiscal 4Q, is that the run rate going forward? Or did you assume there would be improving OneOncology profitability in fiscal 27 versus the run rate we saw exiting? And then is there anything that you contemplated around Cigna's new sort of wholesale dish distribution business that they announced. We do not really know exactly what it is going to be. But the perception was it could potentially impact you.

I am wondering if there was anything in when you thought about guidance that was an input relative to that business. And then the last input is the Option Care relationship that you currently have. We do not know when that contract expires, but is there anything built in to fiscal 27 for potentially losing the distribution part of the Option Care business, if that is even an issue. Thanks.

Eva C. Boratto: Yeah. Thanks for the I am gonna go in reverse order, Kevin. Option Care, you are right. They are Cencora customer and have been for some time. As it relates to the financial impact, I would think about it. It would move us within our guidance range of our pharmaceutical distribution. And services segment. Your point on MSOs OneOncology more specifically, what I would say is first, I wanna iterate that OneOncology and RCA are both continuing to perform well. They performed well in the quarter. We expect there will be significant contributors to our specialty growth. They have been in the past, and we look forward to those continuing to grow nicely.

Robert Mauch: Yeah. And, Kevin, I would I would just add. I think your question was, you know, how we have thought about kind of our customer relationships in terms of guidance. You have mentioned 1 specific 1, but I will I will just say that you know, all of our customer relationships are contemplated in our fiscal 27 guidance. And you know, we would not comment any further on that.

Operator: This concludes the Q&A session. I will now turn the call back to Robert Mauch for closing remarks.

Robert Mauch: Thank you, operator. Fiscal 26 performance demonstrates the strength of our business. We move into fiscal 27 with significant momentum, Cencora is focused on execution and advancing our strategy to continue creating long term value for our customers and shareholders. Thanks, everyone, for your time today.

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

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