Q3 FY24 Earnings Cardinal Health, Inc. May 2, 2024 ...

Cardinal Health, Inc. (NYSE:CAH) Q3 2024 Earnings Conference Call May 2, 2024 8:30 AM ET Company Participants Matt Sims - VP, IR Jason Hollar - CEO Aaron Alt - CFO Conference Call Participants Lisa Gill - JP Morgan Michael Cherny - Leerink Partners George Hill - Deutsche Bank Allen Lutz - Bank of America Kevin Caliendo - UBS Eric Percher - Nephron Research Stephanie Davis - Barclays Eric Coldwell - Baird Elizabeth Anderson - Evercore ISI Stephen Baxter - Wells Fargo Lucas Romanski - TD Cowen Daniel Grosslig ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | |--------------------------------------------------------------------------------------------|-----------------------------------| | For the transition period from | __ ...

Revenue Growth - Revenue increased 9% to $54.9 billion in Q3 FY24 compared to Q3 FY23[1][3] - Revenue for Q3 2024 increased by 9% to $54.911 billion compared to $50.487 billion in Q3 2023[20] - Year-to-date revenue for 2024 increased by 10% to $167.119 billion compared to $151.559 billion in 2023[20] - Pharmaceutical and Specialty Solutions segment revenue increased 9% to $50.7 billion in Q3 FY24[5] - Other segment revenue increased 14% to $1.2 billion in Q3 FY24[8] - Pharmaceutical and Solutions segment revenue grew 9% YoY to $50,651 million in Q3 2024[26] - Global Medical Products and Distribution segment revenue grew 4% YoY to $3,113 million in Q3 2024[26] - Year-to-date revenue for Pharmaceutical and Solutions segment grew 11% YoY to $154,524 million[27] - Year-to-date revenue for Global Medical Products and Distribution segment grew 1% YoY to $9,264 million[27] Non-GAAP Financial Performance - Non-GAAP operating earnings increased 10% to $666 million in Q3 FY24[1][3] - Non-GAAP diluted EPS increased 20% to $2.08 in Q3 FY24[1][3] - Fiscal year 2024 non-GAAP EPS guidance raised to $7.30 to $7.40[1][9] - Preliminary fiscal year 2025 non-GAAP EPS guidance of at least $7.50[1][10] - Non-GAAP net earnings for Q3 2024 were $509 million, a 14% increase YoY[32] - Non-GAAP diluted EPS for Q3 2024 was $2.08, a 20% increase YoY[32] - Non-GAAP operating earnings for the nine months ended March 31, 2024, were $1,799 million, with a 20% effective tax rate, resulting in a diluted EPS of $5.62, a 33% increase year-over-year[35] - Non-GAAP operating earnings for the nine months ended March 31, 2023, were $1,497 million, with a 21% effective tax rate, resulting in a diluted EPS of $4.24[35] Segment Performance - Pharmaceutical and Specialty Solutions segment profit growth outlook updated to 8.5% to 9.5% for FY24[9] - Global Medical Products and Distribution segment profit increased $66 million to $20 million in Q3 FY24[6][7] - Global Medical Products and Distribution segment profit expected to be ~$175 million in FY25[11] - Impairment charges for the GMPD segment were $90 million in Q3 2024 and $671 million year-to-date[20] - The company recognized a cumulative pre-tax goodwill impairment charge of $671 million related to the GMPD segment for the nine months ended March 31, 2024, with an estimated net tax benefit of $56 million[35] - The company recognized a cumulative pre-tax goodwill impairment charge of $863 million related to the GMPD segment for the nine months ended March 31, 2023, with a net tax benefit of $68 million[35] GAAP Financial Performance - Net earnings for Q3 2024 decreased by 25% to $259 million compared to $347 million in Q3 2023[20] - GAAP net earnings for Q3 2024 were $258 million, a 25% decrease YoY[31] - GAAP diluted EPS for Q3 2024 was $1.05, a 22% decrease YoY[31] - GAAP operating earnings for the nine months ended March 31, 2024, were $835 million, with a 42% effective tax rate, resulting in a diluted EPS of $2.49[35] - GAAP operating earnings for the nine months ended March 31, 2023, were $590 million, with a 36.7% effective tax rate, resulting in a diluted EPS of $1.23[35] Cash Flow and Liquidity - Cash and equivalents decreased to $3.718 billion as of March 31, 2024, from $4.043 billion as of June 30, 2023[22] - Net cash provided by operating activities in Q3 2024 was -$49 million, compared to $1,361 million in Q3 2023[25] - GAAP net cash provided by operating activities for the nine months ended March 31, 2024, was $1,685 million, compared to $1,981 million for the same period in 2023[37] - Non-GAAP adjusted free cash flow for the nine months ended March 31, 2024, was $2,128 million, compared to $2,090 million for the same period in 2023[37] - The company excluded $246 million in payments related to litigation recoveries/charges from non-GAAP adjusted free cash flow for the third quarter of 2024[37] Balance Sheet Changes - Total current assets increased to $35.734 billion as of March 31, 2024, from $33.833 billion as of June 30, 2023[22] - Total liabilities increased to $45.880 billion as of March 31, 2024, from $43.417 billion as of June 30, 2023[23] - Accounts payable increased to $32.089 billion as of March 31, 2024, from $29.813 billion as of June 30, 2023[23] - Total shareholders' deficit increased to $3.262 billion as of March 31, 2024, from $2.851 billion as of June 30, 2023[23] Gross Margin and Operating Earnings - Gross margin for Q3 2024 increased by 9% to $1.947 billion compared to $1.785 billion in Q3 2023[20] - Non-GAAP gross margin excludes LIFO charges/(credits)[44] - Non-GAAP SG&A excludes state opioid assessment related to prior fiscal years and shareholder cooperation agreement costs[44] - Non-GAAP operating earnings exclude LIFO charges/(credits), state opioid assessment, shareholder cooperation agreement costs, restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, net, and litigation (recoveries)/charges, net[44] Non-GAAP Adjustments and Definitions - The company's non-GAAP financial measures exclude items such as LIFO charges, state opioid assessments, shareholder cooperation agreement costs, restructuring costs, and acquisition-related costs to provide a clearer view of ongoing business performance[39] - Segment Profit is calculated as segment revenue minus segment cost of products sold and segment distribution, selling, general and administrative expenses[44] - Segment Profit margin is derived by dividing segment profit by segment revenue[44] - Non-GAAP earnings before income taxes exclude LIFO charges/(credits), state opioid assessment, shareholder cooperation agreement costs, restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, net, litigation (recoveries)/charges, net, and loss on early extinguishment of debt[44] - Non-GAAP net earnings attributable to Cardinal Health, Inc. exclude LIFO charges/(credits), state opioid assessment, shareholder cooperation agreement costs, restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, net, litigation (recoveries)/charges, net, and loss on early extinguishment of debt, each net of tax[44] - Non-GAAP effective tax rate adjusts for the tax impacts of LIFO charges/(credits), state opioid assessment, shareholder cooperation agreement costs, restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, net, litigation (recoveries)/charges, net, and loss on early extinguishment of debt[44] - Non-GAAP diluted earnings per share attributable to Cardinal Health, Inc. is calculated by dividing non-GAAP net earnings attributable to Cardinal Health, Inc. by diluted weighted-average shares outstanding[44] - Non-GAAP adjusted free cash flow is net cash provided by/(used in) operating activities less payments related to additions to property and equipment, excluding settlement payments and receipts related to litigation (recoveries)/charges, net, or other significant and unusual or non-recurring cash payments or receipts[44]

Core Insights - Cardinal Health reported a 9% increase in revenue for Q3 FY24, reaching $54.9 billion compared to $50.5 billion in Q3 FY23 [1][2] - Non-GAAP diluted EPS rose 20% to $2.08, while GAAP diluted EPS decreased by 22% to $1.05 due to a $90 million goodwill impairment [1][2] - The company raised its FY24 non-GAAP EPS guidance to a range of $7.30 to $7.40 and provided preliminary guidance for FY25 of at least $7.50 [1][6] Financial Performance - Q3 FY24 revenue for the Pharmaceutical and Specialty Solutions segment increased 9% to $50.7 billion, with segment profit rising 4% to $580 million [1][3] - The Global Medical Products and Distribution segment saw a 4% revenue increase to $3.1 billion, with segment profit improving to $20 million from a loss of $46 million [1][4] - Other segment revenue grew 14% to $1.2 billion, with segment profit increasing 5% to $111 million [1][5] Fiscal Year 2024 Outlook - The company updated its FY24 guidance for the Pharmaceutical and Specialty Solutions segment profit growth to 8.5% to 9.5% [1][6] - The non-GAAP effective tax rate guidance was adjusted to a range of 22% to 23% [1][6] Preliminary Fiscal Year 2025 Outlook - Cardinal Health anticipates non-GAAP diluted EPS of at least $7.50 for FY25 [6] - Segment profit growth for Pharmaceutical and Specialty Solutions is expected to continue, with Global Medical Products and Distribution projected to achieve approximately $175 million in segment profit [6][7] Recent Highlights - The company completed the acquisition of Specialty Networks, enhancing its multi-specialty platform [8] - Cardinal Health was recognized for its supply chain resiliency and received accolades for its leadership in the healthcare industry [8] - The company released its Fiscal 2023 Environmental, Social and Governance (ESG) Report, highlighting its commitment to sustainability [8]

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