Cardinal Health, Inc.

Good day and welcome to the fourth quarter FY2024 Cardinal Health Incorporated Earnings Conference Call. My name is George. I'll be your coordinator for today's event. Please note that this conference is being recorded and for the duration of the call, utilize your being listened only mode. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing star 1 on your telephone keypad to register your questions. In order to allow you as many people as possible to ask a question, we ask that you please limit yourselves to one question each. If you require assistance at any point, please press star zero and you will be connected to an operator. And I'd like to call on your host today, Mr. Matt Sims, Vice President of Investor Relations. Please go ahead, sir.

Welcome to this morning's Cardinal Health fourth quarter and fiscal 24 earnings conference call. And thank you for joining us. With me today are Cardinal Health CEO Jason Holler and our CFO Aaron Ault. You can find this morning's earnings press release and investor presentation on the investor relations section of our website at ir.cardinalhealth.com. Since we will be making forward-looking statements today, let me remind you that the matters addressed in the statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied. Please refer to our SEC filings and the forward-looking statement slide at the beginning of our presentation for a description of these risks and uncertainties. Please note that during our discussion today, the comments will be on a non-GAAP basis, unless specifically called out as GAAP. GAAP to non-GAAP reconciliations for all relevant periods can be found in the supporting schedules attached to our press release. For the Q&A portion of today's call, we kindly ask that you limit questions to one per participant so that we can try and give everyone an opportunity. With that, I will now turn the call over to Jason.

Thanks, Matt, and good morning, everyone. Fiscal year 24 marked a year of strong operational execution and record financial results for Cardinal Health, delivered in tandem with significant strategic progress across the portfolio. On that note, we have three key headlines today. First, We finished the year with momentum, growing EPS 29% in both Q4 and fiscal year 24. Results exceeded guidance, and full year EPS of $7.53 was 96 cents above the midpoint of our original outlook from investor day. We also delivered nearly $4 billion of adjusted free cash flow for the year, positioning us with approximately $5 billion of cash at year end, even after $1.25 billion of capital returned to shareholders this year in funding our growth investments. Second, we have managed through the transition of a significant customer and are raising our guidance for fiscal year 25, while also reconfirming our long-term financial targets. And finally, we continue to advance our strategy to build upon the growth and resiliency of pharma and specialty, execute our GMPD improvement plan, and accelerate our growth in key areas while optimizing our portfolio to maximize shareholder value creation. More on that momentarily, but first, some brief reflections. This year, we continue to take decisive actions to simplify our business and drive performance, highlighted by the reorganization of our operating and segment reporting structure to enhance management focus while enabling efficiencies, accountability, and transparency. We grew our largest and most significant business, pharmaceutical and specialty solutions, above our targeted long-term growth rate. We saw ongoing stability in pharmaceutical demand, strong performance from our generics program, and our specialty business grew revenue 14% for the year. As of fiscal year 24, our specialty business is now over $36 billion, and we anticipate continued growth next year despite the large contract expiration. We prioritize key growth areas in specialty with organic investments across therapeutic areas and the acquisition of specialty networks. In GMPD, we executed our improvement plan initiatives Returning the business to profitability and delivering approximately $240 million in year-over-year segment profit improvement. Notably, we achieved our year-end inflation mitigation target, a critical milestone for the business. Across our other operating businesses, we collectively grew revenue 12% and segment profit 7% in fiscal year 24. We've seen strong demand across nuclear, at-home solutions, and opti-freight, And our purposeful investments and focus on performance excites us about how these businesses are positioned for the future. Overall, these results were achieved through our team's commitment to execute against a focused set of priorities to create value for our shareholders, our customers, and ultimately for millions of patients. As we turn the page to fiscal year 25, our confidence is reinforced by our strong and resilient business with positive industry trends supporting our growth. And we continue to take actions to optimize not only the performance of our businesses, but also the financial strength of the broader enterprise. Before I hand the call over to Aaron, let me provide an update on our business and portfolio review, which, as a reminder, kicked off in September of 2022. Last June, we concluded our review of the former pharma segment, highlighted at investor day with our enhanced organizational focus on specialty and decision to retain and further invest in our nuclear and precision health solutions business. Then, in January, we finalized a review of the growth businesses within the former medical segment, determining the best course of action for shareholder value creation was to invest in and further develop at-home solutions and opti-freight for long-term growth while also completing our resegmentation. All along, management, in collaboration with the business review committee and board, has been reviewing GMPD from every angle as the team executes our turnaround plan. We deeply understand the business's opportunities and complexities and today have some preliminary conclusions to share through the lens of our portfolio review framework as seen on slide 20. In short, we remain committed to executing the GMPD Improvement Plan and our fiscal year 26 target of $300 million in segment profit. We are pleased and unsurprised to see significant interest in GMPD during our review. The business is core to the operations of so many healthcare providers and features not only our formidable distribution expertise, but a broad set of Cardinal Health brand products that are critical to patient care. Following our extensive review, we have gained confidence that we are best positioned to continue capitalizing on the meaningful growth and operational opportunities on the horizon for this business. Ultimately, we see more value creation potential ahead for our shareholders by continuing to drive the GMPD turnaround plan. Even more, our analysis uncovered additional opportunities to unlock near-term value through further simplification actions and working capital improvements while continuing to drive the plan. From these initiatives, we plan to generate at least $500 million in cash over the next two years to be deployed according to our disciplined capital allocation framework. In recognition, we're raising our share repurchase expectations for fiscal year 25 to a total of $750 million which is beyond our $500 million baseline. In terms of mechanics of future reviews as the business continues to improve, the business review committee of our board, sunset in July, is planned, and the ongoing value creation efforts are now being overseen by the board as a whole. As always, we take a thorough, objective, and open-minded approach focused on maximizing long-term shareholder value creation while continuing to invest in the business to ensure that our customers receive the products and service they expect. I'll go deeper into our strategic plans for our segments later in my remarks. But first, let me turn over to Aaron to review our results and guidance.

Thank you, Jason, and good morning. Before discussing our Q4 success and our raised guidance, I want to highlight that today we are providing revised prior period financials for fiscal year 22 through Q3 fiscal year 24, reflecting slight net increases to non-GAAP EPS. During the preparation of our annual financial statements, management identified a longstanding accounting error in part of our at-home solutions business related to revenue recognition from third-party payers. As a result, we have corrected this item in prior periods and also updated the timing of other previously recognized immaterial out-of-period items across the full enterprise. The net impact of these changes increases non-GAAP EPS by 7 cents in fiscal year 24, 6 cents in fiscal year 23, and 1 cent in fiscal year 22. To be helpful, we've included supplemental schedules in our press release along with further detail in our fiscal year 24 10K. Moving to our results, I am pleased to reinforce that Q4 produced a strong finish to a year in which the Cardinal team made tremendous progress against our financial and strategic priorities. For both Q4 and the year, our EPS results reached historical high points with operating profit growth across pharma, GMPD, and other also supported by improvements below the line in the form of lower interest costs, better tax rates, and lower share count. We delivered strong gross margin growth and matched it with well-controlled SG&A, even in an inflationary environment. In Q4, revenue increased 12% to $59.9 billion, reflecting revenue growth in the pharmaceutical and specialty solution segment, the GMPD segment, and in all of the businesses making up other. Gross margin grew 5% to $1.9 billion, outpacing consolidated SG&A, which increased only 2% to $1.3 billion in the quarter, reflecting our disciplined cost management. This translated to total company operating earnings of $605 million, up 14% versus last year. Below the line, interest and other improved $6 million versus prior year to $10 million, benefiting from the quarter's strong cash outperformance. Our fourth quarter effective tax rate finished at 24.6%, 4.5 percentage points lower than the prior year. Fourth quarter average diluted shares outstanding were 245 million, 4% lower than a year ago due to our previously announced share repurchases. The net result was fourth quarter EPS of $1.84, growth of 29%. Moving into our segment results, beginning with the pharma segment on slide 11. Fourth quarter revenue increased 13% to $55.6 billion, driven by brand and specialty pharmaceutical sales growth from existing customers. We continue to see broad-based strength in pharmaceutical demand spanning across product categories, brand, specialty, consumer health, and generics, and from our largest customers. Excluding GLP-1 sales, the segment's Q4 revenue growth would be 9%. As we've commented previously, GLP-1 sales do not meaningfully contribute to the bottom line. Segment profit increased 8% to $482 million in the fourth quarter, driven by positive generics program performance. Within our generics program, we continue to see volume growth and consistent market dynamics, including strong performance from Red Oak. Farmer segment profit growth in the quarter was 8%, despite an approximate $15 million margin headwind related to the unwind of the previously announced large customer transition. This unanticipated impact in the quarter was the primary difference between pharma's Q4 results and the midpoint of our prior guidance. Recall that we previously observed that the impact of the contract loss would be offset by new customers, specialty networks, and cost controls as part of our contingency planning. Consistent with these mitigation plans, the team began implementing cost control measures and started to see offsetting savings. We also saw strong growth from biopharma solutions in the quarter, including contributions from specialty networks. Turning to the GMPD segment on slide 12, we are quite pleased by the Q4 GMPD results, which confirmed our team's continued progress against the GMPD improvement plan. Fourth quarter revenue grew 2% to $3.1 billion, driven by volume growth from existing customers. We again saw growth in Cardinal brand volumes during the quarter. GMPD delivered Q4 segment profit of $47 million, generally consistent with our expectations and our prior guidance of approximately $65 million for the year before the prior period revisions. A $40 million year-over-year increase in Q4 was driven by an improvement in net inflationary impacts, including our mitigation initiatives, as we achieved our target of offsetting the gross impact of inflation by the end of fiscal year 24. we continue to be encouraged by the tenacity of the team in driving improved execution and customer satisfaction and service levels while identifying additional opportunities to optimize the business finishing with the businesses that aggregate into other as seen on slide 13. fourth quarter revenue increased 15 to 1.2 billion dollars driven by growth across all three businesses, at-home solutions, nuclear and precision health solutions, and OptiFrate logistics. Segment profit grew 11% to $111 million, primarily driven by the performance of OptiFrate logistics. The OptiFrate business continues to hit on all cylinders as increasing customer demand for our logistics management services is met with strong execution. In nuclear and at-home solutions, we continue to invest strategically to supercharge growth. All three businesses as key parts of our growth story have received and will receive going forward access to capital for expansion of their business models in support of our customers. I will be brief on the full year commentary. Fiscal 24 revenue increased 11% to $227 billion with growth from all five operating segments. Gross margin increased 8% to $7.4 billion while SG&A increased a more modest 4% to $5 billion reflecting our year-long efforts to control costs. Together, this resulted in fiscal 24 total operating earnings growth of 16% to $2.4 billion. All in, it was an excellent year across the business. Below the line, interest and other decreased 52% to $42 million, driven by increased interest income on cash and equivalents. Our annual effective tax rate finished at 21.7%. Average diluted shares outstanding were 247 million, 6% lower than a year ago due to share repurchases. The net result was fiscal 24 non-GAAP EPS of $7.53, growth of 29%, well above our long-term target of 12% to 14% growth. Now, before I turn to fiscal 25, let's cover the balance sheet. For fiscal 24, our ending cash balance was $5.1 billion. The cash position includes $200 million earmarked for the November 2024 debt maturity with an additional $200 million to be paid through the time deposits held in prepaid assets and other on the balance sheet. To get there, we generated robust adjusted free cash flow, nearly $4 billion in fiscal year 24. Recall that at our investor day last June, I commented that cash flow remained an area of opportunity for us. Our excellent adjusted free cash flow results in 2024 was almost entirely a result of the team's year-long effort to optimize each element of our working capital while remaining focused on our service levels. To a much lesser degree, the results reflect balanced preparation for the Q1 contract expiration, which has now occurred in July, largely as we expected. We attribute only a couple of hundred million dollars of our fiscal 24 cash flow to beneficial timing related to the large contract unwise. I'll talk about the impact of the contract unwind on cash flow shortly as part of our guidance. Also this year, we strengthened our balance sheet and achieved our targeted leverage ratio, which resulted in three positive outlook updates from the credit rating agencies. We also continued to deploy capital in a shareholder-friendly manner, returning more than our baseline commitment of capital return to shareholders through $750 million of share repurchases and $500 million in dividend payments. And we increased our dividend for the 35th year in a row. Now let's look forward and discuss our updated fiscal 25 guidance on slide 15. Today we are increasing our fiscal 25 EPS guidance to a new range of $7.55 to $7.70. This is an increase from the preliminary guidance during our Q3 call of at least $7.50. Slide 16 shows our fiscal 25 outlook for pharma. On revenue, we expect a decline between 4 and 6% reflecting the nearly $40 billion revenue headwind from the large customer contract expiration. Normalizing for the large customer, fiscal 25 revenue growth would be between 15% and 18%. This reflects underlying growth generally consistent with our long-term targeted rate of 10% due to strong overall pharmaceutical demand, as well as significant growth from the onboarding of new customers and existing customer expansions, primarily in the second half of the year. We are on track to address the segment profit impact of the large contract expiration with this incremental volume, contributions from specialty networks, and additional operational efficiencies. Note that all three of these offsets will have some level of a ramp to them throughout our fiscal 25. We expect consistent market dynamics for our generics program to continue. We also expect increased contributions from brand and specialty products, including biosimilars. We are assuming a modest year-over-year headwind related to the distribution of COVID-19 vaccines. On brand manufacturer price increases, we expect an environment generally consistent with the past several years. Summing it all up, we anticipate pharma segment profit growth in the range of 1 to 3%, a testament to the strength and resiliency of this business. It is the case that segment profit growth will be more back-half-weighted than usual. We expect first half segment profit to be slightly lower to flat versus the prior year with profit growth in the back half. Q3 should again be the highest absolute dollar profit quarter for the business. Turning to GMPD on slide 17. On the top line, we expect growth between 3% and 5% aided by low single digit utilization growth, as well as incremental volume from the onboarding of net new distribution customer wins. On the bottom line, we are reiterating our expectation of approximately $175 million in segment profit for fiscal year 25 on our path to approximately $300 million in segment profit by fiscal year 26 by executing the GMPD improvement plan. The plan is unchanged from what we shared a quarter ago. After successfully offsetting inflation at the end of this year, the annualization of these benefits will be a fiscal year 25 tailwind. The team remains focused on continuing to drive Cardinal brand growth through our five-point plan. In fiscal year 25, we expect Cardinal brand sales growth between 3 and 5%. Simplification and cost optimization also continue with further opportunities in the pipeline to drive efficiencies and streamline our operations. Recognizing that while GMPD's plan may be simple, that does not make it easy. We once again expect a back half-weighted profit year in fiscal 25, just like fiscal 24. The quarterly cadence will be driven by seasonality and the ongoing commercial and operational improvements in the business. Additionally, we expect unfavorable manufacturing cost timing in the first half of the year, which, unlike last year, includes some startup costs and timing associated with expanding production at Cardinal Health-owned domestic manufacturing plants to enhance our supply chain resiliency. Q1 should be the low point of the year due to these factors. Last year's updated Q1 shows $12 million of profit, and this year we expect Q1 to increase to up to $20 million with sequential improvements thereafter. Turning to other on slide 18, for each of nuclear, at-home solutions, and Opti-freight, we expect profit to be aided by the continued strength in demand, execution of our growth strategies, and benefits from our increased prioritization of these businesses with investments. Collectively, we expect revenue growth in the range of 10% to 12% and segment profit growth of approximately 10% with all three businesses contributing to these targets. Stepping back, we are pleased to see anticipated profit growth across all of our operating segments in fiscal year 25. Moving below the line, we expect interest and other in the range of $140 million to $170 million. The large year-over-year increase continues to be driven by lower average cash balances, lower short-term investment rates on our cash, and higher rates on our debt resulting from the refinancing of our calendar 2024 maturities. We continue to expect our fiscal year 25 effective tax rate to be in the range of 23% to 24%. With our near-term GMPD value creation issues, we have increased our fiscal year 25 share repurchase expectations beyond our baseline to $750 million on the year, leading to a share count guidance of approximately 243 million shares. Finally, we expect fiscal year 25 a just-repeat cash flow of approximately $1 billion, reflecting the Q1 negative impacts from the large contract unwind, as well as quarter-end day of the week timing. While these dynamics will significantly affect our cash flow in Q1, our strong investment-grade balance sheet positions us well to manage through these fluctuations and continue making strategic investments in the business consistent with our disciplined capital allocation framework. To close, fiscal year 24 was a standout year filled with notable milestones. With adjusted EPS growth of 29% and adjusted free cash flow of nearly $4 billion, the Cardinal team delivered. With six weeks of fiscal 25 behind us, I'm pleased to say that the team is managing adeptly. Between the leaders we have throughout the organization, our dedicated team working tirelessly to serve our customers and our clear strategy, we are confident that we will deliver once again. With that, I will turn it back over to Jason.

Thanks, Aaron. Now I'll go deeper into our strategic priorities, beginning with pharma and specialty solutions, where we remain focused on building upon our strong core foundation and expanding in specialty. Everything we do starts with the customer. Recently, we hosted our 32nd Annual Retail Business Conference, the largest in the industry, bringing together 5,000 attendees from across the country. As the trusted partner to Retail Pharmacy, we understand the critical role retail-independent pharmacies play in caring for their communities as they continue to expand their services as community healthcare destinations and demonstrate their remarkable value and resiliency. We continue to invest in our full suite of clinical, business, and reimbursement solutions to support our customers and provide industry advocacy to empower Retail Pharmacy now and into the future. Our Consumer Health Logistics Center, slated to open in 2025, will offer a comprehensive selection of over-the-counter medications, treatments, and diagnostic solutions. Additionally, our new Vaccine Alliance Program offers cost savings and other benefits from participating manufacturers to help pharmacies engage more patients and expand their immunization programs. We are constantly evaluating ways to bring innovative solutions to our pharmacy and manufacturer partners through the breadth of our offerings and capabilities. As part of that commitment and in collaboration with CVS Health, we have formed Aviron, a joint venture to source biosimilars. Aviron builds upon our company's successful partnerships, like Red Oak Sourcing, with similar overall objectives for biosimilars. Simply put, we are increasing access to additional therapy options that will provide more choice for patients at a lower cost. Aviron began by contracting a couple of products, including Humira biosimilars, and we see opportunities for the program to expand over time. Continuing in specialty, we're pleased with how quickly Specialty Networks has integrated with our business, and we continue to be impressed with the PPS Analytics platform's insights generation capabilities and the team's clinical, technology, and operational expertise. As expected, we are leveraging Specialty Networks' demonstrated capabilities in urology, the largest area of its fully integrated model, to enhance our offering in oncology. The fully integrated Specialty Networks market offering is directly aligned with our strategy for Novista, our oncology practice alliance providing advanced technology and services. Over the course of the last year, we've built a world-class Novista team consisting of industry experts, defined our offerings and go-to-market strategy, and completed our foundational technology build. The Novista team is engaging with an active pipeline of customers across the oncology marketplace, demonstrating to community oncologists how Novista can help them remain independent for good. Upstream with manufacturers, our leading specialty 3PL has continued its track record of growing faster than market with nearly 20% growth during the year. We're leveraging these services as part of our comprehensive offering that further facilitates the commercialization and delivery of critical cell and gene therapies to providers and patients. Our new advanced therapy solutions innovation center features a specialized deep frozen storage suite to handle the logistical challenges associated with cell and gene therapies. Additionally, the dedicated space provides opportunities for collaboration and improved process design supporting the ordering, invoicing, and accounts receivable process for pharmaceutical products. Across classes of trade, our commitment to service and solutions-orientated commercial approach has resonated with customers. A new health system customer onboarding that we recently completed and a few in the earlier phases of ramp-up are going smoothly and we expect over $10 billion in total incremental revenue in fiscal year 25 from committed customer wins and expansions. Turning to GMPD, when we originally introduced the former medical improvement plan, we consistently highlighted that the first key to turning around the performance of the business was addressing the significant impact of inflation and global supply chain constraints on our business. Our team got to work with urgency, executing various mitigation actions, to cover the significant operating losses we incurred. Fast forward to today, after two years of hard work, the GMPD business is on solid ground. We delivered an approximate $240 million year-over-year improvement in segment profit in fiscal year 24. We exited the year successfully offsetting the gross impact of inflation. We've seen three consecutive quarters of year-over-year segment revenue growth and four consecutive quarters of Cardinal Health brand volume growth. We drew Cardinal Health brand revenue 3% overall for the year and 4% in the U.S. Our customer loyalty index score for U.S. distribution remains up over 20 points from its pandemic low, and we're successfully retaining key distribution customers along with some recent wins. As we continue to dive into the business through our portfolio review, it's clear there are still significant opportunities to capture. I'll highlight a few. First, as Aaron mentioned, our progress on inflation mitigation in fiscal year 24 will annualize and be a significant year-over-year tailwind to our results next year, even with a slight headwind expected from the recent cost increases in international freight. Between the actions we've taken to improve our resiliency, the diversity of our global supply chain, and some offsets across our broader portfolio of commodities, we're confident in our ability to continue to effectively mitigate supply chain inflation. Cardinal Health brand leading indicators remain positive and continue to predict an acceleration in growth. We've seen a healthy overall utilization environment for a number of quarters now, and our five-point plan continues to produce encouraging results. Third, the disciplined execution of our simplification strategy has driven improved operational performance. With the business stabilized and only recently turned free cash flow positive, we see opportunities to drive targeted working capital improvements over the next two years. Additionally, we can broaden our simplification efforts, such as further optimizing our real estate and geographic footprints, while always prioritizing the needs of our customers as our North Star. Our team is energized to execute on the next phase of the improvement journey, focused on commercial excellence and continued simplification to create additional value for our customers and shareholders. In nuclear and precision health solutions, Our leading positioning with 130 nuclear pharmacies and 30 pet sites across the country feeds our differentiated ability to partner with manufacturers in order to bring cutting-edge therapies to patients exactly when they need them. Our excitement continues to build around the opportunities to improve patient lives through the use of precision medicine, which we have been investing into heavily with our Center for Theranostics Advancement. We're seeing the results. with our theranostics business growing over 20% in fiscal year 24, driven by strong demand for prostate cancer theranostics products, such as telexes and lucex. In fiscal year 25, we expect similar theranostics growth and will continue to invest to meet the growing pipeline of opportunities, which includes cardiology and neurology, but overall is largely dominated by oncology. As an example, we will be expanding our support of novel prostate radioligand therapies with Novartis' Plovicto in fiscal year 25. We are also investing in increasing our cyclotron capacity and pet manufacturing geographic footprint to meet increasing demand for pet diagnostics, with the majority of emerging radiotherapeutics requiring a companion PET scan. Fiscal year 24 was a foundational year for our $2.9 billion at-home solutions business, as we laid the groundwork for future growth and efficiency. This business continues to grow revenue faster than market, not only aided by care moving into the home, but also our team's commercial execution. To drive operating leverage, we've been investing in our technology capabilities, such as new warehouses with state of the art automation. Just last month, we opened our brand new 350,000 square foot warehouse in South Carolina, featuring the fastest order fulfillment system in the market. This system is also operational in our central Ohio facility and planned for the new Texas distribution center we previously announced and expect to open in 2025. We're seeing fruits from our investments, with our fill rates currently the highest they've been in over three years, and our patient net promoter score up over 16% year over year. The OptiFreight logistics team delivered this year with exceptional performance. Our total view insights platform continues to help customers uncover shipping inefficiencies and optimize delivery through data-driven insights. As a result, our customer loyalty index is at an all-time high. In fiscal year 25, to put it simply, we expect to continue our track record of great execution, helping our customers expand and bringing on new customers to benefit from our program and value. Across enterprise, we are confident in the Cardinal team to continue our momentum and deliver our targeted growth in fiscal year 25 and beyond. Before I wrap up, the former CFO and me can't help but acknowledge our team's tremendous progress on cash flow this year. With the record results in fiscal year 24, we're positioned to exceed the adjusted free cash flow expectations we outlined at Investor Day with at least $7 billion over the fiscal 24 to 26 period, even despite the large contract expiration. We possess the financial flexibility to continue investing in our business, returning capital to shareholders, and maximizing long-term shareholder value creation. In summary, fiscal year 24 was another great year, and we are excited to continue driving our company and healthcare forward. I want to thank our dedicated employees who serve our customers and continue our work to be healthcare's most trusted partner. With that, we will take your questions.

Thank you very much, Mr. Haller. Ladies and gentlemen, once again, if you wish to ask any questions, please press star 1 on your telephone keypad, and just make sure your Uline is not muted in order to let yourself reach your equipment. And also, please limit yourself to one question each. This first question is coming from Lisa Gill, coming from JP Morgan. Please go ahead.

Thanks very much, and good morning. Thanks for all the details, Jason. I just want to better understand just two things. One, a nice driver of the margin going into next year, you had originally said roughly 1%. Now you're talking 1% to 3%. I think you called out a couple of things, the specialty network, new customer, cost mitigation. But I'm just curious, especially in the new customer, is there anything unique about that contract? Anything else that you would call out as we think about the margin improvement throughout 25? Good morning.

Thank you for the question. Happy to talk about it. We are really pleased to raise our guide for the pharma business for fiscal 25. It really reflects our continued confidence in the team and continued confidence in the resiliency of that business, notwithstanding some of the puts and takes that we've been talking about over the last couple of quarters. I'll touch on the... profile in a second, but I do want to emphasize on the revenue side of the house from a guidance perspective that we guided down 4 to 6% all in reflecting the $40 billion headwind on the low margin contract non-renewal. But it's really up 15 to 18% on an adjusted basis if you take out the impact of that customer loss. Within that 15 to 18% is $10 billion of new revenue, new customers, and expansions of service with existing customers. That's on top of an underlying 10% underlying growth with the existing business. And so from that, you can tell that we are growing the portfolio and doing what we said we were going to do with our existing customers and adding on both new customers and expansions with existing customers to get to that revenue base. That supports the increase in guide, the 1% to 3% on the profitability side of the house. The things we called out during the earnings call, it's the consistent market dynamics. It's the generic volume growing. It's the low single-digit growth in core, the high single-digit growth in specialty, and the strong overall RX demand. There's a lot of things going on, but we are confident in our plans as we carry forward. Now, we don't comment on the margin profile of any particular customer, particularly in the context of a new customer, and we were delighted to announce formally the public's win today in our earnings release. I'm not going to comment on their profitability, but I will observe that we have publicly commented on the low margin nature of the business that we've lost, and that certainly doesn't hurt us as we carry forward. Jason, I think you would add nothing to that.

Thank you. Our next question will be coming from Eric Percher, colleague from Nefron Research. Please go ahead. Thank you.

James Meeker, Fair to say there was some concern coming into the quarter on the increase in macro freight trends and other input costs, and I know you mentioned, you were able to. James Meeker, offset that can you give us a sense of how this looked to you in terms of the size of that increase versus what we've seen in the past wasn't material and how it looked under the current or new contracts versus legacy contracts and the ability to pass that along to your customers.

Sure. Thanks for the question, Eric. I think it's important to just go back in time a little bit in the last 12 months. A year ago when we were sitting here, certainly the freight costs had gone all the way back down to historic levels. So we were enjoying, you know, really the run-up had come all the way back down. And it was at the beginning of the calendar year, so in our third quarter when the Red Sea issues first began, and that's when we saw the first And the reason I remind you of that is that first spike was known come springtime when we gave our initial guidance for GMPD. And so we knew about that first step up already. And that's been factored in from the guidance from day one. Yes, there have been further increases since then. But when you look at the combined two increases, the two different steps, first in January, then in the spring, They still are woefully short of where we were a couple of years ago when the whole supply chain was under pressure, where even when we were spending two, three times the current levels, we were having difficulty in actually getting reasonable service. So, yes, the costs are higher, but not nearly as high as they used to be. And most importantly, the supply chain is functioning a lot more efficiently than it was before. Long way of saying, Eric, that, yeah, there's a little bit of an increase here. It's something we monitor and manage very, very tightly. But it's not the point where it requires widespread price adjustments accordingly, at least not yet. And in addition to that, it's important that we look at the overall inflationary environment. And we talked about this a couple of years ago at the peak. We had a lot of oil and petroleum-based products, including fuel and other type of freight, That was also a big issue. Those are actually a little bit softer in terms of the cost. So overall, net-net, we're managing through it better than we have before. And overall, we have some puts and takes that are all very manageable. We'll continue to evaluate the pricing necessary within that. But at this stage, we haven't had to exercise that lever to near the extent that we did in the past.

Next question, please.

Yes, our next question will be coming from Michael Cherney calling from Learing Partners. Please go ahead. Your line is open.

Good morning, and thank you for taking the question. Maybe if I could dive a little bit more into the underlying pharma growth, if you can. You did a good job outlining some of the moving pieces on lost contract versus new. Is there any way you can give us a bit more color on where you expect the profit streams to lie from specialty, and then also a bit more color on the COVID hangover, just so that we can have a better understanding. I guess maybe the simple, straightforward question is, where will you be on a exit run rate on pharma growth exiting the year, given all the moving pieces you have to start the year?

Yeah, let me try to address a few of those pieces. So specialty is absolutely a key part of this story and why we still anticipate being able to grow this business next year. We highlighted in our comments that in fiscal 24, for the year, we saw another year of 14% growth. You may recall at our investor day last year, the specialty business Kager over the prior three years was anticipated at that time to be 14% as well. So another year of strong growth driven by the widespread investments that we have made and continue to make. We talked today about a couple of interesting growth drivers for the future, whether it's our advanced therapy solutions business, the new venture with CVS for Averon, focused on biosimilars. Biosimilars in general has been a rising tide type of benefit over the last several years. And of course, then our acquisition, especially networks, which closed in March, and has an eight, nine month type of year over year benefit tailwind. So these are all areas that are driving our specialty business to some degree in fiscal 24, but they're all examples of where we would expect that to continue to grow over fiscal 25 to help mitigate for that contract non-renewal that we think while that growth will be slower in 25 due to that, I also made the comment in the remarks that even in spite of this overall revenue reduction for the enterprise for the pharma segment and the impact of that contract non-renewal, we still expect our specialty business to grow in fiscal 25 in spite of that. So that tells you that our run rate as we lap fiscal 25 and that non-renewal, we would anticipate it to be very consistent with the long-term algorithm that we've highlighted in the past. which, you know, from a profit perspective, has been defined as low single-digit type of profit growth for our PD core business and double-digit growth for specialty. So we'll continue to look at other opportunities to invest organically as well as inorganically to continue to feed that growth.

Next question, please.

Our next question today will be coming from Aaron Wright, calling from Morgan Stanley.

Tanisha Joyce, Great thanks so in terms of this fiscal 25 guide, are there any changes in terms of how you were thinking about just the optimum unwind in terms of stranded costs or otherwise and just. Tanisha Joyce, Given the building contributions, whether it's specialty networks or the new customer wins. Tanisha Joyce, With that often offset I guess, how should we think about that cadence in terms of the split of first half versus second half or, however, you want to define it on an EPS perspective. given some of those moving pieces in the first half. Thanks.

Yeah, I'll have Aaron walk through some of the cadence elements to your question. But I wanted to stress just up front, which you should have heard from these messages, are very, very similar words and phrases that we used last quarter. The plan is unchanged. Of course, we get a little bit smarter. We sharpen our pencils a little bit, and we get a better understanding of where our exit rate is for 24. But all the factors that we are talking about today with this business are –

very similar to what we walked through in the past and of course all the investments that we made this last year aaron a few thoughts on the cadence sure so the way to think about it is is optum was an existing customer with us until the end of our q4 and you can see the results in q4 we don't need to go deeper on that but what did also happen in q4 was us being incredibly planful around the impact to our operations as well as to our financials of that you know customer unwind we've talked in the past we talked during our last earnings call Phil Kleisler- Around the three offsetting actions, the contribution of specialty networks, of course, the new customer wins the expansion with existing customers, as well as further cost optimization opportunities and. Phil Kleisler- we're pleased that the team got on it got ahead of it and they've already been executing in that respect, and so the guidance were able to provide today we view as. relatively consistent with what we provided in Q3, but with an additional degree of confidence because the plans are behind us and now we're acting in that way. The non-renewal will impact our Q1. There's no way to avoid that. They were a large, low-margin customer. And as we've talked about, the new customers coming on board are largely back half-loaded. And so we will have a timing difference relative to prior years, and that will impact certainly our revenue and profitability timing over the course of the year. There's also a cash impact, right? The unwind of the negative working capital position there is a Q1 impact for us and a key reason why we are carefully monitoring our cash flow during the first quarter, of course, balanced with the fact that we are delighted with the strong adjusted free cash flow and the strong cash balance at the end of our Q4. So look, on balance, the cost optimization is already in play. The special networks is already in play. and we continue to work on the customer expansions and the new customer onboarding, and we will make that successful as well.

Thank you. Our next question will be coming from Alan Lutz calling from Bank of America. Please go ahead.

Good morning, and thanks for taking the questions. One for Aaron. Can you talk about how gross profit performed relative to your internal model? And then are you seeing any impact from insulin pricing changes or Humira share shifts to gross profit dollar growth? And then are there any insights or thoughts around the biosimilar launch for Stellara? Thanks.

I'll start. Look, I would observe that our gross margin progression went largely as we anticipated over the course of the quarter and the year. We have a very complicated business managing between the two, the various parts, and no real surprises from my chair, you know, in that way. Second part of the question was?

So, yeah, let me take that. It was related to, I think, just the general impact of insulin pricing, but there's also a Humira element there, so probably a couple different questions. Within the quarter, we did, as you mentioned, As Erin had highlighted before, we saw, of course, the ongoing benefit of the GLP-1 growth. But we did have a similar offset as it relates to the pricing change for the WAC insulin adjustments that happened at the beginning of the calendar year. So until we get through the second quarter of fiscal 25, we'd anticipate there to be, you know, a bit of an offset related to that price change. There was also a question around Humira and I assume just the biosimilar type of migration. So we see that it's started to move a little bit more. Certainly some of the actions that CVS has done more broadly in the marketplace seems to have moved things along a little bit further. It's still fairly low penetration throughout the broad industry. But generally speaking, we have seen that start to pick up a little bit. I wouldn't say meaningfully within the quarter, maybe a little bit even afterwards. But it's still at fairly low penetration rates. You know, it's one of the reasons why we're so focused on biosimilars and with our joint venture with Avron is just to continue to look for ways to increase access for patients that need that therapy at an affordable cost. So we'll continue to do our part there. Next question, please.

Yes, sir. Our next question today will be coming from Kevin Caliendo of UBS. Please go ahead.

Thanks. Thanks for taking my question. So I'm just trying to triangulate some of the things we've learned this quarter about the GMPD business. You're talking about winning... more share of pocket we're seeing you and make investments in domestic plants we've seen shipping costs go higher at the same time you know we've seen owns and minor and medline put up stronger than expected results in mckesson and henry shine put up worse than expected results in guide lower in those segments is it maybe fair to say that you and your peers on the hospital side are moving downstream at all to try to capture greater percentage of the health system business that's not just in the acute care side is that like is that a trend that's happening um and i guess the second part of that is the investments in domestic driven by the idea that now you could be more because shipping costs are higher or costs overseas tariffs are coming that the domestic manufacturing can be more competitive on a price basis versus versus importing yeah

So it is certainly true that GMPD is more acute-focused customers, and we do benefit from the migration towards more of an ASC model. We do not participate widely in physician offices. So that is an element. It's nothing that we've called out as broad trends, and so I don't have much more to go on there other than on a same-store-sale basis, You know, we're seeing the utilization fairly consistent this past year, generally speaking, that low single digit type of range. So we are seeing that there's like for like growth. What we've highlighted fairly consistently is that this last year was or the end of end of 23, beginning 24 was the inflection point for us. We were not growing with the market at this at that point. Over the course of 24, we've largely grown with the market. plus or minus a point here or there. So very consistent with that low single digit type of growth over, especially after our first quarter. So we don't think there's widespread shifts there, but we definitely have an ASC presence that we do think we benefit from, but I wouldn't call that a main driver of what we're looking at. In terms of the investments we're making, we did call out some domestic investments, but they're not limited to domestic. We believe in a very diversified competitive geographic footprint. We've stressed that specifically we don't have manufacturing, direct manufacturing in China. It's one of the related questions here as it relates to certainly the ongoing tariff risk. And I can also let you know that we only source less than 10% of our total Cardinal Health branded product in China. So specifically to China, we don't have a large exposure. But we do have exposure beyond China and Asia, near shore, central South America. We believe a diversified broad supply base is important as well as a domestic footprint. So we have increased our investments across the supply chain to improve the resiliency. And there's a couple of areas within the US specifically, you've seen that some of the tariffs related to syringes is a specific area of focus and we happen to have that capability in the United States. And so that's just one example of where we're really doubling down on that investment. So, yeah, cost and freight are always a consideration. You know, we build a financial model behind all that and we look at the risk. But on this particular example and one, you know, example where we're really leaning in on that investment, that's more about just ensuring our customers get the products they need. This is more of a volume opportunity

than a pure cost and margin opportunity so you got to look at all those factors next question please yes sir the next question will be coming from Eric Caldwell of Bayard please go ahead thank you very much um I wanted to ask quickly about Medicaid disenrollment and if to the extent you've seen impacts um in consumer or channel behavior as a result of that? And if so, could you specify where and possibly quantify those impacts? I think specifically I'm probably tagging on to Kevin's question and wondering if some of the shifts we're seeing in the medical segment could be related to, you know, roughly 25 million people coming off of Medicaid here in the last several months. Thank you very much.

Yeah, thanks for the question, Eric. You know, again, I think my answer is going to be fairly similar to what I said before, but in a different context. You know, we have a very broad base of customers, very broad base of payers behind those customers. So we don't have necessarily even the insight all the time as to where those reimbursements are coming from. The same store sales types of information, what we see more broadly is just not a lot of fluctuations and variations. And we're not talking, again, in any type of growth rate above and beyond what we believe that underlying utilization is. So generally speaking, if there are some of those trends at this stage, I'm not seeing that as a meaningful driver to where our business is going.

Next question, please.

Yes, sir. Our next question today will be coming from George Hill calling in from Deutsche Bank. Please go ahead.

Hey, good morning, guys. Thanks for taking the question. Two-parter is number one, I guess, Aaron, would you be willing to provide any more color on earnings cadence expectations for the year, particularly Q1 and Q2 versus the back half giving the large number of moving pieces? And then a quick one for Jason is we know you've got the new business coming on. We've got the United Laws. Would you still have an update on the competitive environment and drug distribution, this has been a pretty stable space for a while now. Just kind of want to make sure that nothing's changed or nothing should be changing in the dynamic that we should be aware of. Thanks.

I'll start. I would just observe that we're being very thoughtful in the planning we're doing for the year given the number of moving pieces we have both within the pharma business and within the GMPD business and, of course, keeping an eye on the three growth businesses within other It was in pharma, what we've referenced is first half from a cadence perspective will be slightly down to flat versus prior year. That's only natural given the customer unwind and the back-ended nature of the new customer onboarding. Largely the drivers within the pharma business are consistent with what have been true in previous years. Q3 will be where we see the branded inflation rolling through. Not a lot of different news there that I would call out. From a med perspective, we're just very focused on executing against the plan. We try to be transparent every quarter about how we're doing and where we see it going, which is why we were purposeful in calling out Q1 specifically as we push ahead. We had great success during fiscal year 24 and accomplished what we told you we were going to do, and we plan to do that again. I just want to be clear that we are investing in the business, and there are some near-term Q1 drivers that will make that profit number what we call the up to $20 million as we carry forward. There's no magic there, though. I want to be clear. The plan and the cadence is generally consistent with how we've described the GNPD improvement plan in the past. Of course, we have the benefit of the inflation mitigation now lapping as we push ahead. And, of course, we can't forget the important topic of seasonality from a Q4 to Q1 perspective. We've called that out before, and that's why you see a dip from the great results in Q4 into Q1.

Yes, to relate to the second question, I'll say what I said before. You know, hey, we're 1% industry, so it's competitive but stable. I would say that the, you know, the vast majority of contracts don't change hands period to period. You know, these couple, several that have that are more notable, there's been, you know, several that have long-term five-year types of agreements. So every five years, there's the chance, opportunity or risk for that to occur. But again, I'll just stress that the vast majority don't. And, you know, we feel really good about our positioning, competitive positioning. We know we're competitive. We know that our message and our work and our results resonate with our customers. We're very much focused on that experience, the service levels, the value initiatives and propositions behind it, the tools and platforms. We've talked about our Interlogix and our Atrix platforms for health systems as one example of not just going at them with price, but going at them with value and having true value components to those offerings. And we feel really good about what that positioning is, and that's why we've been able to offset to the degree that we have. Next question, please.

Yes, sir. The next question will be coming from Stephanie Davis of Barclays. Please go ahead.

Hi, guys. This is Anna Grzynski on for Stephanie. Congrats on the quarter, and thank you for taking our questions. I was hoping to hear more about your AI roadmap. You've highlighted AI and machine learning deployments within the Interlogix platform, and just wondering how we should think about additional AI use cases to improve efficiency and potential cost savings.

Yeah, thanks for the question. It's broad-based. It's varied. You know, we don't call it out in every call in all areas, but it's so broad. It really is everywhere. It's in the core of how we operate. You know, examples of what we talked about today, without using the phrase AI, especially networks, you know, their PPS analytics is a great example of taking that data, electronic medical records, and synthesizing that for manufacturers, as well as the providers, and getting actionable insights. I mean, that is AI. When you look at some of the automation I've commented on, on our at-home solutions network, this is now over 25% of our sites that in just the last 12 to 18 months we're launching a new footprint that is bringing in technology and automation in various forms into the manufacturing, or I'm sorry, into the distribution setting to be even more innovative, even more efficient and productive. And as you mentioned, those other platforms, ZentoLogix, Atrix, working with Palantir and other partners to create value, And then I'm not even getting into the more basic use cases like customer service and back office. You know, I guess I don't want to just hit the same drumbeat everyone else is. What we're trying to do in our communication is get beyond the buzzwords and really talk about the essence of where we're driving our business. And we feel really good about that. And it's definitely. Question, please.

Yes, sir. We'll now move to Elizabeth Anderson calling from Evercore. Please go ahead. Your line is open.

Hey, guys. Thanks so much for the question. I was wondering if you could maybe expand on your prior comments about two things. One, you've talked about customer expansions a couple of times across the course of the call. Can you talk about sort of what those are generally speaking? Are they sort of people like moving from pharma to increase in medical? Are they moving across different pharma categories? How do we think about that? And then if we think about the cost cutting, obviously there's some right sizing for the contract change that you guys mentioned, but how do we think about some of the more, it sounds like some of those changes you're putting through are sort of more structural and sort of how do we think about sort of the long-term benefits of those going forward? Thanks.

Yeah, I'll start. On the customer expansion, these are existing customer relationships where we are already a primary distributor for them and they are expanding their footprint um whether it's acquisitions or just taking on more of the business themselves and we're supporting their growth so it's a it's an existing relationship and expanding upon that so it's um you know committed in that sense where we're already there um And you can use BioPlus as one of the examples of what I'm talking about there. Perhaps, Aaron, you can go into a little bit more detail on the cost. Sure.

So as I commented earlier, the team did a great job of assessing our opportunities in the face of the customer non-renewal. But I guess I would go back and point out that at the end of the day, we operate at 1%, you know, operating margin business. And so it's important for us to always be mindful of the cost structure around us. but with a North Star of how do we continue to ensure our customer service. And so we've been pleased that the reviews we undertook during Q4 and the actions we identified will help us to offset the near term impact of your customer loss. But more importantly, they create a more efficient operational structure for us. And the changes are broad ranging across the enterprise with that North Star though of ensuring we continue our customer service focus as we push ahead many of the changes have already been implemented we're operating that new framework already we continue to assess what are the productive opportunities and i also would emphasize that the ideas for these changes are coming from our broader teams as they look around and say okay how can we operate better in support of our existing customers and the new customers on on the line next question please yes sir we'll now move to steven baxter of wells fargo please go ahead

Yeah, hi, thanks. I just wanted to ask a couple about the restatement to GMPD. It sounds like you're saying the higher GMPD base post-restatement in 2024 doesn't change the run rate because you're removing out of period items. Is that the right way to think about it? So there's no comparability issue with the $175 million target on that higher base? I guess that's the first question, and then Based on the restatement schedule you provided, I think the cumulative profit in the business from 2022 to 2024 is $25 or $30 million higher than previous. I'm just trying to understand why those things don't net out if we're thinking about timing issues here. Thank you.

Yeah, appreciate the question. The answer is there is no comparability issue. The 175 is unimpacted by the revisions that we've provided to the financials today. The revisions we provided were for the three-year period. There is an impact of shifting of income or expense into the prior periods as well, which is why you're not seeing direct comparability as we carry forward. I do want to emphasize, though, that part of our operation here is building and maintaining a strong, controlled environment. And as we identified the issue in the Edge Park part of our at-home business, which is part of other You know, it was a revenue recognition issue tied to a business which does less than a half a percent of our overall revenue base. We were careful to do the right thing and disclose, and at the same time, in partnership with our auditors, decided that we would reflect the feedback we've gotten from this community and others around comments around non-recurring adjustments in prior periods, et cetera. And so now we walk into fiscal 25 not only with comparability, but with a clean set of financials, unimpacted by timing, to be able to talk about our progress as we carry forward.

Next question, please.

Yes, sir. The next question will be coming from Charles Rye of TD Cowan. Please go ahead.

Hi, this is Lucas Lumpur, Charles. Thanks for taking the questions. I wanted to ask about the other segment. Can you talk about what's expected from Optifreight Nuclear and at-home in fiscal 25 in terms of growth? Should we be thinking about any of these businesses outperforming the 10% segment target that you've set?

Well, from a guidance perspective, we provide guidance for other on an aggregated basis, but I do want you to take away the enthusiasm present in Jason's comments and his tone of voice around the opportunity we think that each of these three businesses presents to Cardinal Health as we carry forward. The businesses are unique. They're managed differently. We aggregate them from a financial perspective. It's also the case that we are investing in each of those businesses. We have in 24 and we are in 25. At Home has recently opened two new distribution points and is investing in automation. Optifreight has continued to invest in digital platforms in service of its customer experience. The nuclear business we've talked at length about. expanding the pet network as well as our excitement about the theranostic opportunities that that business presents. And so, again, as I go back to the financial guide, part of what you're seeing in the other basis is we are presenting a consistent picture on an aggregated view, which reflects in some cases we'll be investing in a year or a month while reaping the benefit in the same year or month from other parts of the portfolio.

Jason? I would say that the one thing we did clarify in the prior comments is that all three businesses are expected to contribute to that growth in fiscal 25. And we are investing, you know, fiscal 24 was an especially heavy investment period, but we are continuing to invest across the range. Just one example to put it into perspective is we talked a lot about our investments in our nuclear and precision health solutions business. Chris Wanner, You know, this is a business that we've highlighted theranostics now just with our second phase of expansion that we announced about a year ago. Chris Wanner, Or this last year, and then we also have talked about some pet expansion. Chris Wanner, From a 24 fiscal 24 to 26 that's about $100 million mainly capital that we're investing into that business, but is representative. Chris Wanner, Of the the big investments that we're making in addition to the three different distribution centers and at home solutions that Aaron and mentioned. are very representative of the inputs that we're putting into these businesses because we deeply believe in their ability to continue to grow, benefit from the secular trends they each enjoy, but then also reflecting the leadership position we have in each, and that is then further bolstered by these very specific investments. Next question, please.

Thank you, sir. And ladies and gentlemen, our last question today will be coming from Daniel Grossleit of Citi. Please go ahead.

Hi, thanks for taking the question, and congrats on a strong quarter. I was hoping to get a bit more detail on Averon. Will that just be serving CVS at this point, and how does that kind of interact with Cordavis? And then, are there any purchase obligations or quarterly payments associated with that? And then lastly, when does that agreement renew?

Okay, so you crammed in about four there. So, Avron, the first specific question on Avron was. Just broadly speaking.

Broadly.

Yeah, so, well, I referenced a few different times, so I think maybe there's a more specific question behind it, but it, oh, I think the question was, is it just service CVS? The answer is no. It's a consistent concept as what we did with red oak sourcing, reflecting that we both have different needs, different customers, if you will, and can jointly benefit those patients through combining our capabilities in this space. So we would expect to operate it in a similar way where we have different benefits associated with that. Um, there are, uh, I think what you're talking about are, um, there, there's not the same type of payment structure and, and, and schedule that we have, uh, for red oak sourcing, uh, kind of equalization payments, if you will. Um, so that structure does not exist with this. Um, it is, is structured, uh, you know, quite a bit differently in, in that regard. Um, so, uh, and then, uh, we've in terms of the, I think there's a renewal question there about CVS. And so the contract goes through, the distribution contract goes through 27 and then the Red Oak agreement goes through 29. So this is, you know, certainly outside of those agreements and it's, you know, very much an example of the type of partnership that, you know, we look to have with any and all of our customers in various ways to ensure that we're thinking about how better to serve those underlying patients.

Greg? Mr. Haller, we don't have any further questions. I'd like to call back over to you for any additional closing remarks. Thank you.

Yeah, yeah, thank you. And thank you all for joining us. You know, in addition to the usual pleasantries I have at this point in the call, I do want to step back for just a minute, reflecting that given it's our year end as well as additional guidance, I know that there was a lot to digest within this, but I hope that we clarified many of your points today. but i do want to end where i started and just re-emphasize those same three key points i had at the very beginning of the commentary today uh first uh first of all you know we finished the year with terrific momentum we grew our earnings per share by 29 for both the quarter and the fiscal year you add that on top of the growth that we saw last year that's a nearly 50 increase in our eps over the last couple of years driven by performance across the board but really strong performance in our largest, most significant business, our pharma segment, growing despite having some of those impacts in the quarter from that contract unwind. But we're also seeing very good utilization across the enterprise. Whether it's pharma as well as GMPD, we see that this industry continues to have a lot of need within the marketplace. That in part is driving our GMPD, but really that $240 million improvement that we saw for that business this year is uh being driven by the successful mitigation of inflation a long hard journey but we've gotten there and now we're able to focus on driving the business going forward our other businesses we're seeing robust demand across the board utilization but secular trends as well really excited about the ongoing growth there double digit 10 growth in 25 while continuing to invest in the business a cash flow really strong not only four billion dollars nearly this year but when you take last year and this year and in combination that's nearly seven billion dollars that positions us very well for financial flexibility going forward all right the second point was because of that momentum we feel very confident about our fiscal 25 and that's why we raised our guidance both in our largest business with pharma but also driving eps growth in fiscal 25 despite that customer transition And then thirdly and lastly we're doing all that operational and cash flow focus, while also driving our strategy going forward optimizing our portfolio. Very consistent transparent dialogue we've had with you this management team is focused on those key priorities and will continue to communicate. we're excited about the progress across the number of areas that we talked about whether it's furthering our partnership with our largest customer. TAB, Mark McIntyre, or the ongoing inner integration of our largest acquisition especially networks that we've done in quite some time. TAB, Mark McIntyre, we're well positioned to continue to grow the business, even in spite of any type of side ones that we've identified. TAB, Mark McIntyre, And, of course, behind all that we will continue to responsibly prioritize shareholder value creation and we've communicated some additional near term actions specifically within the GM PD business today. And that is translating to even more opportunistic share repurchases in fiscal year 25. So a lot there, but a lot to be excited about. And we appreciate your time and attention and look forward to keeping you updated on our progress.

Thank you much, sir. Ladies and gentlemen, that will conclude today's conference. We thank you for your attendance. You may now disconnect. Have a good day and goodbye.