Thank you for joining us for this session of the BofA Healthcare Conference. I'm Michael Cherny, the healthcare tech and distribution analyst. It's my pleasure to have with us the Cencora team. We have Jim Cleary, Chief Financial Officer, Bennett Murphy, who heads up Investor Relations, as well as treasury, probably does some other stuff that doesn't fall into that title. The Cencora team didn't bring any slides, which is great because I have tons of questions. Maybe, just to kick things off, Jim, you reported earnings just last week, I think. Yes. Maybe give some of the highlights of what was a really strong quarter. Sure. First of all, Michael, thank you for having us to your conference. We have a, great lineup today of meeting with investors, so thank you very much for hosting this great conference. So we announced our Q2 of our fiscal, our earnings last Tuesday, and we felt really good about our quarter and about our increase in guidance. During the quarter, we had 10% top line revenue growth. I think that really speaks very nicely to the utilization trends in our industry. That's on an as-reported basis. On a constant currency basis, it was more like 11%-12% revenue growth. Our EPS for the quarter was $3.50, which was about $0.20 ahead of street expectations. That was driven by good operating income. It was also driven by a better tax rate. As we become a more global business, we've had some tax synergies. We're really pleased with operating income during the quarter. We saw really kind of broad-based strong performance, particularly in the US, which is 80% of our operating income. We really saw some benefits driven by higher sales to some of our largest customers. We also saw very good specialty product sales to both specialty physician practices and health systems. We did it a increase in guidance across several of our guidance metrics. Just one that I'll call out is our U.S. operating income growth ex-COVID, we increased our guidance for growth rate for fiscal year 2023 from 5%-7% operating income growth to 6%-8% operating income growth. As I said, we felt very good about the quarter and about the guidance. W e describe ourselves as a very resilient business. I think we've shown over the last several years the resilience of our business, and that's one of the many good things about our business. We have a foundation in pharmaceutical distribution, and it's complemented by higher margin, higher growth businesses that we've been investing in. One of the many good things about our company is we have leading customer relationships in all of our businesses, which I've talked about benefited us during the quarter. We also have a leadership position in specialty, which has been driving our profitability growth for several years, and we recently made a very important capital deployment announcement where we're making an investment in the One Oncology business that should close probably at the end of our fiscal year. Another thing that we've really been benefiting a trend is we have strong biopharma manufacturer services businesses that we've been investing in, which includes the PharmaLex acquisition that we announced earlier this year. We feel, very good about our results, thus far during the first half of fiscal year 2023, and we have a high degree of confidence in our guidance for the full fiscal year. With that, we'll open it up to any questions you have, Michael. Yeah. I'm going to definitely get back to specialty at One Oncology, I want to just level set too on this guidance factor. You've had a, let's call it, interesting start to the year. You had the annualization in the Q1 of some wage investments and other operating investments, yet still displayed great confidence in the guidance. Two Q came and guided up. Maybe use that as a backdrop against what's been seems to be improving utilization across the board. How much of that confidence is what you're seeing on the utilization side, on the fact that script growth still remains at a healthy clip? We can see any hospital or med tech company seeing the broader base utilizations up. Pharma seems as resilient as any sector on that front. What are you seeing within your book of business that underlies that guidance increase? Yeah. Let me talk about it from two different standpoints, and you've mentioned both of these things. One is utilization trends, and the other is OpEx. Really, I think what you're probably most interested in is the utilization trends that we're seeing. As we've commented on, those have been quite positive this fiscal year, and it's, one of the key things that gives us a high degree of confidence in our guidance for the year. You know, as I said, we found pharmaceutical market to be a very resilient market. We've also seen good trends this fiscal year, really broad-based, to some of our largest customers, and then also in the specialty markets, which again, has been kind of our key profit, a key profit growth driver for some time, both to specialty physician practices and sales of specialty products to health systems, also. Let me talk briefly about OpEx also. We found ourselves in a position that I think a lot of companies did coming out of COVID. COVID was a benefit for us from a GP standpoint and also a benefit for us from an OpEx standpoint. Our OpEx growth was lower as things like people weren't traveling. As we came out of COVID, we found ourselves having higher OpEx growth as people got back on the road and those sorts of things. We also saw some inflationary pressure on the OpEx front. We really don't, aren't impacted by inflation as much as many businesses are because it really doesn't impact us as much on the cost of goods sold side, but it does to some extent on the OpEx front. During the Q1 of the year, our operating expenses were growing too fast, and we saw that was gonna happen during the Q2 of the year. So we took some actions to bring down the rate of our OpEx growth. Also that's coupled with the fact that the inflation comps get easier for us in the second half of the year. We're confident in the back half of the year that our OpEx will be growing at a slower rate than our gross profits. If you combine that with the really good utilization trends that our industry is seeing, those are, kind of a couple things that are driving our guidance increase with Bennett. Yeah. I think throughout COVID or even going back farther, you've seen consistent, as Jim said, stability. To say it another way, you haven't seen the type of volatility that you've seen in other parts of the market because you don't have that same elective nature, because in many cases, pharmaceuticals are the most efficient and preventative form of care, keeping people out of higher cost parts of the healthcare system, keeping them healthy. I think as you look at our base, you can see continued strong utilization, which as you'd expect is driven by things like utilization, innovation, new products coming to market, and also continued growth and understanding and appreciation of the value of pharmaceuticals. Let's pull on a thread on innovation because ABC, for as long as I've covered your stock, has been, a leading specialty business. Specialty encompasses so much more. It's one thing to distribute the drugs, but there's a lot of wraparound. Maybe as you sit today, before thinking about the One Oncology, just want to get into that specifically, but where do you feel that ABC has the most value add to provide to continue to support what remains a high-growth specialty market? Yeah. Let me call out a couple of different areas, and then, Bennett, if you wanna add in. T he two areas I'll call out are different. O ne is on the biosimilar front, particularly in Part B, which is where we see the most benefit. We're able to really, I think provide a lot of value and as a result, benefit, in that we have, for instance, a leading oncology supply business. We have a leading ophthalmology distribution business. We couple that with wraparound services like our ION GPO in the oncology market. As a result of that, we're really able to provide a lot of value to our customers as biosimilars have been launched in that market. Really, kind of a separate area where I'll mention that I think we're able to provide a lot of value with regard to innovation in the specialty market is with all of the biopharma manufacturer services we have. For instance, our World Courier business that's in over 55 countries around the world that is a leader in doing logistics for drug trials and managing the logistics part of it. That's been a really growth driver for us where we're able to provide a lot of value to manufacturers. When we combine that with other parts of our business, like our Xcenda consulting business and the new PharmaLex acquisition, I think we're able to, provide a lot of value when it comes to innovation, and benefit from it also. Bennett, if you'd like to add anything there. I think AmerisourceBergen thrives in our ability to help our partners navigate complexity. Whether that's in the commercialization process from World Courier in the clinical trial side, to regulatory affairs and market access, or down to our downstream partners that are purchasing the wide array of pharmaceuticals. We pride ourselves on helping our upstream and downstream partners navigate the complexity that is inherent with the regulatory nature of pharmaceuticals. Maybe to stay on that upstream idea because there's this ongoing debate of just how broad manufacturer services is as a market. I mean, you have traditional contract research organizations, you have traditional contract manufacturers, and then you have businesses that sit within you and your peers that touch a lot of those areas but are not those entities. I'd also say that thanks to the Alliance and PharmaLex acquisitions, you've gotten a lot bigger there. Yeah quickly with other capabilities. What attracted you in terms of, I'm not gonna call it a whole, but more just an expansion, but within with, the Alliance capabilities plus PharmaLex that you feel like you didn't have access to before, that you feel like manufacturers were asking you to do that you weren't already? Yeah. Okay. First let me say that, as we look at that market, there isn't any additional business capability that we need. Okay. I mean, we feel like we have a, broad array of services, and we can provide a lot of value added services to manufacturers. As I look at some of our businesses in that market, some of them are pretty tight with our distribution business. For instance, we have 3PL capabilities both in the U.S. and internationally, where we'll do the pre-distribution for manufacturers. An example of that is the Alloga business, which was one of the attractive parts of the Alliance acquisition, which is a leading 3PL distributor in those markets. We're not only doing the distribution to, say, pharmacies, but we're also doing a lot of the 3PL pre-distribution, and that's also a way that a lot of specialty products are distributed in that market. Markets like the manufacturer services like 3PL or like our World Courier business, where we're the leader in doing logistics for drug trials, that's kinda highly aligned with the distribution business. As we look at companies like PharmaLex that provide, kind of An array of value-added consulting services. We find that to be, a really good platform that we'll be able to incrementally add on to over time. I don't see anything really large, but incrementally add on to over time to provide, even better, breadth and depth of services. Bennett, do you wanna add there? Yeah. We pride ourselves on being the entity that can support large and small biopharma, pharma through the commercialization journey, through these various points in the cycle of advancing a product to the point of approval, and then actually getting their product into the market. There's a natural transition there from those services to then actually physically getting the product into the hands of the patient ultimately downstream. Okay. Maybe now, with that as a backdrop, let's turn to One Oncology. Unique transaction, both from a type of asset you bought, obviously one of your peers has something similar, but very natural evolution, but also from the structure. Maybe we'll start on the type of asset first. As far as we know, you're the largest oncology distributor by our guesstimates. I know it's our best work, but we do what we can. Thank you. What do you think that you bring to the table from the whole wraparound services to One Oncology, which I know has always been a partner of yours and a customer that can make their business better while also adding to the overall growth rate and quality and value of ABC? Yeah. I'll start, and then I'll ask Bennett to add, and then we'd like to get into the Yes Also if you have time. Yeah, so we feel, just very good about our presence in the oncology market. You know, as I've talked about, we have a leading oncology supply business. We have a leading GPO in the oncology market. We feel like this investment is, a great next step for us, where we'll have a leading managed service organization, helping these oncology practices, managing the administrative and the support parts of their businesses. These are very important business partners for us. They're oncology practices that we have very long-term relationships with and, kinda helping them manage these parts of their businesses, we feel, it's just a very important value add. Given the growth that there has been in this market, and we think it'll be one of the fastest growing parts of the market, over the intermediate and long term, we feel it's a very good and logical space for our company to get into. Ben, I'm not sure if you'd like to add at all? No, I think it's a natural evolution of our position in specialty. You know, for a long time we've talked about the importance of our specialty distribution into both physician practices and health systems, and the ability to be able to offer this, complementary, these complementary capabilities is, as I said, a natural evolution of our position in that market. That brings me, 'cause I want to certainly make time to the structure of the transaction. Unique in the sense that you're making a minority investment with numerous opportunities to consolidate over time. Yeah. I guess, what was the rationale behind that? I have some guesses. What is having a partner and a financial partner bring to the table, especially for what should be an asset that has the ability to continue to grow organically and inorganically on its own? Yeah. We felt that this was the smartest way for us to get into this business. While we do have exposure to the market, we had never owned a business like this in the past and have never managed a business like this in the past. We feel it was really smart for us to have a partner that does have experience in these types of businesses, and this really gives us the opportunity to really learn the business. It gives us the opportunity to own a lot more of the business, whether it be in the next three to five years. We felt that from a management and learning standpoint, it was the right way to do it. We also felt it was a capital efficient way to do it. There were, kind of a number of things that drove our thinking. We also think this structure will allow the business to grow nicely over the next few years. I guess as a minority investor, but one with a financial partner, so you're bringing operational heft and might and experience that they don't have. What will be the interaction once the deal closes in terms of how closely, beyond the commercial relationship you already have, that you'll be working with them as they drive their strategy alongside you? Yeah, I think we bring a certain knowledge base to it. I think our partners bring a real knowledge base to it also. We have a financial partner that has a good deal of experience in these types of businesses. Also, we'll have the physicians and management team that will be, meaningful owners of the business and will have a lot of incentive to drive the success. I would imagine that this business will continue to grow at a nice pace over the next few years. Of course, we'll have representation on the board and we'll have active involvement because this is, a very important investment for us. You know, as we, talk about AmerisourceBergen, we really want to advance healthcare and really, feel very strongly about our role in healthcare, and this is just a great next step for us. Turning back to the core distribution side, there's never-ending debates on pricing. We touched on volumes and the volume strength, and pricing takes on so many different comments. I'm going to start on generics and the whole dynamic of where you sit in the middle and your spread pricing and data points that we get that might be one side or the other that don't necessarily paint the complete picture. What do you see in terms of the biggest push and pull factors on that generic spread, on your relationship with the manufacturer, the relationship with your pharmacy customers? I guess qualitatively, because I don't want to not ask for the numbers, but what do you see changing or evolving over time, or do you not? Yeah. That's a great question, and I'll start out there, and then Bennett, feel free to add. You know, let me talk both about the buy side and the sell side. You know, on the buy side, we've obviously experienced generic deflation for quite some time. I would say this year, generic deflation is generally in line with our expectations. We've seen probably a bit of moderation of deflation this calendar and fiscal year for us. What that means, it's, less of a headwind for us. That deflation is something that's a headwind for us to overcome each year, and we've seen a bit of moderation in that one. The headwind is a bit less, and that's of course a good thing for us. There are kind of changes from a month-to-month and quarter-to-quarter basis, so it's really hard to call out whether that's a temporary thing or a longer-term thing. On the sell side, I would say it's been stable, from a sell side standpoint. I t's been consistent and so, it obviously continues to be a very important and key driver for AmerisourceBergen. This year it's in line with our expectations. On the brand side, your business now is very little tied to brand, for the most part, brand inflation. Yeah. That being said, there's some discussions on quasi ex-existential changes, whether it's the manufacturer actions on insulin, changes around IRA. What happens to your business as some of those changes go into place, and what is the contractual difference or contractual evolution that comes with manufacturers as things like WAC and list price just arbitrarily change? Sure. Well, let me get to your first comment, and then I'll address the entire question that you asked. As we look at our branded business, branded inflation, as you were saying, is a less important factor for us. W ell over 95%, it's way over 995% of our brand buy side $ are fee-for-service. I'll also go on to say that, one of the things our company has done for several years now is to make sure that we make a fair return across products in generic brand and specialty. Then I also think kind of a really key thing is that we have a high degree of confidence that the margins we earn, the dollar margins we earn are, highly defensible and justifiable. So, if, for instance, a WAC price comes down that you asked about, we have terms in our contract that indicate that, we'll that we and the manufacturer will come to the table, and we'll negotiate. Like we've said, we have, just a high degree of confidence in the, value of the services that we provide and that and that our our margins, our dollar margins are defensible and justifiable. I guess along those lines, as you think about the impact of IRA, we're all wondering, A, will it even go into place in terms of some of the price changes, but B, what happens next? How as a company do you position yourself to respond to what still remains for, lack of better term, a moving target? I think, Jim got to the crux of it, and I think the key element is there's significant transparency upstream, downstream into our dollar margins. They're because of the nature of the U.S. pharmaceutical space or the U.S. healthcare system overall being a multi-payer system, you have some complexities that need to exist based on some type of reference price. We will continue to iterate through those things and adjust as needed, but we feel very good about our compensation. Turning to Alliance, which typically I know most companies don't want to make acquisitions of international businesses as unexpected currency collapses occur, skewing the numbers. That being said, it seems like it's performing on an underlying basis where you'd hoped. I guess, maybe update us on what you're seeing from a ability you've had to put in changes in place, excuse me, to drive better outcomes of the business and where you see the synergy capture having gone at this point in time. Yeah. That's, there are a few things there. Overall, we feel very good about the Alliance acquisition. The performance since we've purchased it on a constant currency basis has met our expectations. In terms of where we're making investments, I would say probably the biggest place we're making investments is technology investments. That's an area where, whether it be from a data center standpoint or an ERP standpoint, we're making investments to give them systems that are more comparable to the AmerisourceBergen systems that we've had for quite some time. As we look at synergy opportunities there, it's things like on the business and operational front, it's things like synergies between our World Courier business that I've talked about today and the Alloga business there. Now as we look at the PharmaLex acquisition coming in, synergy opportunities there. As PharmaLex had been doing their business plans prior to the acquisition, the next business that they were planning on getting into is the 3PL business, the pre-distribution business. So we feel there'll be some good synergy opportunities in cross-selling with manufacturers there. Then we've also seen synergies on other areas such as shared services, where we're kind of pursuing on a much larger scale across AmerisourceBergen shared service opportunities in functional areas. Then we've seen some really good tax synergies also as we become an international business. We're pleased with the Alliance acquisition, and we've had, very good consistency with the management team there also. The management team had worked for a U.S. multinational company for many years, and so the management team has done a great job of making the transition to AmerisourceBergen. obviously, it's a business you've known for a long time. Yeah. You've been purchasing partners with them. Walgreens has been your biggest customer. Any changes to that purchasing dynamic that occurs given that you're now, by owning Alliance, a bigger purchaser as a% of the total within WBAD? Yeah. It's, I would say the, kind of the relationship that AmerisourceBergen has distributing to Walgreens is comparable to the very good relationship that Alliance has as being the distributor to Boots, which of course is, a very big business in the UK. The purchasing deal that we have with WBA, it continues to be, a very important and well-performing part of our business. Yeah. I can't have a meeting with you without talking about Animal Health and MWI just because of your roots. I think too, it got probably overlooked in the grander scheme of the overall quarter, just how strong Animal Health bounced back, especially against what seems to be more mixed data points from some of your manufacturer partners. Can you give us a little more detail about where the growth came from and what gives you the comfort in terms of underlying growth within the guidance for the remainder of this year? Yeah. Our Animal Health business did have a very solid quarter. We do report the top line growth. It had 6% revenue growth during the quarter. We don't report the operating income growth there, but it had a very good operating income quarter also. You know, what we saw, particularly this quarter, was some good pricing. I think that in the companion animal market, some of the volume trends are still a bit down. I think quarter-over-quarter, they're coming back, but still not great on a year-over-year basis. Of course, the Animal Health business, in particular the companion animal business, really kind of boomed during the COVID period, as, people were getting pets and spending a lot of money on pets. The comps have been tougher for a period of time. We saw better performance this most recent quarter, and I think the comps start to get easier over the next couple of quarters. That's kind of a quarter-by-quarter analysis of the business. I think the most important thing is that it's, a really good business for us and industry-wide over the long term, given just the importance of the human-pet bond on the companion animal side and on due to the, growing demands for protein globally on the production animal side. There's been some recent blockbuster launches in that market. From a pipeline perspective, it seemed pretty strong. How much correlation is there directly between what might be a major manufacturer launch that can actually impact ABC's total EBIT? Like, is there anything that's big enough that you can actually see? In Animal Health? In Animal Health, yeah. Yeah. Just like Human Health, it's a market that long term is driven by innovation. Innovation will be, a key driver in that market and really positive for the businesses and, also very importantly, very positive for pets. I wouldn't say there's any individual product, no, that would move the needle for Cencora, though. Yeah. That's what I figured. Yeah. Never hurts to check. You know, running out of time, but I wanna touch on the capital deployment side, especially because it's been since we were last up here, a very interesting year. You've announced a number of deals. You've had two major buybacks alongside Walgreens, along with other activity you have. As you sit here today, I know you've talked about debt paydown. I know the transaction structure of One Oncology I find to be fascinating 'cause it also is capital efficient. How do you feel about your capital positioning? I'm not gonna ask you to get inside the mind of Walgreens, but relative to buybacks, either alongside them or separately in your ability to meet the targets that you have based on buyback capacity. Yeah. From a capital deployment standpoint, we'll continue to invest in the business through CapEx, and a lot of those will be technology sorts of investments. I think you've seen that we've done strategic acquisitions, and there's two that we've talked about today, One Oncology and PharmaLex. We'll continue to do opportunistic share repurchases. As we've said before, if WBA sells, we'll look at the opportunity to collaborate with them and be a repurchaser of some of the shares. Given some of the capital deployment that we've done, we probably will repurchase a little bit less than we have the last couple of deals. But we'll continue to look at that as a good opportunity for opportunistic share repurchases. As you've seen over several years, we'll continue to grow the dividend on our stock. One of the things we're very pleased with also, finally, from a capital deployment standpoint, is we committed to the rating agencies that we'd pay down two-thirds of the Alliance debt within two years of the acquisition, and we've completed that in March when we paid off the last $675 million of our commitment there. Awesome. We've gone red on the clock, so we'll wrap up there. Jim Bennett, thanks as always for joining us here and for all the color. Thanks, everyone.