Cardinal Health, Inc. (NYSE:CAH) Q1 2024 Earnings Call Transcript

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We’re continuing to see the results of our actions benefiting our leading indicators, such as our customer experience metrics and portfolio health for key categories, which gives us confidence that we’ll be able to better participate in the growth from an overall improving medical utilization environment moving forward. For example, we’ve seen further improvement in our Customer Loyalty Index score for U.S. distribution beyond the 13-point increase in the last two years that we noted at Investor Day. And we’ve seen a continued reduction in our product back orders, which are now at a multiyear low and consistent with pre-pandemic levels. Outside of product and distribution, we’re continuing to accelerate our growth businesses. In at-Home Solutions, we continue to see strong demand as care increasingly shifts to the home.

Our team’s focus on operational efficiency is producing better operating leverage in this business, resulting in increased contributions to the bottom-line. To wrap-up the Medical, we’re continuing to execute our simplification and cost savings initiatives across the segment, which contributed to the strong SG&A management in the quarter. Finally, priority number 3, maximizing shareholder value creation. We’re maximizing shareholder value creation through our improved operational performance, robust cash flow and responsible allocation of capital. As Aaron detailed, our confidence in our cash flow generation enabled execution of our fiscal 2024 baseline share repurchases, continued evidence of our willingness to return excess capital to shareholders and our value creation through capital deployment.

With our financial flexibility, we’ll continue to opportunistically evaluate disciplined M&A in specialty and potential additional share repurchases. We continue to actively evaluate a range of potential partners or acquisition candidates for both the downstream and upstream elements for our specialty strategy, but have been clear that our long-term growth targets are not predicated on inorganic investment. We are making progress with our ongoing business and portfolio review focused on the Medical segment. While across the company, our team has made significant progress over the past year realigning our operations for focus and simplicity, there is still work and opportunity in front of us. We continue to work collaboratively with our Business Review Committee to evaluate additional value creation initiatives and expect to provide further updates in the coming quarters.

To close, we had a great first quarter and are excited to build upon last year’s momentum. This was driven by our highly engaged and talented team, and I would like to thank them for all their efforts fulfilling our critical role as health care’s most trusted partner. With that, we will take your questions.

Operator: [Operator Instructions] Our next question comes from Lisa Gill from JPMorgan. Please go ahead.

Lisa Gill: Thanks very much and congratulations on the quarter. Jason, I just wanted to understand the COVID-19 vaccines. Can you maybe just talk about the economics of that? Is that substantially better than kind of traditional drug distribution? And I know you said it only goes through October, but are there other vaccine opportunities that would be similar and incremental opportunities for Cardinal?

Jason Hollar: Yes. Thanks, Lisa. How I think about the vaccines is, again, we’re not going to get into, obviously, product and customer level type of detail. But overall, it all comes down to the value that we provide. And so, when you think about COVID-19 vaccines and vaccines in general, you really have to understand what’s the requirements. And so with COVID and with some vaccines, it requires more complex distribution, cold chain capacity and capabilities. And of course, there’s also – the unique thing about vaccines is that you scale up and down quickly and so you’re spreading a lot of that cost over a pretty short period of time. So it’s – there’s not a one-size-fits-all answer to your question. And we provided a little bit of color for you in Aaron’s comments there, so you can get a general understanding of the benefit that we had.

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