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

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And to go a little bit further, I can say that about one-third of the growth for the Pharma segment this quarter was related to vaccines. So it was a component of it, but certainly not the majority of the driver of the business. The core part of the business remained very strong within the segment for the quarter, and our guidance continues that core to continue to be strong. We do expect the vaccine benefit to be a bit greater in the second quarter because, of course, there’s more volume in Q2 than in Q1, just given the nature of the October most likely being the peak volume that we would expect to see for vaccine distribution. And then we’d expect that to ramp down as we get the pipeline. We’ve got the pipeline pretty full here as we exited October.

And now the future volumes will be much more predicated on what the actual demand is, which, of course, at this point in time is hard to anticipate.

Matt Sims: Next question, please.

Operator: We’ll now move to our next question from Eric Percher from Nephron Research. Please go ahead.

Eric Percher: Thank you. A question on Medical, specifically the over-delivery this quarter or upside that you showed versus expectations. How much of that is core medical and mitigation efforts. What will carry through to the future versus not? And then were there any one-time items in Q1 we should keep an eye on? Any update on factors driving Q2 to Q4, including the incremental oil price and commodity pressure over the last few months?

Aaron Alt: Eric, good morning. It’s Aaron. Look, we were really pleased to see Q1 results slightly exceeding our external or rather our expectations. The results of the team doing what they had planned to do as well as being good managers and always looking for optimization opportunities across the portfolio, and so they did what they were expected to on the first part – or first part of the year for the medical improvement plan, and there were no notable one-time items contrary to some earlier quarters that complicated the results. So we were quite pleased with the results that we gave. And we do expect that to continue. You will have noted from our guidance for the year that we do expect slight continued improvement quarter-over-quarter.

We are not changing our guidance for the year on medical. I want to emphasize that we’ve taken a balanced approach and believe that the $400 million profit number for the year is the right target and the right guidance for that business. And the plans also haven’t changed, right? It’s going to start with the continued execution of the Medical Improvement Plan and inflation mitigation elements that we’ve been talking about. Jason highlighted that we had hit 70% plus in the quarter as well, and they’re going to continue to optimize and grow the Cardinal Health brand We’re continuing to focus on driving more out of at home and the other growth businesses as well as simplification and cost optimization and so overall, a great quarter and good expectations for the year to come.

Jason Hollar: Yes. The other thing I’d add, Eric, I think the component of your question was just asking about commodities, and there’s any impact there. There was not anything significant. So I know we’ve all been on this long journey as it relates to the impacts of commodities. So let me just spend a moment on that. As I think about the commodity and just general inflation, let me answer the question that way. I’d put our work into a couple of key buckets. The international freight piece is the only component that we’ve seen a meaningful change. And of course, that started about a year ago, and it was a dramatic reduction. So that reduction is as expected and given the elongated supply chain we had at that time, it took some time for that to work through and hit our P&L, but we’re now seeing the more significant benefits of that over the last couple of quarters.

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