We’re also investing in data and analytics. We think that’s going to be important to drive the efficiency of our operations, the capabilities for our customers. So you should expect to see us continue to deliver operating margin leverage, but to continue to invest against our programs, our capabilities on behalf of those efficiencies and our customers.
Rachel Rodriguez: Next question, please.
Operator: And next will be Eric Coldwell with Baird. Please go ahead.
Eric Coldwell: Hi, this is Eric. Was that me? I had a beep here.
Britt Vitalone: Hi Eric.
Eric Coldwell: He I’m good. Okay, thanks. Hi guys. I wanted to hit on the Med-Surg segment specifically primary care. I think you’re under — your comments on slow start, low ramp in the illness season is I think well understood. We’ve seen that elsewhere. I’m curious what else you might have seen in the quarter that could lend some color on the lower primary care volumes. You know, I’ve heard heavy travel season from some companies. I’ve heard others talk about vacation schedules, just the timing of the calendar if you will, but I’m curious if you have any more details or thoughts you could add on the primary care trend? And if you could, could you quantify the rate of growth change that you saw during the September quarter? Thank you.
Brian Tyler:
Tripledemic:
IQVIA:
Britt Vitalone: And Eric, I would just also point out that we are extremely well positioned across all ultra-sites of care and the confidence that we have in that position to service our customers, we’re continuing to make investments and I talked about some of the investments that we are making not only in distribution capabilities in the network, but also in data and analytics to help support our customers and the product portfolio that we provide to them. So we have a lot of confidence in the position and the capabilities that we have and the investments that we’re making are a reflection of that.
Brian Tyler: And we do think macro trends support the continued migration of care into these alternate sites or these more community based settings. So we are well positioned.
Rachel Rodriguez: Next question, please.
Operator: And next will be Kevin Caliendo with UBS. Please go ahead.
Kevin Caliendo: Hi, thanks for taking my question. The Pharma segment growth continues to be really impressive and I’m guessing it’s more than just the typical fundamentals of pharma distribution with generic pricing or generic mix and the like. Can you talk about how the mix is evolving? Maybe is it some of your oncology businesses, some of the clinics you purchased recently that are contributing? How is that mix changing currently to drive this sort of outsized EBIT growth that you’re seeing?
Britt Vitalone:
ClarusONE:
Rachel Rodriguez: Next question, please.
Operator: And next will be Daniel Grosslight with Citi. Please go ahead.
Daniel Grosslight: Hi, thanks for taking the question. I want to go back to the Medical segment and the cadence for the remainder of the year. If I just look at guidance, it implies around a 4% increase in both revenue and AOI from the first half to the second half, so flat margins. You mentioned a less severe flu season and some investments you’re making in distribution and data analytics. How should we be thinking about the cadence of AOI for the next two quarters, particularly as we think about some of those larger investments you’re making?
Britt Vitalone: Yes, it’s a great question, Dan. I think for modeling purposes, I would guide you to model something very similar in terms of growth rates to the second quarter.
Rachel Rodriguez: Okay. Next question please.
Operator: And next will be Allen Lutz with Bank of America. Please go ahead.
Allen Lutz:
ClarusONE:
ClarusONE:
Brian Tyler:
ClarusONE:
ClarusONE:
Britt Vitalone: Yes, I’ll take the second one Brian. As it relates to your question on the restructuring, we did incur certain charges in the fourth quarter of our fiscal 2023. We also incurred additional restructuring charges in the first half of fiscal 2024. And so we’re still in the process of finalizing the programs and the savings that we have are contemplated within our guidance. So the fact that we started this program in fiscal fourth quarter of 2023, continued the program really taking charges and organizing and integrating through the first half of 2024 and we certainly haven’t seen all of the benefits from those programs to this point in time.
Rachel Rodriguez: Next question please. Operator And next will be Erin Wright with Morgan Stanley. Please go ahead.
Erin Wright: Great. Thanks for taking the questions. Two questions here. I guess, are you seeing the generic or easing generic deflation environment, has that been a material driver for you? Just to follow up on the generic side. And then on M&A, and you outlined the share repurchases, but how are you thinking about the acquisition pipeline from here? Where’s the focus? What does the M&A pipeline look like? Thanks.
Brian Tyler: Britt do you want to take the first part?
Britt Vitalone: Sure, Brian. Thanks for the question Erin. As it relates to generics, our focus continues to be on a strong sourcing program combined with discipline on the sell side. We’ve been operating in a competitive but stable environment now for a number of years really and we’re really not seeing any different in the second quarter from what we’ve seen in the previous several quarters before that. We’re able to procure generics very competitively on behalf of our customers and we focused on stability of supply at the same time. So from a generics perspective, our programs are running very well. We feel very well positioned to continue to procure at a low cost and stable supply for our customers and the environment is conducive to us being able to do that.
Brian Tyler: And I think the second part of the question was on M&A. Clearly, one of our top priorities for capital deployment is to support the growth and the differentiated capabilities we have in our segments to continue to extend that growth. And so we are and continue to be active on the M&A front. Now we have a very structured and disciplined way we approach that. First is it’s got to be aligned to our stated strategy and particularly our growth pillars. And so if you look at recent activities like Rx Saving Solutions or Sarah Cannon joint venture, obviously both very, very tied to our stated growth priorities. And then the second step of that process is to layer over a lens of financial discipline. We have many uses for capital, some internal investment and efficiencies and technologies and tools.
Obviously, we have share repurchase hurdles that we can meet. So we bring a lot of financial discipline to the acquisition process to ensure that we’re getting good returns for shareholders as we deploy that capital. So it’s on strategy and has the appropriate financial return. We’re very interested and we continue to develop our business development funnels.
Rachel Rodriguez: Next question, please.
Operator: And next will be Elizabeth Anderson with Evercore ISI. Please go ahead.
