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The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

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The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

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G500-2023-Cardinal Health

This U.S. wholesale health-supply distributor is one of three such companies in the top 40 of the Global 500. Its revenue rose 11.6% last year, to $181 billion. 
<ul> 
 	<li>Ongoing litigation issues over the alleged role of Cardinal and other pharmaceutical distributors in the opioid crisis bled into the company’s 2022 financials; the company registered a $933 million loss in the fiscal year ended June 2022. But the company’s stock soared in calendar 2022, reflecting investors’ relief after Cardinal reached settlements in several opioid-related lawsuits. (The company did not admit wrongdoing in those settlements.)</li> 
 	<li>The pharmaceutical arm of the company performed well, with a 5% increase in profit year over year.</li> 
 	<li>CEO Mike Kaufmann was succeeded by former CFO Jason Hollar in September 2022.</li> 
</ul>

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F500 2023-Cardinal Health

This wholesale health-supply distributor is one of three such companies in the top 20 of the Fortune 500. Its revenue rose 11.6% last year, to $181 billion. 
<ul> 
 	<li>Ongoing litigation issues over the alleged role of Cardinal and other pharmaceutical distributors in the opioid crisis bled into the company’s 2022 financials; the company registered a $933 million loss in the fiscal year ended June 2022. But the company’s stock soared in calendar 2022, reflecting investors’ relief after Cardinal reached settlements in several opioid-related lawsuits. (The company did not admit wrongdoing in those settlements.)</li> 
 	<li>The pharmaceutical arm of the company performed well, with a 5% increase in profit year over year.</li> 
 	<li>CEO Mike Kaufmann was succeeded by former CFO Jason Hollar in September 2022.</li> 
</ul>

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Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

Despite bringing in over $160 billion in revenue in 2021, Cardinal Health reported net income of just $611 million for the year. Litigation costs were one factor: One of several companies entangled in lawsuits over their alleged role in the opioid crisis, Cardinal in July 2021 agreed to pay $6.4 billion in settlements to help fund health care and drug-treatment programs. The company also agreed to settle a case with the Equal Employment Opportunity Commission involving racial harassment claims made by Black employees at one of its distribution centers, offering $1.45 million in settlements and agreeing to implement a range of policy changes. On the business-building front, Cardinal partnered with logistics startup Zipline to deliver products to pharmacies using autonomous aircraft.

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F500 2022 Cardinal Health

Despite bringing in over $160 billion in revenue in 2021, Cardinal Health reported net income of just $611 million for the year. Litigation costs were one factor: One of several companies entangled in lawsuits over their alleged role in the opioid crisis, Cardinal in July 2021 agreed to pay $6.4 billion in settlements to help pay for health care and drug-treatment programs. The company also agreed to settle a case with the Equal Employment Opportunity Commission involving racial harassment claims made by Black employees at one of its distribution centers, offering $1.45 million in settlements and agreeing to implement a range of policy changes. On the business-building front, Cardinal recently partnered with logistics startup Zipline to deliver products to pharmacies using autonomous aircraft.

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Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500-2021-030-Cardinal Health

The drug and medical supply company saw 5.1% sales growth last year (its fiscal year ended in June 2020) owing to the strength of its pharmaceutical distribution business. That was particularly true during the first half of 2020, as customers stocked up on medications at the onset of the pandemic. A manufacturer and distributor of the personal protective equipment that has been much in demand, Cardinal has seen both sales of these products and the cost of making and sourcing them increase in the past year. As with other drug wholesalers, Cardinal faces legal challenges over its alleged role in America’s opioid epidemic.

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F500-201-14-Cardinal Health

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G500-2020-037-Cardinal-Health

The Ohio-based drug wholesaler, which counts CVS Health and Kroger as customers, saw revenues rise 6.4% in its 2019 fiscal year due to growth in its drug and specialty pharmaceutical distribution business—and despite the 2018 divestiture of part of its business in China. While depressed prices of generic medications and the cost of opioid-related litigation weighed on Cardinal’s bottom line, the company’s profits rebounded from 2018, when the company took a $1.4 billion impairment charge. Like its two large competitors, Cardinal faces thousands of lawsuits over its alleged role in the nation’s opioid epidemic. In February, states rejected a proposed $18 billion settlement with the nation’s three largest drug distributors.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-016-Cardinal-Health

The Ohio-based drug wholesaler, which counts CVS Health and Kroger as customers, saw revenues rise 6.4% in its 2019 fiscal year due to growth in its drug and specialty pharmaceutical distribution business—and despite the 2018 divestiture of the business in China. While depressed prices of generic medications and the cost of opioid-related litigation weighed on Cardinal’s bottom line, the company’s profits rebounded from 2018, when the company took a $1.4 billion impairment charge. Like its two large competitors, Cardinal faces thousands of lawsuits over its alleged role in the nation’s opioid epidemic. In February, states rejected a proposed $18 billion settlement with the nation’s three largest drug distributors.

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Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Cardinal Health is a U.S. health care services and products company operating across over 30 countries as of 2025. The business provides customized solutions for hospitals, health care systems, pharmacies, surgery centers, clinical laboratories, and patients at home. The medical giant distributes generic and specialty pharmaceuticals, as well as medical, surgical, and laboratory products. Cardinal Health’s history dates back to 1971, in its founding as Cardinal Foods; in 1979, the company switched industries from food to health care, changing its name to Cardinal Distribution.

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Cardinal Health (CAH): Company Profile, Stock Price, News, Rankings

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Cardinal Health

cardinal health

Hello, and welcome to the Third Quarter Fiscal Year twenty twenty five Cardinal Health Incorporated Earnings Conference Call. My name is George, I'll be your coordinator for today's event. Please note this conference is being recorded. And for the duration of the call, your lines will be in listen only mode. However, you will have the opportunity to ask questions towards the end of the presentation.

On your top of the keypad to ask your question. And can you also please limit yourself to one question each to allow the maximum people to ask a question. If it requires assistance at any point, I would like to now turn the call over to your host today, Mr. Matt Sims, Vice President of Investor Relations, to be in today's conference. Thank you.

Welcome to this morning's Cardinal Health third quarter fiscal twenty twenty five earnings conference call, and thank you for joining us. With me today are Cardinal Health's CEO, Jason Holler and our CFO, Aaron Alt. 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 these statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected or implied. Please refer to our SEC filings and the forward looking statements 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 and A portion of today's call, we kindly ask that you limit question 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.

Thank you, and good morning, everyone. Today, we reported strong third quarter results, which demonstrate the continued acceleration of the momentum we've established in recent years, the underlying strength of our business and the effectiveness of our strategy. In today's increasingly complex macro environment, our role as Healthcare's crucial link is more important than ever. We bridge the clinical and operational aspects of healthcare, delivering end to end solutions that touch every part of the care continuum. Customers and manufacturer partners confidently rely on us to safely, securely and efficiently deliver essential products and services to the right place and time.

Our team continuously navigates evolving market conditions and regulatory complexities within the healthcare industry, allowing us to act with urgency and flexibility to best serve customers and patients. We create tremendous value for our partners through the breadth and scale of our offerings. With our strong competitive positioning and the positive trends underpinning our results, our business has proven to be incredibly resilient. It should also be noted that while our industry relies upon an efficient and effective global supply chain, Cardinal Health has a strong U. S.

Footprint with over 99% of our enterprise revenue generated here. Roughly 95% of our segment profit is generated from four of our five businesses which are as yet largely unimpacted by tariffs or other regulatory actions. And we have invested approximately $7,000,000,000 in the last two years in The United States including recent acquisitions, expanded domestic manufacturing, new distribution nodes, technology and automation, which has directly supported the delivery of our country's healthcare. As always, we proactively monitor proposed legislation and regulation. And as I said before, we continue to support the overarching goals of increasing patient access, affordability and innovation in healthcare.

Moving on to our results. Our performance this quarter was driven by strong utilization trends and execution across our most significant business, Pharmaceutical and Specialty Solutions, and our three growth businesses reported in other, which are becoming an increasingly important part of our overall mix. Most notably, the broad based performance reflected profit growth from all five of our operating segments, an indication that our relentless focus on advancing our strategic priorities is delivering real measurable impact. It's also worth mentioning when looking at the strong Pharma results, we're seeing the first positive benefits from the acquisitions of GI Alliance and Integrated Oncology Network, both of which in early days are performing consistent with our expectations. And within our higher margin other businesses, At Home Solutions, Nuclear and Optifreight, we see continued potential to expand our capabilities and create additional value.

We are pleased to complete the acquisition of Advanced Diabetes Supply Group at the April and would like to extend a warm welcome to the ADSG team. As a result, we are pleased to again raise our fiscal twenty twenty five EPS guidance and have great confidence in our ability to generate sustainable long term growth for the future. In summary, we are encouraged by the performance this quarter, which validates the strength of our strategy, the discipline of our teams and our conviction in our trajectory heading into the fourth quarter. With that, I'll turn it over to Aaron.

Thanks, Jason, and good morning. Q3 was a strong financial quarter for us as we continued to do what we said we were going to do, invest in the business, drive growth in Pharma and the three other growth businesses, and continue the turnaround of GMPD. Overall, we grew operating earnings by 21% and EPS by 13% even while comparing against the prior period to the customer contract expiration and while executing and integrating our recent acquisitions. The outstanding performance of Pharma, up 14%, anchored our earnings results with further momentum provided by all three of the other growth businesses, together up 22% and continued profit growth in GNPD. In total, our results led to earnings per share in the quarter of $2.35 As a result, we are raising and narrowing our full year EPS guidance to a range of $8.5 to $8.15 Let's review the results starting with slide four.

Total company revenue was flat at nearly $55,000,000,000 on a reported basis. Adjusting for the contract expiration, revenue increased 19% versus the prior year with strong demand across pharma and all three of the growth businesses in other. We drove strong operating leverage in the quarter. Total company gross profit dollars increased 10%, while SG and A increased a more modest 4%, notwithstanding our investments across the business and recent acquisitions. Digging deeper, SG and A actually decreased slightly year over year when normalizing out the additions of GI Alliance and ION, reflecting the strong cost control efforts and efficiencies pursued by the team.

This led to operating earnings growth of 21% versus the prior year. Moving below the line, interest and other increased by $38,000,000 to $65,000,000 in the quarter, primarily due to previously anticipated acquisition related financing costs. Our third quarter effective tax rate was 22.4%, a 2.5 increase from prior year due to the non repetition of some positive discrete items in the prior year. Q3 average diluted shares outstanding were $240,000,000 shares, 2% lower than a year ago due to our share repurchase efforts. The net result for Q3 was EPS of $2.35 growth of 13%.

Now turning to the segments beginning with Pharma on slide five. Third quarter revenue was relatively flat at $50,400,000,000 Excluding the customer contract expiration, revenue increased 20% driven by brand and specialty pharmaceutical sales growth from existing and new customers. This included approximately seven percentage points of revenue growth from GLP-one sales. In Q3, we saw a continuation of strong pharmaceutical demand across the business within brand, specialty, generics and consumer health and from our largest customers. We also saw growth from new customers and we're especially pleased with successful onboarding of Publix during the quarter, which was made possible by the collaborative effort between the Cardinal and Publix teams.

Q3 delivered segment profit of $662,000,000 growth of 14%. This was driven by all of contributions from brand and specialty products, our MSO platforms including GI Alliance, biopharma solutions including Specialty Networks and by positive generics program performance. This growth was partially offset by the customer contract expiration. As a reminder, we closed our acquisition of Ion in Q2 and of GIA on January 30. So the quarter included positive results from both businesses.

We continue to be excited about these additional higher margin revenue streams, which as we've said are anticipated to contribute approximately three percentage points to our Pharma segment profit growth this year. Finally, our generics program continued to see positive performance, including strong volume growth and consistent market dynamics. Let's turn now to our turnaround business, the GNPD segment. Revenue increased 2% in Q3 to $3,200,000,000 driven by volume growth from existing customers. We were particularly pleased to see Cardinal Health brand growth of 3% during the quarter, which was actually a couple percentage points higher when normalizing for billing day differences between periods and currency fluctuations.

GNPD segment profit increased to $39,000,000 in the quarter, driven by the net benefit from our cost optimization initiatives. The team continues to be aggressive in executing its simplification strategy to deliver operational efficiencies and best serve our customers. Finishing with the businesses reported in Other as seen on slide seven. Third quarter revenue increased 13% to $1,300,000,000 Demand was strong for the products and services of these businesses. In At Home Solutions, we saw 12% revenue growth.

Optifreight Logistics had 17% revenue growth. And Nuclear had 14% revenue growth, which included 30% plus revenue growth in Theranostics. Third quarter profit growth in Other increased 22% to $134,000,000 with profit growth across all three operating segments. Now turning to the balance sheet. We ended the quarter with a cash position of $3,300,000,000 We've delivered adjusted free cash flow of 1,200,000,000 year to date and have continued to deploy capital according to our disciplined capital allocation framework.

We've invested $315,000,000 back into the business so far this year. We have more than fulfilled our baseline commitment and repurchased $750,000,000 in shares during the year as we completed $375,000,000 of accelerated share repurchases in March. The average price of our year to date share repurchases has been $117 per share. And during Q3, we deployed $2,800,000,000 for the closing of our majority position in GI Alliance. Now let's talk about our full year guidance for fiscal year twenty twenty five with only one quarter left to go.

Reflecting the strong Q3 results, we are raising and narrowing our fiscal twenty twenty five EPS guidance to a range of 8.5 to $8.15 an $0.18 increase at the midpoint of our prior guidance. Given the better than expected adjusted free cash flow year to date, we also are now expecting adjusted free cash flow at the high end of our prior guidance range, approximately $1,500,000,000 We are narrowing our interest and other guidance to the lower end of our previous guidance, now $200,000,000 to $215,000,000 primarily reflecting the strong cash flows. As a result, we borrowed less than we anticipated to complete the ADSG transaction. This guidance implies roughly $75,000,000 in I and O next quarter now that we've completed our acquisitions of ION, GIA and ADSG. As a reminder, our interest in other line also includes the income that GIA recognizes from its minority equity positions in ambulatory surgery centers.

For context, we expect about $10,000,000 of other income from the ASC positions in Q4. We are also updating our effective tax rate guidance to a range 23% to 23.5%. Moving on to our segments starting on slide 10. For Pharma, we are raising our segment profit guidance for the full year to 11.5% to 12.5% growth driven by the continued broad based demand we've seen in core pharma and specialty. Of note, Q4 is expected to contain a higher than usual amount of investment related costs as we near completion of our Consumer Health Logistics Center, continue to invest in technology and continue to add capabilities while scaling our MSL platforms.

While individual customer timelines have varied, we are confirming that we have now completed customer onboardings that make up approximately $10,000,000,000 of new customer revenue in fiscal year twenty twenty five, setting us up for further growth in fiscal year twenty twenty six. For GNPD, we are narrowing our guidance to the lower end of our prior fiscal year twenty twenty five guidance range, now $130,000,000 to $140,000,000 Even with this narrowing of guidance for GAPD, the team is making good progress and the fourth quarter should reflect a meaningful step up in profitability as a result of the actions taken in the last several quarters. There are a few factors which support our guidance. First, Q3 showed a positive change in trajectory for Cardinal Health brand volume, including strength we saw as we exited the quarter. Second, the team has continued to respond to environmental adversity by finding incremental cost saving actions, including a reduction in force, which occurred at the end of Q3.

Third, our guidance has always signaled that fourth quarter would be our highest seasonal quarter in terms of segment profit, just like last year. I should note that while Q4 will be impacted by the earlier rounds of tariffs between The U. S, Mexico and Canada, most of that early impact will be offset in the quarter or will be recognized in future periods when the related product is sold. As a result, the onset of tariffs is not expected to have a direct material financial impact on the fourth fiscal quarter for any of our businesses. In other, we now expect fiscal year twenty twenty five revenue growth of 17% to 19% and segment profit growth of 16% to 18%, driven by stronger organic growth across the businesses and anticipated contributions from ADSG during the fourth quarter.

We expect ADSG to be slightly accretive to EPS immediately despite the one time impact of an acquisition related inventory fair value step up, which will be unique to Q4. Now given the highly dynamic environment in which we are all operating, today, we will provide early context on next year. We are only six weeks away from our Investor Day on June 12, by which time we expect to have more visibility on macro events and to offer more concrete thoughts on fiscal twenty twenty six and beyond. In pharma, we expect to continue to benefit from positive utilization growth, our strong core foundation, which includes our leading Red Oak enabled generics program and our partnerships across a diverse and growing customer base. We expect strong growth in specialty, both in our upstream biopharma solutions and our downstream services, including our MSL platforms, which continue to expand.

We are confident in our ability to navigate changes to The U. S. Healthcare ecosystem, whether that is the administration Section two thirty two review of the pharmaceutical industry or the recent drug pricing executive order. Based on what is known at this time, we do not currently expect meaningful changes to our economics from these actions because of our unique value proposition and ability to respond as needed. In Other, we expect continued strong demand and organic growth fueled by the secular tailwinds of the markets, our leading competitive positions and our investments.

The addition of ADSG to At Home Solutions will be accretive to our business as we work to quickly unlock deal synergies. In GNPD, Jason will shortly talk about the aggressive actions we're continuing to take to reduce the burden of the tariffs on our customers and on our business. We remain committed to the GNPD turnaround and are relentlessly focused on ensuring GNPD retains a viable and improved financial profile. While we need more clarity on the nature, geographic reach, intended duration and resulting financial impact to our business of the reciprocal and targeted tariffs, the operational improvements the team has made give us confidence that GNPD fiscal year 'twenty six segment profit will be at least consistent with fiscal 'twenty five levels. Finally, in fiscal 'twenty six, having lapped the negative working capital unwind of the customer contract expiration, we expect robust cash flow generation.

We remain committed to our disciplined capital allocation framework, prioritizing internal investments such as our new consumer health logistics center, strengthening our balance sheet with incremental debt pay down, returning capital to shareholders and prioritizing tuck in acquisitions in areas of on strategic focus as you saw in our earnings release this morning. Bringing this all together, overall, the largest and highest growth parts of our business are resilient and well positioned to continue growth in fiscal year twenty twenty six, and we are confident in the enterprise achieving double digit non GAAP EPS growth next year. In closing, our team is steadfast on pursuing operational execution while investing for long term growth. We have a plan. We are executing against it, and we look forward to sharing more at our upcoming Investor Day on June 12.

With that, I will turn it back over to Jason.

Thanks, Aaron. Stepping back, there is a lot to be excited about with our results this quarter. Not only did we see earnings growth in each of our five operating segments, but we also saw significant growth in our high priority growth areas: specialty, nuclear, at home solutions and Optifree. We have more work to do at GMPD, but I am pleased with the operational improvements we have achieved even in a more uncertain macroeconomic environment. So let's go a little deeper.

Pharmaceutical and Specialty Solutions, the positive third quarter performance reflects sustained momentum across the segment, highlighting our disciplined approach to operational execution and prioritization of the core. It is our customer focused execution that led to the successful onboarding of Publix during this quarter. We consistently aim to provide all of our customers with industry leading support and the team has continued to drive above target on time delivery metrics with historically high service levels. Another critical component of our success in the core is our partnership with Red Oak, which continues to fulfill its dual mandate of securing product access and controlling costs. Specialty remains central to our long term growth strategy with compelling opportunities to drive meaningful and differentiated value and accelerate our growth.

We were delighted to share the news about GI Alliance's recent acquisitions, furthering our mission to deliver integrated, high quality and patient centered specialty care across The United States. Notably, Urology America and Potomac Urology marked GIA's expansion into urology, reinforcing its commitment to building a comprehensive multi specialty model. We are encouraged by the latest additions to our portfolio and see clear evidence that strategic approach of providing community based physician practices with a comprehensive MSO platform is working. Turning to GMPD, where the team's rigorous focus on executing the GMPD improvement plan led to solid growth for the quarter. Along with the efforts to further streamline our cost structure, we were pleased to see stronger growth of our Cardinal Health branded products.

We're also pleased with the recent commercial progress, including a new long term distribution agreement with a notable health system. Now, I know that you're all interested in some further color on tariffs. We understand the importance of The United States competing in a fair global market and we are engaging with administration to try to mitigate impact to patient care. Our focus has been on GMPD, given the other four operating segments representing 95% of our segment profit are largely unaffected by the announcements to date and we anticipate their robust business models will continue to minimize ongoing impacts. Within GMPD, we have been proactive and aggressive in implementing mitigation actions to reduce the burden on our customers as much as possible.

This includes increasing U. S. Manufacturing capacity in key categories such as syringes and incontinence, diversifying our supplier network away from higher risk jurisdictions identifying and onboarding alternate sources of supply including in some cases pre stocking inventory deploying AI in support of our tariff planning and compliance and further reducing our internal cost structure. Only after aggressive mitigation actions like these are accomplished do we consider price adjustments. So far, these actions and others have helped us already mitigate several hundred million dollars of exposure.

However, based on today's tariffs, we would still anticipate roughly $2 to $300,000,000 of remaining gross tariff costs in fiscal twenty twenty six before further mitigation. We anticipate mitigating the majority of these costs through continued operational actions and price adjustments, which we are already working on with our customers. As Aaron said, we are working to ensure that GMPD retains a viable financial profile. We are all too aware of the burden that GMPD and Cardinal Health shouldered during COVID resulting in significant financial losses and we are highly focused on ensuring that costs are minimized but also shared more equitably in this case. In proactively working with our customers, we are seeking a scenario which does not result in market scarcity of key products or disruptions to supply.

And now finishing with our other businesses. With strong performance across the three operating segments, this continues to be an area where we see substantial runway for growth, thanks to our differentiated offerings, supportive secular trends, strong competitive positioning and investments for the future. Within Nuclear and Precision Health Solutions, we continue to see above market growth in our core business and saw over 30% growth in Theranostics this quarter, reflecting meaningful growth in the demand for products within our oncology and urology portfolio such as Elucix and Plavicto. We're also excited about the potential of new therapeutics to enhance the treatment of Alzheimer's and other conditions. Our positioning as the go to partner for radiopharmaceutical innovators is evident when we consider recent activity, including our announcement that we've entered into an agreement with GE Healthcare to manufacture and distribute Flurcado, a first of its kind pet agent for enhanced diagnosis of coronary artery disease.

In At Home Solutions, we are delivering on our clear strategy to win in this rapidly growing part of the industry. We continue to invest in automation to bolster the productivity, quality and safety of our supply chain, which has been a driver in our all time high operational metrics. The business is on an extremely solid foundation as we have begun the integration of ADSG, which in its early weeks is tracking as planned. We continue to expect the synergistic combination of ADSG and at home solutions to create value for patients and enable us to grow profitably as the overall diabetes care market expands well into the future. And in Optifreight Logistics, we're driving consistently strong performance.

With the team's ability to deliver action driving insights, more customers are expanding on our platform. In closing, this quarter's strong results driven by solid contributions across all five operating segments demonstrate the clarity of our strategic direction and underlying strength of our business. The broad based momentum we're seeing across Enterprise reinforces our confidence in the path ahead and our ability to accelerate through the remainder of fiscal year twenty twenty five. While we continue to monitor the broader landscape, we are confident in the resiliency of our business and this team's ability to deliver. Our focus remains on the disciplined execution of our strategy to best serve our customers and drive long term value creation.

Thank you to our team for consistently going above and beyond to fulfill our role as healthcare's most trusted partner. With that, we will take your questions.

Thank you, sir. Our first question today is coming from Lisa Gill calling from JPMorgan. Please go ahead.

Thanks very much, and thank you for all the details, Jason. I appreciate the comments around the tariffs and I look forward to more when we get to the Analyst Day. I really want to focus my question on what you talked about in the quarter, really strong brand and specialty sales growth. Can you talk about where that's coming from? Do you think that changes due to the IRA under Part D, is that driving it?

I know underlying utilization costs continue to go higher when we think about pharmaceutical costs. Just any color that you can give around what you're seeing from a volume perspective and how sustainable you think that is as we move into '26?

Lisa, for the question. And while that may out of pocket maximum reduction may have some impact. It'd be nearly impossible to determine. But I would highlight that this is very broad based. And so I think there are other factors at play here as well.

When you think about the strength that we've seen that we saw this quarter, it goes certainly, it began well before this quarter and it's in each of the different categories of our business. When we called out the drivers for earnings growth for the Pharma segment this quarter, we highlighted multiple different categories, generics and just broader branded products. But especially within Specialty, we saw broad based strength continued strength. We're now several years into mid teens type of growth for our specialty distribution and this was yet another quarter at that same type of level. We saw very good strength within our biopharma solutions business, obviously relatively little on the top line, but in terms of the size of the business, but a nice profit contributor.

That did include the Specialty Networks last quarter that we see that tailwind from a year over year perspective. And then we saw the addition of course of the MSOs, ION and GIA. So it really is broad based, both organic and inorganic within the quarter. And we are quite consistent with what we've seen in the prior quarters in that regard as well. We did have the beginnings of the new customers did start in our second quarter, but this is the first real full quarter associated with that $10,000,000,000 of new customers that we anticipated for the full year.

This is kind of the first full quarter of that. So that was another additional nice tailwind which to put that into context while our revenue was relatively flat ex the large customer transition that's about 20% volume revenue growth and that was driven by all those factors that I just referenced. And of course GLP-1s being about 7% of that growth as well. So still very solid robust low to mid teens type of growth driven by all those factors.

And Lisa to the point of your question on the carry forward, while we're not providing a specific guide on pharma today, we'll provide more details on that at our Investor Day. It is the case that we are carrying forward in 2026 assuming a positive utilization environment. We're assuming consistent market dynamics and good performance in the generics program as we move into next year as well as well as continued strong growth in specialty, both upstream in biopharma and downstream in the MSO platforms as well as benefiting from those customer wins that Jason referenced earlier.

Yes, sir. Our next question is coming from Alan Lutz of Bank of America. Please go ahead.

Good morning and thanks for taking the questions. I guess I'll kind of flip Lisa's question and ask you, are you seeing any script headwinds from consumer weakness related to tariff concerns in a weaker macro? Wondering if any, consumers are pulling back on prescriptions or has the growth really been resilient across the board? Thanks, guys.

Yeah. Nothing in particular. No. And, you know, while we're just into the first month of the next quarter, there's no trend changes that we see kind of real time, here as well. And when you go back in time to, some of the I think the the more significant types of macro, events like the great recession, to to use an extreme example, even in that environment, we saw, pharmaceutical demand remain quite resilient.

So we are privileged to be in an industry that typically does not see significant volatility in the face of especially more minor type of macro events. The more significant they get there, there could be some impact, but it's not consistent with what we've seen historically being a very cyclical type of industry. And the other key point with all of that is beyond just the lack of cyclical nature of it, This is an industry that does have very favorable secular trends. You've heard me talk quite a bit about whether it's the demographics or the innovation that continues to be the lifeblood of this industry. That does continue and will continue under any type of macro scenario and event.

And so we're feeling really good about the setup for the industry and our role specifically.

We will now go to Elizabeth Anderson of Evercore ISI. Please go ahead.

Thanks for the question. This is Joanna for Elysis. So I think we know Cardinal brand revenue is about one third of total GNPD revenue. Can you give us an update what's the AOI percentage? And what percentage of Cardinal Health branded do you expect to be covered by USMCA?

I think just to make sure that it was a question around the profit mix of Cardinal Health brand, which is Yeah. Yeah. Talked about the revenue disclosure.

Right. So the the only information that we'll provide is revenue based and roughly $4,000,000,000 of our GMPD revenue is from Cardinal Health brand. It is clearly a higher margin relative to national brand, but we're not going to break out the specific pieces there. Aaron highlighted in his comments that we did see good volume growth for Cardinal Health brand overall being at 3%, but when normalized for FX and a number of operating billing days, that was closer to 5%. And that was led by our most important categories within Cardinal brand or leader categories that do have higher margin and the types of products that we are investing most into.

And it is also a case that our team is very focused on wherever appropriate pursuing the USMCA and the IROBE protocol exemptions. And the team is focused there, we've been deploying new tools to ensure that we are mitigating tariffs wherever possible based on those exemptions.

Yes, sir. Thank you. We'll now move to Eric Percher of Nephron. Please go ahead.

Thank you. I'll take the tariff question at slightly different angle. So if we look at the one third of Cardinal brand, could you speak to what is required there to offset the exposure that you have? And when you speak to 200,000,000 to $300,000,000 incremental, how does the action to offset for Cardinal brand differ from national brand? And is there a general expectation of ability to pass that on if needed at national brand versus more responsibility for Offset falling to you at Cardinal Brand?

Yeah. Of the remaining $200 to $300,000,000 the majority of that, given the significant operational actions and the other several hundred million, so more than 50% being mitigated plans already in place. Given that that is already after those mitigation actions, we would anticipate the majority of that $2.300000000 dollars to be in the form of pricing. So we're already kind of working through the operational aspects and getting to that remaining component. We'll continue to look for opportunities to minimize that as much as possible, but that is the underlying assumption that we're basing that on.

Within national brand and that component of your question, you know, that's largely a pass through, and so there will be some, you know, short term type of of noise that goes along with that, but it's largely a fee for service type of relationship. And so the pricing we're talking about, the vast majority of it would be on the Cardinal Health side of it.

Thank you, sir. We'll now go to Michael Cherny of Leerink Partners. Please go ahead. Your line is open.

Good morning and congrats on a nice quarter.

the tariff question, especially as you think through the starting point for fiscal twenty twenty six. I appreciate the update. I think it was $200.300000000 expected tariff impact at this point in time that you're obviously working to mitigate. As you think about where MPD sits as a jumping off point, should we think about, based on what you know now at least, that being the max impact and that the new update, both, a, is a framing of a downside and, b, is much more tariff oriented than anything else? It seems like everything else on the GNPD recovery still seems to be on track.

So just trying to bridge the delta from, previous versus current views and figure out how much precisely of that is specifically the net impact of tariffs.

Yeah. The the more significant part, certainly, the the majority of it will be in the form of the tariff impact that flows through. I think about it, just let's just start with kind of a kind of puts and takes from '25 to '26. We would anticipate all the things that we've been talking about and the drivers of the business this year continuing. So we anticipate continued growth with Cardinal Health brand largely driven by the underlying industry, but continued improvements in underlying mix as well as our ongoing cost reductions.

You heard from Aaron that we made further reductions in headcount here in the third quarter to ensure that we are doing our part to mitigate this as much as possible. But then that will be offset to some degree with the impacts in the near term that we do anticipate from the portion of the 200 to $300,000,000 that is not passed along in the form of pricing. So those are the puts and takes that are the key contributors to that and very consistent with the prior commentary we made about the underlying drivers of the business.

Thanks, sir. Next question will coming from Kevin Caliendo of UBS. Please go ahead.

Thanks. Thanks for taking my question. I want to shift actually over to the potential pharma tariffs and how to think about the impact to you guys and how it impacts the chain. Like, do you have enough comfort contractually that you as a distributor and purchaser of the drug can pass through whatever the ingredient cost tariff is to pharmacies? And, you know, is there a potential opportunity here for you?

Is there any potential risk? Just trying to understand how the process might work and how you fit into that and how it affects your financials.

Yeah. Certainly. I I guess this is the the benefit of being a 1% margin distributor is that we don't have that type of risk largely in our in our pharma business. You know, we take title typically in The United States. It is an important element to our customers and ultimately patient affordability.

So it's not lost on us that changes to the pricing for pharmaceutical products is something that we watch very closely. I feel very good about the model. The model the business model has evolved many times over the years. The value that we provide to safely, securely, and efficiently deliver these products is unchanged, Unchanged relative to the price point, unchanged relative to any tariff add ons, whatever it may be. We've seen this in the past as it relates to when prices have gone down for certain products like insulin.

You heard from us at that point in time talk about the value we are providing was unchanged. And so we expect our compensation to be unchanged and that's exactly what's happened. So as we look forward, we can't predict exactly what will happen and how that will look. But we feel very good about the contract. We feel very good about this business model.

We feel very good about the historical context that has proven that the value that we provide is understood and rewarded by our customers in in the form of just the ongoing arrangement. So we'll we'll continue to stay focused on it, but we feel good about that setup. Now your question was on pharma, but I I do wanna take a moment to highlight the other businesses. You know, that's they're individually each have their own different version of that that same type of discussion. We largely, in the same manner, don't have we have very similar type of structure and arrangement as pharma.

Some like Optifreight has has no real direct exposure. So we feel very good about the 95% of our segment profit that's in the form of those four out of five different businesses. We'll continue to manage through that aggressively and appropriately to make sure we take care of customers and patients. But at the same time, we we feel really good about the business models of each of those those four businesses, and we'll continue to work hard to mitigate any impacts on GNPD.

Thank you, sir. We'll now move to George Hill of Deutsche Bank. Please go ahead. Your line is open, sir.

Hey, good morning, guys, and thanks for taking the question.

the margin expansion in pharma. And Aaron, I was wondering, if we look at the we've kind of continued to see this margin expansion in pharma despite the growth in specialty and brand drug sales. I was just wondering if maybe you could attribute the margin expansion on a rank order. You're going to have the acquisitions, the new customers, just growth in the business, generics program to some degree offset by the client loss and which should be compression in due to mix change in branded specialty. Would would just be interested if there's any way that you could attribute kind of the the outweigh to the positive drivers versus the negative drivers of margin expansion.

Well, first, thank you for noticing. That's certainly been an intentional effort on the part of the pharma team to grow our gross margin. And the drivers you called out are the right drivers, whereas we continue to double and triple down on growing the specialty parts of our portfolio, that is a higher margin part of the business that's growing much faster than our core lower margin business. Certainly, the additions of the higher of the additional revenue streams that are higher margin profiles as well to the MSOs is facilitating that, although those are still early days for us given the timing of the closure of the benefits. And so all of that is really coming together to help drive that gross margin improvement.

Now I would be remiss if I didn't point out the other piece of it though, which is we are very happy with how the team has also been controlling our SG and A position. And as a 1% business overall, we're very focused on both parts of the P and L. And I hope you noticed that I called out during my comments that if you extract the you normalize out the absolute dollar addition of the SG and A from the acquisitions, our SG and A was actually down for the quarter. And that's us trying to set the business up for long term success as we carry forward.

Thank you, sir. Next question is from Eric Coldwell of Baird. Please go ahead.

Thanks very much. Quick one here on the mention of taking advantage or at least looking at the Nairobi protocol on tariffs. I'm curious, one, do you have Nairobi protocol protections in place today for any of your products? Two, could you give us a sense on what types of products you think would be most applicable? And then three, what is the process?

Do you simply say discounts, we're not gonna pay a tariff, or do you actually have to get affirmation from, US customs before doing so? Thanks very much.

Now for a little bit of perspective, well, without going too far, which is we do actually have some protections in place. As the tariff discussion has continued, as I said earlier, our team has continued to lean in into where the existing protections are and what additional products may be benefited by the NIROB protocol. And so that is part of the team's ongoing efforts as well as we assess the broader portfolio. We're not going to identify today because it is broadly immaterial to the at an enterprise level for us. But just know but just take away that the team is turning over every rock and attempt to identify where we have those opportunities.

What I would add is it's it's consistent with what Aaron is saying, just give you a little more color. It it is something we've used for the last couple of years, so it's not new to us. And it and it's covered hundreds of different products skews that we have. So we have a pretty good understanding of it, and, we'll continue to monitor very closely any, ongoing evolution and usage of it.

Next question will be coming from Erin Wright of Morgan Stanley. Please go ahead.

Can you talk a little bit more, I guess, in detail about kind of the customer onboarding in terms of the new customer wins? Anything new to call out on that front and and and sort of how that how we should be thinking about that in terms of the progression of of of pharma growth in the quarterly cadence of this onboarding and how that's just progressing relative to your expectations at this point? Thanks.

Yeah. There's always puts and takes to any new customer onboarding, but we did, you know, reaffirm the $10,000,000,000 of incremental new customers for this year. I did comment just briefly in my earlier comment, but to repeat it here. That onboarding did begin in the second quarter. But when you look at the $10,000,000,000 it's spread fairly evenly between the third and fourth quarter in terms of the biggest impact.

So it started in Q2 and now has gotten to the full rollout of those customers that we anticipate for the remainder of this year. But like I said, there's puts and takes, but we feel very good about certainly the benefit that we're seeing in the current year being consistent with what we thought.

Cardinal Health (CAH) Q3 2025 Earnings Call Transcript

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