Cencora (NYSE:COR) Q4 2023 Earnings Call Transcript

Cencora (NYSE:COR) Q4 2023 Earnings Call Transcript November 4, 2023

Operator: Hello, everyone, and welcome to the Cencora Q4 Full Year 2023 Earnings Call. My name is Emily, and I’ll be coordinating your call today. [Operator Instructions] I will now turn the call over to our host, Bennett Murphy with Cencora. Please go ahead.

Bennett Murphy: Good morning, good afternoon, and thank you all for joining us for this conference call to discuss Cencora’s fiscal 2023 Fourth Quarter and Full Year Results. I am Bennett Murphy, Senior Vice President, Head of Investor Relations and Treasury. Joining me today are Steve Collis, Chairman, President and CEO; and Jim Cleary, Executive Vice President and CFO. On today’s call, we’ll be discussing non-GAAP financial measures. Reconciliations of these measures to GAAP are provided in today’s press release, which is available on our website, investor.cencora.com. We have also posted a slide presentation to accompany today’s press release on our investor website. During this conference call, we will make forward-looking statements about our business and financial expectations on an adjusted non-GAAP basis, including, but not limited to, EPS, operating income and income taxes.

Forward-looking statements are based on management’s current expectations and are subject to uncertainty and change. For a discussion of key risks and assumptions, we refer you to today’s press release and our SEC filings, including our most recent 10-K. Cencora assumes no obligation to update any forward-looking statements, and this call cannot be rebroadcast without the permission of the company. You’ll have an opportunity to ask questions after today’s remarks by management. We ask you to limit your questions to one per participant in order for us to get through as many participants as possible in the hour. With that, I’ll turn the call over to Steve.

Steve Collis: Thank you, Bennett. Good morning and good afternoon to everyone on the call. Welcome to our fourth and final earnings call for fiscal 2023 and our first earnings call as Cencora. Today, my remarks will focus on the continued execution and success of our business in fiscal 2023 and how our strategy and capabilities as a global health care services company position us to further drive value for stakeholders in 2024 and beyond. Fiscal 2023 was a seminal year for Cencora as we united together under our new globally inclusive identity and took key steps to advance our position at the center of health care. I am proud of how we continue to deliver strong results through execution by our team members as we capitalize on the strength of our business, while strategically deploying our capital by both returning capital to our shareholders and making meaningful internal and external investments.

PharmaLex and OneOncology were important investments made this year that extended the services and opportunities we have to continue to differentiate the solutions we provide our core customers. Our evolution to Cencora unites our team members under a name that better reflects our impact on health care as we continue to build on our commercial strength. We entered 2023 from a position of strength and have continued to build on the momentum throughout the year, delivering full year adjusted EPS growth of 9%. Guided by our purpose, powered by our foundation in pharmaceutical distribution and differentiated by the breadth of solutions we provide our partners, we continue to execute on our strategic imperatives to advance our core business and enhance our capabilities to drive value in the years to come.

This year, we expanded our leadership in specialty by enhancing our suite of services for pharmaceutical partners and adding to the solutions we offer providers. In January, we closed on our acquisition of PharmaLex, which broadened our suite of end-to-end commercialization service offerings. PharmaLex complements our capabilities in market access strategy, patient access and adherence and specialty logistics. The business provides us a global platform of solutions to drive our long-term growth in supporting pharma partners across the development and commercialization journey. On the provider side, we made a minority investment in OneOncology, allowing us to deepen our relationships with community oncologists, and which represents the next evolution of our long-standing leadership in specialty.

Over the past 20 years, we have been proud to build this leadership in specialty through strategic partnerships and investments to continuously expand the breadth and depth of solutions we provide to both downstream providers and upstream innovators. The acquisition and investments we completed during fiscal 2023 complements our core business and are a testament to our commitment to advancing our leadership in specialty. We also consistently invest in innovation to strengthen our ability to efficiently and effectively serve our customers. Teams across Cencora, from our sales teams to distribution center operations, to consultants in the field, actively embrace innovative technology to drive our business forward and support our pharma partners.

One example is our premier Global Specialty Logistics business, which continues to drive innovation by adding services to support clinical trial logistics and commercial time- and temperature-sensitive products through enhanced cryogenic shipping capabilities and expanded use of real-time tracking for shipments. Technologies like these are vital, allowing us to transport highly specialized products while giving our customers 24/7 visibility to their critical shipments, enabling them to better serve patients. Innovation and the rapidly evolving health care landscape necessitate that we remain agile and adaptive to support our customers’ needs. As pharmaceutical innovation continues to advance, so too must our capabilities in supporting it. Earlier this year, we opened a new state-of-the-art specialty distribution facility in California.

As the specialty space continues its rapid growth, the new distribution center increases our scale and allows us to better support our customers and partners by providing efficient and reliable distribution for these complex products. Cencora’s customer-centric approach prioritizes understanding the challenges our partners face and exploring how we can provide them the solutions and services they need to reach and better serve patients. As pharmacists continue to be recognized for their role as accessible care providers who can bridge care gaps, particularly in underserved populations, we aim to provide tools and technology to enable them to spend more time with patients. In August, we hosted our annual ThoughtSpot Conference in partnership with our Good Neighbor Pharmacy network.

The conference brought together thousands of independent community pharmacists and gave them the opportunity to attend education sessions on the evolving health care environment and latest technology solutions, connect and learn from industry peers and celebrate the impact community pharmacies have in health care. Our recently launched Cencora Marketplace, which was showcased at the conference, allows independent pharmacies to streamline their ordering process for consumer products in one centralized location. The solutions we provide our pharmacy customers allow them to spend more time caring for their patients and understanding their needs, an important role that has been recognized for the seventh year in a row by J.D. Power, with Good Neighbor Pharmacy ranking #1 in customer satisfaction among chain drugstore pharmacies in its 2022 U.S. Pharmacy Study.

Pharmacists also play a critical role in hospitals by working in alignment with physicians and nurses to treat patients. And one way in which they do this is in keeping medication stocked and up to date for immediate use. Recognizing the time hospitals spend on inventory management, our teams look for ways to leverage technology to provide a solution to make this process more seamless. Through RFID tagging, hospital pharmacists can quickly identify out of stock or soon-to-be expired medications, ensuring that patients have access to the medication they need when they need it. This tagging is conveniently done at our distribution sites before medications are delivered to our health system customers. By understanding our customers’ needs, our team is able to leverage innovation and create solutions to promote efficiency and address their challenges, advancing our shared goal of improving patients’ quality of care.

Each day, we are enhancing reach and efficiency in the pharmaceutical supply chain and leveraging the breadth of our global health care services to help our customers navigate the increasingly complex environment they face. Driven by customer and patient needs and our focus on contributing to prescription outcomes, we have forged innovative partnerships aimed at ensuring a stable supply of essential medications. Early this year, we announced a relationship with a nonprofit entity that partners with health care systems to reduce and prevent drug shortages. As the exclusive distributor of their contracted products, we provide supply chain support and ensure that their crucial products reach their members in a timely and safe manner. We have also cemented our role at the center of health care by building long-term relationships with market-leading customers.

We provide our customers with valuable services ranging from distribution and logistics to consulting to grow their businesses, which in turn supports our own growth. We are creatively resourceful and next-minded as we assess our talents and strengths and plan for future opportunities to create value for all of our stakeholders. Since the beginning of fiscal 2023, we have welcomed 4 new independent directors with valuable experience and backgrounds that adds to the strength of our board. These new directors add complementary expertise and diverse perspective to support our advancement both internally and externally as a global health care services leader. Our commitment to elevating talent and advancing Cencora’s capabilities is pivotal in delivering on our strategic growth initiatives.

This year, I am proud to announce we have reached 100% dollar-for-dollar pay equity in the United States and set 3 ESG goals that we believe are relevant to and aligned with our business. Our first goal involved business impact assessments across our footprint to inform our business resiliency planning. Our second goal was focused on female representation in global leadership roles, and our third goal targeted our team member experience in elevating our culture of inclusion. Coupled with the importance of achieving pay equity in our workplace, we know we must be conscious of our culture and footprint to ensure we have the highest caliber talent, engaged team members and resilient businesses. The sustainability of our operations and collective power of our team members drives our ability to live our purpose, strengthens our business and culture and enables our leadership in health care.

Cencora’s long-term growth and commitment to creating differentiated value drives our investments internally in our people. Our team members are the core of everything we do, power our purpose and drive our execution with their diverse backgrounds and experiences. We are motivating our leaders to foster an environment of inclusion that embraces diversity across the organization, leveraging unique global views across our enterprise and enhancing ways of working, drives efficiency and differentiated customer experience for our partners. We are very proud of our team members, whose dedication and execution powered the successful year we had in fiscal 2023. As we move into fiscal 2024, we are inspired by our ability to unlock new opportunities, united as Cencora, and support the continued evolution of health care.

As a global organization united under our new name, we are even better positioned to execute our growth strategy as a leader in pharmaceutical distribution, complemented by higher margin, high-growth commercialization solutions while our purpose and who we are as an organization remain the same, I as well as our 46,000 team members are tremendously proud to now be a part of Cencora. We are confident in our strategy, and by building on our foundation and established services, we are expanding, diversifying and enhancing our position as a partner of choice for our customers and partners, both now and into the future. Now I will turn the call over to Jim for a more in-depth review of our fourth quarter and fiscal year 2023 results and to discuss our expectations for fiscal 2024.

Jim?

Jim Cleary: Thanks, Steve. Good morning and good afternoon, everyone. Fiscal 2023 was a milestone year as we became Cencora, uniting under a name and stock ticker that are more meaningful and reflective of the important role that we play at the center of health care. Solid underlying business fundamentals, broad-based utilization trends and execution by our team members allowed us to deliver strong results in the quarter and the year. In fiscal 2023, we continue to do what we do best, now as Cencora, driving strong execution, deepening relationships with our partners and continuing to invest in our strengths to advance our pharmaceutical-centric strategy and help drive long-term growth. Now turning to our results. And as a reminder, my remarks today will focus on our adjusted non-GAAP financial results, unless otherwise stated.

Growth rates and comparisons are made against the prior year September quarter and fiscal year. For a detailed discussion of our GAAP results, please refer to our earnings press release. Beginning with our fourth quarter results, we finished the quarter with adjusted diluted EPS of $2.86, an increase of 10%, which was driven by operating income growth in both segments and a lower share count as a result of opportunistic share repurchases. Our consolidated revenue was $68.9 billion, up nearly 13% with strong revenue growth in the U.S. Healthcare Solutions segment and also in the International Healthcare Solutions segment. In the quarter, our U.S. Healthcare Solutions segment continued to see significant growth in sales of low-margin GLP-1 products, and excluding GLP-1s, our consolidated revenue growth would have been 10%.

Consolidated gross profit was $2.3 billion, up 9% due to gross profit growth in both segments, particularly in the International Healthcare Solutions segment, which also benefited from the addition of PharmaLex. Consolidated gross profit margin was 3.34%, a decrease of 10 basis points. Similar to last quarter, and as expected, the gross profit margin comparison is negatively impacted by 2 U.S. Healthcare Solutions segment items. First, continued volume growth and low gross profit margin GLP-1 products; and second, decreased volumes of government-owned COVID treatments, which have higher margins. Consolidated operating expenses were $1.5 billion, up 10%. This growth was largely driven by higher operating expenses in the International Healthcare Solutions segment, including the addition of PharmaLex.

Consolidated operating income was $801 million, up 8% compared to the prior year quarter. The increase in operating income was driven by growth in both segments, which I will discuss in more detail when reviewing segment-level results. Moving now to our net interest expense and effective tax rate for the fourth quarter. Net interest expense was $61 million, an increase of 18%, due to an increase in intra-period borrowings and related interest rates. Our effective income tax rate was 21.6% compared to 19.8% in the prior year quarter. Our diluted share count was 203.4 million shares, a 3% decrease compared to the prior year fourth quarter, driven by $1.2 billion of opportunistic share repurchases completed over the course of fiscal 2023, including $250 million in August, concurrent with the underwritten transaction completed by Walgreens Boots Alliance.

This completes the review of our consolidated results. Now I’ll turn to our segment results for the fourth quarter. U.S. Healthcare Solutions segment revenue was $61.9 billion, up 13% versus the fiscal 2022 fourth quarter. This was driven by sales growth across our distribution businesses and the continued volume growth we have seen in low-margin GLP-1 products. U.S. Healthcare Solutions segment operating income increased by 9% to $633 million. In the quarter, we continued to benefit from our leadership in specialty distribution to both physician practices and health systems, broad-based strong prescription utilization trends in human health distribution and a great fourth quarter for our Animal Health business. As we said last quarter, we expected $0.01 to $0.02 of contribution related to exclusive COVID-19 product distribution.

We ended the quarter with $0.08 of contribution in the quarter due to the late summer uptick in COVID-19 cases. Additionally, in the month of September, we began distributing commercial COVID-19 vaccines, which was an incremental benefit in the quarter. This contribution is comparing to a period where vaccines were government-managed and being distributed by other parties. Given the complexities, temperature requirements and customer channels associated with COVID-19 vaccines, we captured a larger market share in COVID vaccine distribution than we would have previously expected, having used flu vaccine distribution market share as an initial proxy. That completes my review of the U.S. Healthcare Solutions segment. I will now turn to our International Healthcare Solutions segment.

In the quarter, International Healthcare Solutions revenue was $7.0 billion, an increase of 10% on both an as-reported and constant currency basis. International Healthcare Solutions segment operating income was $168 million, up 3% on an as-reported basis and up 4% on a constant currency basis. In the quarter, we saw good performance from our Global Specialty Logistics business, which offset a continued degradation of results at Alliance Healthcare’s less than wholly owned subsidiary in Egypt. We recently completed the divestiture of the stake in the Egyptian subsidiary, and the results of that business will no longer be consolidated beginning in fiscal 2024. Egypt was a headwind for the International segment throughout the year, including generating an operating loss in the fourth quarter.

And we are pleased to have divested our stake in this noncore business. In the quarter, we also had higher bad debt expense in International, driven primarily by a reserve established related to a specific pharmacy customer in Europe. That concludes our fiscal fourth quarter discussion. Now I will turn to a discussion of our full year fiscal 2023 results. Our consolidated revenue was $262 billion, up 10%, driven by growth in both segments. On a constant currency basis, consolidated revenue grew 11%. Consolidated operating income was $3.3 billion, an increase of 4% due to the strong performance in our U.S. Healthcare Solutions segment, offset in part by the International Healthcare Solutions segment, which was negatively impacted by the results of the Egyptian business that I just mentioned and the effects of foreign currency translation for much of the year.

On a constant currency basis, consolidated operating income grew 6%. From a segment perspective, U.S. Healthcare Solutions had operating income growth of 6%, driven by strong prescription utilization trends, including continued growth in specialty and good execution in our businesses. International Health Care Solutions operating income fell 2% on an as-reported basis due to the now divested Egyptian business. Excluding Egypt, International Healthcare Solutions operating income would have been up over 3%. On a constant currency basis, the segment delivered 7% operating income growth. In fiscal 2023, we had $0.38 of contribution of adjusted EPS related to exclusive COVID-19 product distribution on a consolidated basis compared to $0.72 in fiscal 2022.

At the segment level, we had $0.31 of contribution to adjusted EPS in the U.S. Healthcare Solutions segment and $0.07 in the International Healthcare Solutions segment in fiscal 2023. Turning now to interest expense. In fiscal 2023, net interest expense was $229 million, an increase of 9%, as a result of higher intra-period borrowings for parts of the year due to timing of capital deployment, debt repayment and cash flows as well as higher average interest rates on intra-period borrowings. Regarding taxes, our adjusted effective tax rate for fiscal 2023 was 20.3% compared to 20.6% in fiscal 2022. Turning now to EPS. Our full year adjusted diluted EPS was $11.99, an increase of 9%, driven by our strong operating income growth and strategic capital deployment.

Finally, in fiscal 2023, we generated $3.1 billion of adjusted free cash flow and ended the year with a cash balance of $2.6 billion. We continue to be a strong free cash flow generator and have a balanced approach to capital deployment. In addition to our internal capital expenditures, our acquisition of PharmaLex and our investment in OneOncology in fiscal 2023, this year, we also repurchased $1.2 billion of our shares opportunistically, and just this morning, announced that our Board of Directors has approved a 5% increase in our quarterly dividend. The dividend increase demonstrates our commitment to maintaining a reasonable growing dividend, and this is our 19th consecutive year of increasing our dividend. Turning now to discuss our fiscal 2024 guidance expectations.

As a reminder, we do not provide forward-looking guidance on a GAAP basis, so the following metrics are provided on an adjusted non-GAAP basis. I will also provide certain guidance metrics on a constant currency basis. We have also provided a detailed overview of guidance metrics on Slides 11 and 12 of our earnings presentation. First, starting with EPS. In fiscal 2024, we are guiding for adjusted diluted EPS to be in the range of $12.70 to $13, representing growth of 6% to 8%, driven by growth in each segment and contributions from capital deployment. Before I detail the building blocks of our solid EPS growth for fiscal 2024, I want to spend some time discussing our approach to COVID-19 contributions in the coming year. Over the past several years, we’ve recognized benefits related to our role as the exclusive distributor of a number of COVID-19 products, which we have normalized for by providing ex-COVID numbers.

As we’ve indicated from the onset, we fully expected the exclusive distribution products to move to a normal commercial distribution model in the U.S., and as we all now know, that will now occur during the first quarter of our fiscal 2024. The key products driving our exclusive COVID contribution are moving to a commercial model this month. In fiscal 2024, we are anticipating the remaining benefit from exclusivity to be as low as $0.02 or as high as $0.10. We do not anticipate that there will be a meaningful contribution from any remaining exclusive COVID products beyond our first quarter. As we’ve been doing for some time, we will plan to provide an update on the contribution we recognize from the exclusive distribution of these COVID products.

Excluding the benefit from exclusive COVID-19 contributions in fiscal 2023, our fiscal 2024 EPS guidance represents growth in the range of 9% to 12%, with a small $0.02 to $0.10 contribution from exclusive COVID products in fiscal 2024. On Page 13 in our earnings presentation, we have provided a bridge showing the components of our adjusted diluted EPS growth from the adjusted baseline in fiscal 2023. As I mentioned when discussing our fourth quarter results, we began distributing COVID-19 vaccines in the U.S. in September and recognized a benefit from gaining access to these products now that they are commercially available. As I also mentioned, we have seen better-than-expected share in the products, given the complex handling requirements of these temperature-sensitive vaccines and the customer channels.

Since these products are normal commercial arrangements, we will include contributions related to these products in our as-reported results and will not provide a category-level contribution on them, consistent with our approach to the other pharmaceuticals that we distribute commercially. We continue to monitor trends for these vaccines, which have generally experienced higher-than-expected presumably seasonal demand alongside flu vaccines. Now I will discuss the key income statement items that drive our adjusted EPS guidance. Starting with revenue. We expect consolidated revenue growth to be in the range of 7% to 10% on both an as-reported and constant currency basis. At the segment level, we also expect U.S. Healthcare Solutions revenue growth to be in the range of 7% to 10% as we continue to see strong prescription utilization trends, including continued growth in products in the GLP-1 class.

For the International Healthcare Solutions segment on an as-reported basis, using October foreign exchange rates, we expect revenue growth to be in the range of 4% to 8%. On a constant currency basis, we expect revenue growth for the International segment to be in the range of 7% to 11%. Moving to operating income. We expect consolidated operating income growth to be in the range of 4% to 6% or 5% to 7% on a constant currency basis. Excluding the COVID-19 contributions I detailed, we expect consolidated operating income growth to be in the range of 7% to 9% or 8% to 10% on a constant currency basis. In the U.S. Healthcare Solutions segment, we expect operating income growth to be in the range of 4% to 7% in fiscal 2024. On an ex-COVID basis, we expect U.S. segment operating income growth to be in the range of 7% to 10% as we benefit from continued strong fundamentals in our core pharmaceutical distribution business, our leadership in specialty and good contributions from our Animal Health and upstream pharma services businesses in the U.S. For our International Healthcare Solutions segment, we expect operating income growth to be in the range of 1% to 4% on an as-reported basis or 5% to 8% on a constant currency basis.

On an ex-COVID basis, we expect segment operating income growth to be in the range of 3% to 6% on an as-reported basis or 7% to 10% on a constant currency basis. The International Healthcare Solutions segment has seen strong performance from our Global Specialty Logistics business and good execution in our European distribution business, which we expect to continue in fiscal 2024. Now turning to interest expense. We expect our interest expense to be between $210 million and $230 million. Moving on to tax rate. We expect our tax rate to be approximately 20% to 21% for fiscal 2024, similar to the prior 2 years. Turning now to share count. We expect that our full year average share count will be between 200 million and 202 million shares in fiscal 2024.

Moving now to our adjusted free cash flow and capital expenditure expectations. In fiscal 2024, we expect adjusted free cash flow to be approximately $2.5 billion. Our continued generation of strong free cash flow supports our ability to grow our dividend and opportunistically return capital to shareholders through share repurchases while also making important investments to advance our business, both externally and internally. With regards to internal investments, we again expect capital expenditures to be approximately $500 million for the year. We remain focused on ensuring our business is well positioned by investing in our systems and infrastructure to support our current and future growth. In closing, fiscal 2023 was a successful year for Cencora as we delivered strong financial performance and took key steps to advance our strategy.

We made investments to support our people and culture and united together as Cencora. As we have demonstrated, our business is well positioned to capture opportunities, driven by the strength of our infrastructure, breadth of our capabilities across the supply chain and thought leadership of our team members to proactively navigate complexities. We move into fiscal 2024 with strong momentum as we continue to capitalize on the opportunities presented by our pharmaceutical-centric strategy and capabilities and remain focused on delivering on our purpose as we create value for our upstream and downstream customers, our team members, shareholders and the communities where we live and work. With that, I will turn the call over to the operator to open the line for questions.

Operator?

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Q&A Session

Operator: [Operator Instructions] Our first question today comes from the line of Lisa Gill with JPMorgan.

Lisa Gill: Thanks for all the detail, Jim and Steve. Steve, I wanted to ask a bigger picture question. I think there’s been a little bit of an overhang on the stock as you think about your relationship with Walgreens Boots Alliance and the lack of leadership. And even with the former leaders, I would say they had less of a healthcare focus. We now have Tim Wentworth, who’s been named CEO. I know you’ve had a long-standing relationship with Tim. I really just would be curious around 2 things. One, when you think about the relationship, do you think that there’s an opportunity to even deepen the relationship? Or are there new verticals you can work together on? And what are your thoughts on the leadership, number one. And then number two, when we think about the sale of your stock — and they clearly are in a position where they probably need to do something, whether it’s cut their dividend or sell more stock.

I know that they have some future contracts, and the percentage of ownership of ABC as way down. But how do I think about that and your ability — maybe this is a question for Jim — to continue to buy back shares as that continues to happen?

Steve Collis: Yes, Lisa. So of course, our relationship with Walgreens is — and Boots in the U.K. is very significant. We also have the WBAD purchasing alliance. So it’s by far the most scaled and material relationship we have. So having said that, we’re very pleased that someone who we’ve known literally for decades like Tim has assumed the mantle. And he has a proven track record. I first met Tim when I was running the specialty business at the former Bergen Brunswig, and he was running the Accredo division at Medco. So go back a long, long time. But our partnership is very strategic. We believe that there’s always room to do more because of the scale that we have, and also the challenges that we’re going to have. So in the past, we’ve worked together on purchasing and sourcing initiatives.

I think we worked effectively very well together through this COVID season, where we both had our respective roles. There has been, of course, much more patient director in front of the patient. But we think that this relationship will continue to prosper. And we look forward to Tim being very successful in the new role. Jim, do you want to take the second part?

Jim Cleary: Sure. Thanks for the question, Lisa. And I’ll talk about the capital deployment portion. We’ve successfully collaborated with Walgreens on their latest transactions, repurchasing about $250 million in shares from Walgreens in the most recent quarter and over $1 billion in shares from Walgreens over the past year. And if they were to continue to sell our shares, which wouldn’t surprise us, we view it as an opportunity to continue to collaborate with them and repurchase some of the shares and the amount that we’ve repurchased would be dependent on managing our capital needs and opportunities. And I’m pleased to say that this fiscal year that recently ended, we generated $3.1 billion of free cash flow. So we feel very good about our cash flow generation and our balance sheet and our ability to deploy capital. Thanks a lot for the question.

Operator: Our next question comes from the line of Elizabeth Anderson with Evercore ISI.

Elizabeth Anderson: I appreciate the details on ’24. I was wondering if you could talk through some — in a little bit more detail, some of the underlying profit drivers for 2024? And as I’m thinking about them, sort of core customer growth, GLP-1 benefit. Obviously, some of the new — the benefit for the new acquisitions you’ve been doing, just to help us sort of get a better sense on where you’re seeing perhaps outsized growth, et cetera for the upcoming fiscal year?

Jim Cleary: Great. Well, I’ll start off by saying that we feel very good about our guidance for fiscal year ’24. On a consolidated level, our adjusted operating income, we’re expecting it to grow in the 8% to 10% range. So that’s constant currency, ex-COVID. And so some of the things that move us within that range, from a big picture standpoint, it’s of course, the growth rate of our higher-margin, higher-growth businesses. In particular, specialty distribution, but also our commercialization services businesses, including World Courier. The continued strength and utilization trends, which we’ve certainly seen in fiscal year ’23. The extent of the strength of those utilization trends in fiscal year ’24; certainly, are 1 of the things that will drive our business.

Of course, drug pricing always plays a role, including branded inflation and generic deflation rates, sales of COVID products. And I talked quite a bit about that during the prepared remarks. And then, of course, also FX, but typically, we look at this on a constant currency basis. And I could get into a little bit more detailed commentary on some of these things on some of the kind of the moving pieces. As I said during the prepared remarks, we’re expecting $0.02 to $0.10 of EPS contribution related to exclusive COVID-19 product distribution with a vast majority of that in the first quarter. We divested, of course, the Egyptian business during the fourth quarter of the year, which we were pretty — very pleased with. And that business didn’t have a meaningful operating income contribution in fiscal ’23.

So the divestiture will not create a meaningful headwind to fiscal ’24. You asked about GLP-1 products, they’re a key driver of our revenue growth, but they’re minimally profitable for us, so not a major driver of our operating income growth. But — and so those are some of the things that are — from a big picture standpoint and a detailed standpoint, that our driving our business in fiscal year ’24. And I’ll just finish up by saying we have very good confidence in our guidance, given our strong momentum and the strength we’ve seen broadly across our businesses as we’ve finished fiscal year ’23.

Operator: Our next question comes from Eric Percher with Nephron Research.

Eric Percher: Guidance-related question here. Steve or Jim, I’d be interested for your view on the list prices related to [A&P cap] changes in January. And obviously, we have the insulins. I’m curious if that was an impact at all in guidance for next year? And if you expect to see others? And then, Jim, I’d be interested in your assumptions on brand increases. Are you assuming in the guidance that it’s not as strong as what we saw in ’23, and that might leave upside? And then GLP-1s, do those begin to annualize at the revenue line in Q1, in Q2? When do we start to cycle that?

Jim Cleary: Yes. Okay. So let me address those things, Eric. First of all, with regard to insulin pricing. There’s nothing that I’ll call out. The anticipated impact is reflected within our guidance range. And I’ll say that, as always, when there are changes that could impact our economics, we engage in discussions with manufacturers and other stakeholders to ensure that we continue to be adequately compensated for the value we provide. You’d asked about drug pricing and how that impacts guidance. And what I’ll say is we don’t put out specific guidance metrics on drug pricing, but our guidance contemplates brand and generic pricing changes being in line with what we’ve seen over the past couple of years. With regard to brand inflation, it’s really less important for Cencora because well over 95% of our brand buy-side dollars are fee-for-service.