- Progress achieved on company's ongoing business and
portfolio review
- Completed review of growth businesses within the Medical
Segment: investing in and further developing at-Home Solutions and
OptiFreight® Logistics as part of the company's
portfolio for long-term growth and value creation
- Review of Global Medical Products and Distribution business
continues, with focus on driving operational performance through
the Medical Improvement Plan
- Reorganizing leadership structure to continue company's
simplification efforts, prioritize core operational execution and
drive efficiencies, accountability and transparency
- Updated enterprise operating and segment reporting
structure, effective January 1, 2024,
to be reflected in company's financial reporting beginning third
quarter fiscal 2024
- Providing pro-forma long-term financial targets for updated
segment reporting structure
- Updated fiscal 2024 non-GAAP diluted EPS guidance to high
end of $6.75 to $7.00 range
- Primarily driven by favorability in Interest and Other and
Diluted Weighted Average Shares Outstanding, enabled by continued
strong cash flow generation and incremental share repurchase during
second quarter fiscal 2024
- Further updates and details to be provided on February 1 during fiscal 2024 Q2 earnings
call
DUBLIN,
Ohio, Jan. 9, 2024 /PRNewswire/ -- Cardinal
Health (NYSE:CAH) today announced progress on the company's ongoing
business and portfolio review, including an updated enterprise
operating and segment reporting structure, and an update to its
fiscal year 2024 non-GAAP diluted earnings per share (EPS) outlook.
These updates build upon the company's momentum, focus on long-term
value creation, and continued actions to become more streamlined
and focused. The company will host an analyst conference call today
beginning at 8:30 a.m. E.T. where
management will further discuss these announcements.
"We are excited to demonstrate further progress on how we are
driving our company, and healthcare, forward," said
Jason Hollar CEO of Cardinal Health. "As we continue
down the path of becoming a simplified and more focused company,
these actions align with our operational focus on the core of our
business, provide increased visibility to key growth areas, and
enable greater efficiencies across all our businesses. We continue
to prioritize focused execution to best serve our customers and
advance our mission as healthcare's most trusted partner."
Business and portfolio review update
While Cardinal Health's business and portfolio review efforts
remain active and ongoing, the company has completed a review of
its growth businesses within the Medical Segment, at-Home Solutions
and OptiFreight® Logistics, and has determined that
investing in and further developing these businesses will drive the
most significant long-term shareholder value creation for Cardinal
Health. This conclusion follows the June 2023 announcement that the business review
determined that Cardinal Health would retain and invest in its
attractive Nuclear and Precision Health Solutions business.
Cardinal Health's at-Home Solutions business, a
$2.6B revenue leading home healthcare
medical supplies provider serving people with chronic and serious
health conditions in the United
States, is well-positioned to continue to accelerate in the
coming years with industry trends of care shifting to the home. To
support increased demand, the company is investing in network
expansion, and today, is announcing plans to build a new
distribution center in Texas, with
increased capacity, advanced automation and robotics within the
facility. This is in addition to the recently opened site in
Ohio, and the previously announced
expansion in South Carolina set to
open this calendar year.
Cardinal Health's OptiFreight® Logistics, a
$250M revenue leading provider of
healthcare logistics, manages over 21 million shipments annually to
22,000 healthcare provider shipping locations across the continuum
of care. Powered by its proprietary technology and team's deep
expertise, the business has a strong operational track record of
profitable growth over many years. To sustain the business' strong
performance, the company continues to invest in innovative and
technology-driven solutions such as TotalVue™ Insights that enable
healthcare supply chain leaders to optimize their transportation
and logistics processes and control shipping spend.
Cardinal Health's review of its Global Medical Products and
Distribution business continues, with a focus on executing the
Medical Improvement Plan, which remains a critical priority for the
enterprise. The company is continuing to drive ongoing initiatives
and invest in the business to support customers' needs and achieve
its long-term target.
Operating and segment reporting structure update
The company also announced plans to realign its business to
increase its focus on the core and accelerate its growth
areas.
Effective January 1, 2024, the
company began operating under an updated enterprise operating and
segment reporting structure, which includes two reportable segments
Pharmaceutical and Specialty Solutions and Global Medical
Products and Distribution (GMPD). Separate from these two
segments, Nuclear and Precision Health Solutions, at-Home Solutions
and OptiFreight® Logistics will be reported as
Other1.
The Pharmaceutical and Specialty Solutions Segment, previously
in the Pharmaceutical Segment, continues under the leadership of
Debbie Weitzman. The segment
consists of the company's largest and most significant businesses,
its resilient Pharmaceutical Distribution business and its
higher-growth Specialty business, including both downstream
Specialty Distribution and upstream Manufacturer Services. Weitzman
will continue to report directly to Jason
Hollar.
The GMPD segment, previously in the Medical Segment, continues
to be led by Steve Mason. The
segment consists of the company's U.S. and International Products
and Distribution businesses, as well as its WaveMark business.
Mason will report directly to Jason
Hollar and continue to have a pivotal role in driving the
success of the Medical Improvement Plan.
Other consists of at-Home Solutions and
OptiFreight® Logistics from the former Medical
Segment, and Nuclear and Precision Health Solutions from the
former Pharmaceutical Segment. Each of these businesses will
continue to operate independently and each of the business leaders,
Rob Schlissberg, at-Home Solutions;
Emily Gallo, OptiFreight®
Logistics; and Mike Pintek, Nuclear
and Precision Health Solutions, will now report directly to
Jason Hollar. This updated operating
structure is designed to provide greater visibility to the
performance of these businesses and allow prioritization of
investments to ensure their long-term success.
The company plans to report its second quarter fiscal 2024
results on February 1, 2024,
according to its former reporting segments and will then report its
third quarter fiscal 2024 results and forward on the basis of its
updated structure.
Fiscal 24 outlook update
The company updated fiscal year 2024 non-GAAP diluted EPS
guidance to the high end of its $6.75
to $7.00 range.
This update is driven by anticipated favorability in fiscal 24
Interest and Other and Diluted Weighted Average Shares Outstanding,
due to continued strong cash flow generation, resulting in
higher-than-expected cash balances, and the execution of a new
$250M accelerated share repurchase
program in the second quarter.
The company also provided an update to its previous expectations
for second quarter Medical segment profit. While utilization
trends, including Cardinal Health™ Brand volumes, and inflation
mitigation efforts have trended according to the company's
expectations in the GMPD business, the company now anticipates
second quarter Medical segment profit to be generally consistent
with first quarter Medical segment profit, due to anticipated
non-recurring adjustments in the second quarter. These anticipated
non-recurring adjustments do not affect the company's progression
towards its previously-communicated fiscal 26 targets.
The company will provide further updates and details on its
fiscal second quarter results and its fiscal 24 guidance during its
second quarter earnings call, on February 1,
2024.
Long-term financial targets
The company reiterated its long-term financial targets
reflecting 12% to 14% growth of non-GAAP diluted
EPS2.
The company also provided pro-forma long-term targets for its
updated segment reporting structure, and, for information purposes,
recast its fiscal 2023 actuals on the same basis3.
The company's previously announced Medical Improvement Plan
targeting at least $650M of segment
profit by fiscal 26 continues, with elements of that plan to reside
in the results of both GMPD and Other.
|
FY23
Actuals3
|
Long-term
Target
|
Businesses
|
Pharmaceutical
and
Specialty Solutions
|
Revenue:
~$188.8B
Segment
Profit:
~1.87B
|
4-6%
Segment Profit
CAGR2
|
Former Pharmaceutical
Segment, excluding Nuclear
and Precision Health Solutions
|
GMPD
|
Revenue:
~$12.1B
Segment
Profit:
~$(165)M
|
~$300
million
in
Segment Profit by FY26
|
Former Medical Segment,
excluding at-Home Solutions
and OptiFreight® Logistics
|
Other
|
Revenue:
~$4.1B
Segment
Profit:
~$410M
|
8-10%
Segment Profit
CAGR2
|
at-Home Solutions,
Nuclear and Precision Health Solutions
and OptiFreight® Logistics
|
The company does not provide forward-looking guidance on a GAAP
basis as certain financial information, the probable significance
of which cannot be determined, is not available and cannot be
reasonably estimated. See "Forward-Looking Non-GAAP Measures" below
for additional explanation.
Analyst Conference Call and Webcasted Investor Events
The company will hold an analyst conference call, which
will be webcast, to discuss today's announcements prior to the
opening of trading on the New York Stock Exchange beginning
at 8:30 a.m. Eastern.
Additionally, the company plans to present at the
42nd Annual J.P. Morgan Healthcare Conference today
beginning at 5:15 p.m. Eastern.
To access the webcasts and corresponding presentations,
visit Cardinal Health's Investor Relations page. No
access code is required. Presentation slides and a webcast replay
will be available on the Investor Relations page for 12 months.
About Cardinal Health
Cardinal Health is a distributor of pharmaceuticals, a global
manufacturer and distributor of medical and laboratory products,
and a provider of performance and data solutions for healthcare
facilities. With more than 50 years in business, operations in more
than 30 countries and approximately 48,000 employees globally,
Cardinal Health is essential to care. Information about Cardinal
Health is available at cardinalhealth.com.
Contacts
Media: Erich Timmerman,
erich.timmerman@cardinalhealth.com and 614.757.8231
Investors: Matt Sims,
matt.sims@cardinalhealth.com and 614.553.3661
1 Other includes the following three operating
segments: at-Home Solutions, Nuclear and Precision Health Solutions
and OptiFreight® Logistics, which are not significant
enough individually to require reportable segment disclosure.
2 FY24 to FY26 CAGR, as of FY23 baseline.
3 Recast FY23 actuals for updated segment reporting
structure are considered preliminary and pending a final recast of
segment results that is expected to be completed by the company's
Q3 FY24 earnings release. The sum of the components may reflect
rounding adjustments.
Cautions Concerning Forward-Looking Statements
This news release contains forward-looking statements addressing
expectations, prospects, estimates and other matters that are
dependent upon future events or developments. These statements may
be identified by words such as "expect," "anticipate," "intend,"
"plan," "believe," "will," "should," "could," "would," "project,"
"continue," "likely," and similar expressions, and include
statements reflecting future results or guidance, statements of
outlook, preliminary recast fiscal 2023 results and various
accruals and estimates. These matters are subject to risks and
uncertainties that could cause actual results to differ materially
from those projected, anticipated or implied. These risks and
uncertainties include risks arising from ongoing inflationary
pressures, including the risk that our plans to mitigate such
effects may not be as successful as we anticipate or that costs
could remain elevated; the possibility that our Medical unit
goodwill could be further impaired due to additional changes to our
long-term financial plan, increases in global interest rates or
unfavorable changes in the U.S. statutory tax rate; risks
associated with our ongoing review of our operations, portfolio and
businesses, including the risk that our management team could
become distracted or that the outcome of such review may have
unintended consequences; competitive pressures in Cardinal Health's
various lines of business, including the risk that customers may
reduce purchases made under their contracts with us or terminate or
not renew their contracts; the performance of our generics program,
including the amount or rate of generic deflation and our ability
to offset generic deflation and maintain other financial and
strategic benefits through our generic sourcing venture or other
components of our generics programs; ongoing risks associated with
the distribution of opioids, including the financial impact
associated with the settlements with governmental authorities and
the risk that challenges to tax deductions for opioid-related
losses could adversely impact our financial results; risks arising
from the Department of Justice investigation which we believe
concerns our anti-diversion program and risks associated with the
injunctive relief requirements under the national settlement,
including the risk that we may incur higher costs or operational
challenges in the implementation and maintenance of the required
changes; risks associated with the manufacture and sourcing of
certain products, including risks related to our ability and the
ability of third-party manufacturers to import or export
certain products or component parts and to comply with applicable
regulations; our ability to manage uncertainties associated with
the pricing of branded pharmaceuticals; uncertainties related to
the timing, magnitude and profit impact of the distribution of
recently commercially available COVID-19 vaccines; risks associated
with business process initiatives, such as the Medical Improvement
Plan, including the possibility that they could fail to achieve the
intended results; and the risk that we may not realize the
anticipated benefits related to our updated operating and segment
reporting structure. Cardinal Health is subject to additional risks
and uncertainties described in Cardinal Health's Form 10-K, Form
10-Q and Form 8-K reports and exhibits to those reports. This news
release reflects management's views as of January 9, 2024. Except to the extent required by
applicable law, Cardinal Health undertakes no obligation to update
or revise any forward-looking statement. Forward-looking statements
are aspirational and not guarantees or promises that goals, targets
or projections will be met, and no assurance can be given that any
commitment, expectation, initiative or plan in this news release
can or will be achieved or completed.
Forward Looking Non-GAAP Measures
In this news release, the company presents certain
forward-looking non-GAAP metrics. The company does not provide
outlook on a GAAP basis because the items that the company excludes
from GAAP to calculate the comparable non-GAAP measure can be
dependent on future events that are less capable of being
controlled or reliably predicted by management and are not part of
the company's routine operating activities. Additionally,
management does not forecast many of the excluded items for
internal use and therefore cannot create or rely on outlook done on
a GAAP basis.
The occurrence, timing and amount of any of the items excluded
from GAAP to calculate non-GAAP could significantly impact the
company's fiscal 2024 GAAP results. Over the past five fiscal
years, the excluded items have impacted the company's EPS from
$0.75 to $18.06, which includes a $17.54 charge related to the opioid litigation
the company recognized in fiscal 2020.
Definitions
Non-GAAP net earnings attributable to Cardinal Health,
Inc.: net earnings attributable to Cardinal Health,
Inc. excluding (1) LIFO charges/(credits), (2) state opioid
assessment related to prior fiscal years, (3) shareholder
cooperation agreement costs, (4) restructuring and employee
severance, (5) amortization and other acquisition-related costs,
(6) impairments and (gain)/loss on disposal of assets, net, (7)
litigation (recoveries)/charges, net and (8) loss on early
extinguishment of debt.
Non-GAAP diluted earnings per share attributable to Cardinal
Health, Inc.: non-GAAP net earnings attributable to
Cardinal Health, Inc. divided by diluted weighted-average shares
outstanding.
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SOURCE Cardinal Health, Inc.