10-QPeriod: Q3 FY2021

Cencora, Inc. Quarterly Report for Q3 Ended Jun 30, 2021

Filed August 4, 2021For Securities:COR

Summary

Cencora, Inc. (formerly AmerisourceBergen Corporation) reported strong revenue growth for the third quarter and first nine months of fiscal year 2021, primarily driven by the significant acquisition of Alliance Healthcare and continued expansion in its Pharmaceutical Distribution Services segment. Revenue increased by 17.7% and 10.3% for the three and nine months ended June 30, 2021, respectively, compared to the prior year periods. This growth was bolstered by increased sales of specialty products, including COVID-19 treatments, and overall market expansion. The company also saw a substantial increase in gross profit, up 54.0% and 26.8% for the respective periods, benefiting from higher gross profit in its core segments, LIFO credits, and gains from antitrust litigation settlements. However, operating expenses also rose significantly (54.4% and 7.5%) due to the Alliance Healthcare acquisition, increased legal accruals for the proposed opioid settlement, and integration costs. Operationally, the company continues to navigate significant legal matters, notably the proposed comprehensive opioid settlement, which represents a substantial financial commitment. Despite these challenges, the company maintained solid cash flow from operations and a healthy liquidity position, with significant availability under its credit facilities, enabling it to manage its debt obligations and continue its share repurchase program and dividend payments.

Financial Highlights

56 data points
Beta

Revenue

$53.41B

3.5% Gross Margin

Net Income

$292.12M

0.5% Net Margin

EPS (Diluted)

$1.40

Total Assets

$55.93B

Cash & Equivalents

$2.55B

Free Cash Flow

$1.09B

Financial Statements
Beta
Revenue$53.41B
Cost of Revenue$51.52B
Gross Profit$1.89B
SG&A Expenses$913.41M
Operating Income$620.73M
Net Income$292.12M
EPS (Basic)$1.42
EPS (Diluted)$1.40
Shares Outstanding (Basic)206.16M
Shares Outstanding (Diluted)208.91M

Key Highlights

  • 1Significant revenue growth of 17.7% and 10.3% for the quarter and nine months ended June 30, 2021, largely attributable to the acquisition of Alliance Healthcare and organic growth in Pharmaceutical Distribution Services.
  • 2Gross profit surged by 54.0% and 26.8% for the quarter and nine months, respectively, supported by higher sales volumes, specialty product increases, and favorable LIFO adjustments.
  • 3Operating expenses increased significantly due to the substantial acquisition of Alliance Healthcare, integration costs, and accruals related to the proposed opioid settlement.
  • 4The company is progressing with a comprehensive proposed settlement for the majority of opioid lawsuits, representing a significant financial commitment over 18 years.
  • 5Robust operating cash flow was generated, demonstrating the company's ability to fund operations, debt repayments, dividends, and acquisitions.
  • 6The company's balance sheet reflects substantial increases in goodwill and intangible assets following the Alliance Healthcare acquisition.
  • 7Effective tax rates were significantly higher in the current periods due to UK Tax Reform, impacting profitability.

Frequently Asked Questions

The primary driver of the significant revenue increase was the acquisition of the majority of Walgreens Boots Alliance's Alliance Healthcare businesses on June 1, 2021. This acquisition, combined with continued growth in the Pharmaceutical Distribution Services segment, led to a 17.7% increase in revenue for the quarter ended June 30, 2021.

Cencora (formerly AmerisourceBergen) has negotiated a comprehensive proposed settlement agreement to resolve a substantial majority of opioid lawsuits filed by state and local governmental entities. This settlement involves payments of up to approximately $6.4 billion over 18 years. The company has already recorded a significant liability and made provisions for this settlement.

The acquisition of Alliance Healthcare significantly increased Cencora's assets, particularly goodwill and other intangible assets. It also led to a substantial rise in revenue and operating expenses. The integration of Alliance Healthcare is expected to expand the company's global reach and diversify its service offerings, though it also introduces integration costs and operational complexities.

The company's debt structure has increased due to financing activities related to the Alliance Healthcare acquisition. This includes issuing new senior notes and entering into new term loans. Total debt increased significantly from September 30, 2020, to June 30, 2021, reflecting these financing arrangements.