10-QPeriod: Q2 FY2023

Cencora, Inc. Quarterly Report for Q2 Ended Mar 31, 2023

Filed May 2, 2023For Securities:COR

Summary

Cencora, Inc. (formerly AmerisourceBergen Corporation) reported strong revenue growth in the first quarter of fiscal year 2023, driven primarily by its U.S. Healthcare Solutions segment. This segment saw a significant increase in revenue, largely attributed to unit volume growth and increased sales to major customers, despite a decline in COVID-19 treatment sales. The company's International Healthcare Solutions segment experienced a slight revenue decrease, impacted by a prior divestiture and unfavorable foreign currency exchange rates, though partially offset by contributions from recent acquisitions and ongoing business. While gross profit saw a modest increase, total operating expenses rose due to higher administrative, restructuring, and amortization costs. The company also completed a significant acquisition of PharmaLex, enhancing its global services capabilities, and announced a forthcoming investment in OneOncology. The ongoing opioid litigation remains a significant financial and operational consideration, with a substantial liability accrued.

Financial Highlights

55 data points
Beta

Revenue

$63.46B

3.6% Gross Margin

Net Income

$435.40M

0.7% Net Margin

EPS (Diluted)

$2.13

Total Assets

$58.77B

Cash & Equivalents

$1.54B

Free Cash Flow

$526.65M

Financial Statements
Beta
Revenue$63.46B
Cost of Revenue$61.16B
Gross Profit$2.30B
SG&A Expenses$1.32B
Operating Income$560.52M
Net Income$435.40M
EPS (Basic)$2.15
EPS (Diluted)$2.13
Shares Outstanding (Basic)202.32M
Shares Outstanding (Diluted)204.26M

Key Highlights

  • 1Revenue increased by 9.9% year-over-year to $63.5 billion for the three months ended March 31, 2023, primarily driven by the U.S. Healthcare Solutions segment's 11.3% growth.
  • 2Gross profit increased by 2.7% to $2.3 billion for the quarter, positively impacted by both reporting segments and antitrust litigation settlement gains.
  • 3Total operating expenses increased by 19.2% to $1.7 billion, driven by higher distribution, selling, administrative, restructuring, and amortization expenses.
  • 4The company acquired PharmaLex Holding Gmbh for $1.473 billion, adding specialized services to its International Healthcare Solutions segment.
  • 5Net income attributable to AmerisourceBergen Corporation was $435.4 million, a decrease from $548.0 million in the prior year quarter, impacted by increased operating expenses and a lower effective tax rate.
  • 6The company's balance sheet shows robust current assets of $40.0 billion, though current liabilities also remain high at $45.1 billion, mainly due to accounts payable.
  • 7Significant cash outflow from investing activities ($1.6 billion) was largely due to the PharmaLex acquisition, while financing activities also showed a net outflow.
  • 8The company ended the quarter with $1.69 billion in cash, cash equivalents, and restricted cash, a decrease from $3.59 billion at the beginning of the period.

Frequently Asked Questions

The primary driver of revenue growth was the U.S. Healthcare Solutions segment, which experienced an 11.3% increase due to overall market growth, higher unit volumes, increased sales to key customers, and strong performance in specialty products. This growth was partially offset by decreased sales of COVID-19 treatments.

The company has accrued a liability of approximately $5.9 billion related to the Distributor Settlement Agreement and other opioid litigation. Payments are expected over the next 16 years, with $434.2 million estimated to be paid prior to March 31, 2024. While a significant liability, the company is actively defending itself in ongoing legal matters.

The acquisition of PharmaLex for $1.473 billion, effective January 1, 2023, has been integrated into the International Healthcare Solutions segment. It contributed incremental revenue and gross profit. The acquisition also resulted in a significant increase in goodwill on the balance sheet and amortization expenses related to acquired intangible assets.

Total debt decreased from $5.7 billion to $4.9 billion during the period, mainly due to the maturity and repayment of $675 million in senior notes. The company has significant availability under its revolving credit facilities and maintains compliance with its debt covenants.