Cardinal Health, Inc. · NYSE:CAH
Cardinal Health — Q4 FY2016 Earnings Presentation
30 slides from Cardinal Health's earnings presentation, Aug 2, 2016
Slide 1: Q4 FY2016 Earnings Investor/Analyst call
Q4 FY2016 Cardinal Health, Inc. Earnings Investor/Analyst call August 2, 2016 © Copyright 2016, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved
Slide 2: Forward-looking statements and GAAP reconciliation
Forward-looking statements and GAAP reconciliation Cautions Concerning Forward-Looking Statements This presentation contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be ident
Slide 3: CAH FY2016 accomplishments
CAH FY2016 accomplishments • Increased revenue by 19% to a record $121.5B • Increased gross margin dollars by 15% • Generated record GAAP operating earnings of $2.5B and record non-GAAP operating earnings of $2.9B, an increase of 14% and 17%, respectively • Grew both GAAP and non-GAAP diluted EPS fr
Slide 4: Q4 and FY2016 results
Q4 and FY2016 results © Copyright 2016, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved
Slide 5: Q4 FY16 financial summary
Q4 FY16 financial summary GAAP Basis ($M) Non-GAAP Basis ($M) Q4 FY16 Q4 FY15 Q4 FY16 Q4 FY15 Revenue $31,384 $27,547 $31,384 $27,547 % change 14% increase YoY 20% increase YoY 14% increase YoY 20% increase YoY Gross Margin $1,665 $1,458 $1,614 $1,458 % change 14% increase YoY 16% increase YoY 11% i
Slide 6: Q4 FY16 Pharmaceutical segment business analysis
Q4 FY16 Pharmaceutical segment business analysis Q4 FY16 ($M) Q4 FY15 ($M) YoY Change Revenue $28,177 $24,676 14% Segment Profit $542 $535 1% Segment 1.93% 2.17% -24 bps Profit Margin Highlights: • Revenue for the Pharmaceutical segment increased 14 percent to $28.2 billion due to growth from existi
Slide 7: Q4 FY16 Medical segment business analysis
Q4 FY16 Medical segment business analysis Q4 FY16 ($M) Q4 FY15 ($M) YoY Change Revenue $3,210 $2,855 12% Segment Profit $122 $103 19% Segment 3.81% 3.59% +22 bps Profit Margin Highlights: • Revenue for the Medical segment increased 12 percent to $3.2 billion primarily due to contributions from acqui
Slide 8: Q4 FY16 GAAP to non-GAAP adjustments
Q4 FY16 GAAP to non-GAAP adjustments1 Q4 FY 2016 Q4 FY 2015 Gross Operating Net Earnings 2 2 Gross Operating Net Earnings 2 Diluted EPS Diluted EPS 2 Margin ($M) Earnings ($M) ($M) Margin ($M) Earnings ($M) ($M) GAAP $1,665 $620 $333 $1.02 $1,458 $558 $293 $0.88 LIFO charges/(credits) (51) (51) (31)
Slide 9: FY16 financial summary
FY16 financial summary GAAP Basis ($M) Non-GAAP Basis ($M) FY16 FY15 FY16 FY15 Revenue $121,546 $102,531 $121,546 $102,531 % change 19% increase YoY 13% increase YoY 19% increase YoY 13% increase YoY Gross Margin $6,543 $5,712 $6,543 $5,712 % change 15% increase YoY 11% increase YoY 15% increase YoY
Slide 10: FY16 Pharmaceutical segment business analysis
FY16 Pharmaceutical segment business analysis FY16 ($M) FY15 ($M) YoY Change Revenue $109,131 $91,116 20% Segment Profit $2,488 $2,094 19% Segment 2.28% 2.30% -2 bps Profit Margin Highlights: • Revenue for the Pharmaceutical segment increased 20 percent to $109.1 billion due to growth from existing
Slide 11: FY16 Medical segment business analysis
FY16 Medical segment business analysis FY16 ($M) FY15 ($M) YoY Change Revenue $12,430 $11,395 9% Segment Profit $457 $433 6% Segment 3.68% 3.80% -12 bps Profit Margin Highlights: • Revenue for the Medical segment increased 9 percent to $12.4 billion due to net contributions from acquisitions and sal
Slide 12: FY16 GAAP to non-GAAP adjustments
FY16 GAAP to non-GAAP adjustments1 FY 2016 FY 2015 Gross Operating Net Earnings 2 2 Gross Operating Net Earnings 2 Diluted EPS Diluted EPS 2 Margin ($M) Earnings ($M) ($M) Margin ($M) Earnings ($M) ($M) GAAP $6,543 $2,459 $1,427 $4.32 $5,712 $2,161 $1,212 $3.61 Restructuring and employee severance -
Slide 13: FY2017 Outlook
FY2017 Outlook The company presents its outlook for fiscal 2017 non-GAAP EPS, non-GAAP effective tax rate and other forward-looking goals on the following pages. The company does not provide a GAAP EPS or GAAP effective tax rate outlook because it is unable to reliably forecast many of the items tha
Slide 14: FY17 financial expectations
FY17 financial expectations FY2017 Outlook FY2016 Actual High-single digit Revenue percentage growth vs. PY $121.5B Non-GAAP $5.48 to $5.73 $5.24 Diluted EPS 14 © Copyright 2016, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Slide 15: FY17 corporate assumptions
FY17 corporate assumptions FY2017 Outlook FY2016 Actual Non-GAAP effective tax rate 35% - 37%1 36.0%4 Diluted weighted average Shares outstanding 324M – 326M2 330M Interest and other, net $190M - $205M $183M Capital expenditures $400M - $450M $465M Acquisition-related intangible amortization ~$376M
Slide 16: Pharmaceutical segment FY17(E)
Pharmaceutical segment FY17(E) • High-single digit percentage increase in revenue versus prior year • Full-year segment profit essentially flat vs. prior year and back half-weighted. Q1FY17 expected to be down in high teens to low 20-percent range, vs. unusually strong Q1FY16 Key assumptions • Loss
Slide 17: Medical segment FY17(E)
Medical segment FY17(E) • Mid-single digit percentage increase in revenue vs. prior year • Double-digit segment profit growth vs. prior year Key assumptions • Cordis accretive by >$0.15 vs. prior year; net of transaction-related interest expense of $0.07-$0.08; increasingly accretive thereafter • Ab
Slide 18: FY16 to FY17E non-GAAP EPS bridge
FY16 to FY17E non-GAAP EPS bridge (Items in red reflect mid-point of risk-adjusted range) FY16 non-GAAP EPS1 $5.24 Net customer activity2 ($0.55) Generic programs3 $0.35 Existing (or Remaining) businesses4 $0.47 Capital deployment5 $0.10 FY17 non-GAAP EPS1 midpoint $5.61 1 From continuing operations
Slide 19: Cardinal Health outlook
Cardinal Health outlook FY17 non-GAAP EPS growth contribution Business growth1 ~ 3% - 6% Capital deployment ~ 2% - 3% Total company growth ~ 5% - 9% Multi-year aspirations Non-GAAP EPS growth 10% – 15% Dividend payout2 30% – 35% 1Defined as growth excluding acquisitions and share repurchase 2Defined
Slide 20: Appendix: GAAP to Non-GAAP reconciliation statements
Appendix Q4 FY2016 trailing five quarters, GAAP to Non-GAAP reconciliation statements and supplemental financial information © Copyright 2016, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved
Slide 21: Q4 FY2016 segment analysis
Q4 FY2016 segment analysis Pharmaceutical segment Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Revenue 24,676 25,140 28,287 27,527 28,177 ($M) Segment Profit 535 657 627 660 542 ($M) Medical segment Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Revenue 2,855 2,919 3,162 3,138 3,210 ($M) Segment Profit 103 101
Slide 22: GAAP / Non-GAAP Reconciliation
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation 1 Net Earnings Gross Net Earnings from Margin Operating Provision for from Continuing Diluted Gross Grow th Operating Earnings Earnings 2 Before Incom e Continuing Operations 3 Diluted EPS3 Margin Rate Earnings Grow th Rate Incom
Slide 23: Total Company Business Analysis
Cardinal Health, Inc. and Subsidiaries Total Com pany Business Analysis Non-GAAP Fourth Quarter Fourth Quarter (in millions) 2016 2015 2016 2015 Revenue Amount $ 31,384 $ 27,547 Grow th rate 14 % 20 % Gross m argin Amount1 $ 1,665 $ 1,458 $ 1,614 $ 1,458 Grow th rate 14 % 16 % 11 % 16 % Operating ea
Slide 24: Segment Business Analysis Fourth Quarter
Cardinal Health, Inc. and Subsidiaries Segm ent Business Analysis Fourth Quarter Fourth Quarter (in millions) 2016 2015 (in millions) 2016 2015 Pharm aceutical Medical Revenue Revenue Amount $ 28,177 $ 24,676 Amount $ 3,210 $ 2,855 Grow th rate 14 % 23 % Grow th rate 12 % 2% Segm ent profit Segm ent
Slide 25: Segment Business Analysis Fiscal Year
Cardinal Health, Inc. and Subsidiaries Segm ent Business Analysis Fiscal Year Fiscal Year (in millions) 2016 2015 (in millions) 2016 2015 Pharm aceutical Medical Revenue Revenue Amount $ 109,131 $ 91,116 Amount $ 12,430 $ 11,395 Grow th rate 20 % 14 % Grow th rate 9% 4% Segm ent profit Segm ent prof
Slide 26: GAAP / Non-GAAP Reconciliation Fourth Quarter ROE
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Fourth Quarter (in millions) 2016 2015 GAAP return on equity 20 % 18.7 % Non-GAAP return on equity Net earnings from continuing operations attributable to Cardinal Health, Inc. $ 333 $ 293 LIFO charges/(credits), net of tax (31) -
Slide 27: GAAP / Non-GAAP Reconciliation Fiscal Year ROE
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Fiscal Year (in millions) 2016 2015 GAAP return on equity 21.9 % 19.4 % Non-GAAP return on equity Net earnings from continuing operations attributable to Cardinal Health, Inc. $ 1,427 $ 1,212 Restructuring and employee severance,
Slide 28: GAAP / Non-GAAP Reconciliation effective tax rate
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Fourth Quarter Fiscal Year (in millions) 2016 2015 2016 2015 GAAP effective tax rate 41.8 % 44.1 % 37.1 % 38.4 % Non-GAAP effective tax rate Earnings before income taxes $ 576 $ 523 $ 2,276 $ 1,967 LIFO charges/(credits) (51) - -
Slide 29: Forward Looking non-GAAP Measures
Cardinal Health, Inc. and Subsidiaries Forward Looking non-GAAP Measures In this presentation, the Company presents its outlook for fiscal 2017 non-GAAP EPS and non-GAAP Effective Tax Rate (ETR). The Company does not provide EPS or ETR outlook, which are the most directly comparable GAAP measures to
Slide 30: Definitions
Cardinal Health, Inc. and Subsidiaries Definitions Debt: long-term obligations plus short-term borrow ings. Debt to Total Capital: debt divided by (debt plus total Cardinal Health, Inc. shareholders’ equity). Interest and Other, net: other (income)/expense, net plus interest expense, net. Net Debt: