Cardinal Health, Inc. · NYSE:CAH
Cardinal Health — Q2 FY2018 Earnings Presentation
25 slides from Cardinal Health's earnings presentation, Feb 8, 2018
Slide 1: Q2 FY2018 Earnings Investor/Analyst Call
Q2 FY2018 Cardinal Health, Inc. Earnings Investor/Analyst call February 8, 2018 © Copyright 2018, 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: Q2 FY18 results
Q2 FY18 results © Copyright 2018, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved
Slide 4: Q2 FY18 financial summary
Q2 FY18 financial summary GAAP Basis ($M) Non-GAAP Basis ($M) Q2 FY18 Q2 FY17 Q2 FY18 Q2 FY17 Revenue $35,186 $33,150 N/A N/A % change 6% increase YoY 5% increase YoY Operating Earnings $399 $542 $730 $701 % change 26% decrease YoY 4% decrease YoY 4% increase YoY 4% decrease YoY Ratio to revenue 1.1
Slide 5: Q2 FY18 Pharmaceutical segment business analysis
Q2 FY18 Pharmaceutical segment business analysis Q2 FY18 ($M) Q2 FY17 ($M) YoY Change Revenue $31,146 $29,743 5% Segment Profit $514 $537 (4)% Segment 1.65% 1.81% -16 bps Profit Margin Highlights: • Revenue increase was due to sales growth from pharmaceutical and specialty distribution customers, wh
Slide 6: Q2 FY18 Medical segment business analysis
Q2 FY18 Medical segment business analysis Q2 FY18 ($M) Q2 FY17 ($M) YoY Change Revenue $4,044 $3,410 19% Segment Profit $220 $159 38% Segment 5.43% 4.68% +76 bps Profit Margin Highlights: • Revenue increase was driven by contributions from the acquisition of the Patient Recovery business and, to a l
Slide 7: Q2 FY18 GAAP to non-GAAP adjustments
Q2 FY18 GAAP to non-GAAP adjustments1 Q2 FY 2018 Q2 FY 2017 Gross Operating Net Earnings 2 Gross Operating Net Earnings 2 Diluted EPS 2 Diluted EPS 2 Margin ($M) Earnings ($M) ($M) Margin ($M) Earnings ($M) ($M) GAAP $1,861 $399 $1,053 $3.33 $1,602 $542 $324 $1.02 LIFO charges/(credits) - - - - 9 9
Slide 8: FY2018 Outlook
FY2018 Outlook The company presents its outlook for fiscal 2018 non-GAAP EPS and non-GAAP effective tax rate 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 that the company excludes from G
Slide 9: Non-GAAP EPS impact of tax reform
Non-GAAP EPS impact of tax reform Q2 FY18 FY18 Non-GAAP EPS $1.51 $5.25 - $5.50 Less: Tax benefit from change in U.S. federal rate1 $0.20 $0.40 Non-GAAP EPS excluding the impact of tax reform $1.31 $4.85 - $5.10 1 Reflects the benefit from applying a lower federal tax rate to our U.S. pretax non-GAA
Slide 10: FY18 financial expectations
FY18 financial expectations FY2018 Outlook FY2017 Actual Mid-single digit Revenue percentage growth vs. PY $130.0B Non-GAAP EPS $5.25 to $5.50 $5.40 Red font indicates a change since 11/6/17. 10 © Copyright 2018, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Slide 11: FY18 corporate assumptions
FY18 corporate assumptions FY2018 Outlook FY2017 Actual Non-GAAP effective tax rate 29% - 31%1 32.6%3 Diluted weighted average Shares outstanding 316M - 317M 320M Interest and other, net $340M - $360M $197M Capital expenditures $500M - $540M $387M Acquisition-related intangible amortization $576M or
Slide 12: Pharmaceutical segment FY18(E)
Pharmaceutical segment FY18(E) • Low- to mid-single digit percentage increase in revenue versus prior year • Full-year segment profit down low-double digits versus prior year Key assumptions • Generic drug price assumption of mid-single digit deflation for full fiscal year • Brand drug manufacturer
Slide 13: Medical segment FY18(E)
Medical segment FY18(E) • High-teens percentage increase in revenue versus prior year • Strong double-digit segment profit growth versus prior year Key assumptions • Patient Recovery business acquisition completed in July 2017, accretive to FY18; integrated into Cardinal Health Branded products upon
Slide 14: Appendix: trailing five quarters, GAAP to Non-GAAP reconciliation
Appendix Q2 FY18 trailing five quarters, GAAP to Non-GAAP reconciliation statements and supplemental financial information © Copyright 2018, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved
Slide 15: Q2 FY18 segment analysis
Q2 FY18 segment analysis Pharmaceutical segment Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Revenue 29,743 28,406 29,552 28,920 31,146 ($M) Segment Profit 537 611 505 467 514 ($M) Medical segment Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Revenue 3,410 3,418 3,416 3,724 4,044 ($M) Segment Profit 159 148 13
Slide 16: GAAP / Non-GAAP Reconciliation
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation 1 Gross Provision for/ Margin Operating (Benefit from ) Net Diluted Gross Grow th Operating Earnings Earnings Before Incom e Net Earnings 2 Diluted EPS2 Margin Rate Earnings Grow th Rate Incom e Taxes Taxes Earnings 2 Grow th Rate
Slide 17: GAAP / Non-GAAP Reconciliation
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation 1 Gross Provision for/ Margin Operating (Benefit from ) Net Diluted Gross Grow th Operating Earnings Earnings Before Incom e Net Earnings 2 Diluted EPS2 Margin Rate Earnings Grow th Rate Incom e Taxes Taxes Earnings 2 Grow th Rate
Slide 18: Total Company Information
Cardinal Health, Inc. and Subsidiaries Total Com pany Inform ation Non-GAAP Second Quarter Second Quarter (in millions) 2018 2017 2018 2017 Revenue Amount $ 35,186 $ 33,150 Grow th rate 6% 5% Gross m argin Amount $ 1,861 $ 1,602 $ 1,861 $ 1,611 Grow th rate 16 % (0)% 15 % (2)% Operating earnings Amo
Slide 19: Segment Information
Cardinal Health, Inc. and Subsidiaries Segm ent Inform ation Second Quarter Second Quarter (in millions) 2018 2017 (in millions) 2018 2017 Pharm aceutical Medical Revenue Revenue Amount $ 31,146 $ 29,743 Amount $ 4,044 $ 3,410 Grow th rate 5% 5% Grow th rate 19 % 8% Segm ent profit Segm ent profit A
Slide 20: GAAP / Non-GAAP Reconciliation Second Quarter
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Second Quarter (in millions) 2018 2017 GAAP return on equity 58.9 % 20.2 % Non-GAAP return on equity Net earnings attributable to Cardinal Health, Inc. $ 1,053 $ 324 LIFO charges/(credits), net of tax - 5 Restructuring and employe
Slide 21: GAAP / Non-GAAP Reconciliation Year-to-Date
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Year-to-Date (in millions) 2018 2017 GAAP return on equity 33.1 % 19.6 % Non-GAAP return on equity Net earnings from continuing operations attributable to Cardinal Health, Inc. $ 1,168 $ 633 LIFO charges/(credits), net of tax - 5
Slide 22: GAAP / Non-GAAP Reconciliation Second Quarter
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Second Quarter Fiscal Year (in millions) 2018 2017 2017 GAAP effective tax rate (231.9)% 34.0 % 32.7 % Non-GAAP effective tax rate Earnings before income taxes $ 317 $ 491 $ 1,924 LIFO charges/(credits) - 9 - Restructuring and emp
Slide 23: 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 2018 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 24: Definitions
Cardinal Health, Inc. and Subsidiaries Definitions Debt: long-term obligations plus short-term borrowings. 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: a
Slide 25: Definitions
Cardinal Health, Inc. and Subsidiaries Definitions Non-GAAP Net Earnings attributable to Cardinal Health, Inc. or "Non-GAAP Net Earnings": net earnings attributable to Cardinal Health, Inc. excluding (1) LIFO charges/(credits), (2) restructuring and employee severance, (3) amortization and other acq