Cardinal Health, Inc. (CAH) Earnings Call Transcript & Summary

Good morning. My name is Lisa Gill, and I head health care services here at JPMorgan. It is with great pleasure this morning that we have Cardinal Health. Presenting for Cardinal Health will be CEO, Jason Hollar. Post Jason's presentation, he will join myself and CFO, Aaron Alt, for some questions. With that, let me turn it over to Jason.

Great. Thank you, Lisa. Thanks for having us, and thank you all for coming. Real quick housekeeping. We'll be making some forward-looking statements today, which are subject to risks and uncertainties. For a description of these, please refer to our second slide or our SEC filings. So today, I'll be talking about the continuation of our multiyear growth journey. And I think that's the perfect way to sum up what you're going to hear today, consistent with our press release this morning. You're going to hear about very clear operational, financial and strategic progress that we've made over the last really now several years. I'll go into each of these topics in more detail. But at the highest levels, we're going to talk about financial improvements that we see in fiscal '26, the short-term progress we're making. EPS now expected to be at least $10 per share, in part driven by broad-based growth in the marketplace, but also the strategies that we're driving within our specialty business, giving you some proof points on that business as well as a little bit of business resiliency, business model resiliency and going a little bit deeper into some of the work that's been completed as it relates to the more recent IRA price changes. And then we'll also give you a few strategic proof points, one of which is related to how we're working together between our pharmacy business, our Pharmaceutical Distribution, Pharmaceutical and Specialty Distribution business, but also the other growth businesses, in particular, the at-Home Solutions business. When you think about the continuation of this journey, you certainly should start with the facts and the data. We've focused on the core, driven a lot of strategic growth on top of that strong foundation, giving us nice strong core operating earnings growth of 14% CAGR over the last several years. That's translated into EPS of 18%. And we've also kept a close watch and driving the cash flow, so adjusted free cash flow averaging over $3 billion. That certainly translated into strong equity returns. And again, as we're demonstrating and communicating today, the momentum continues with our team. Real quick on who we are. I suspect you have a good idea. We won't spend a lot of time on this. We are health care's crucial link. You can think about us as the backbone of the industry. In some cases, we are the manufactured innovator, but often we're working with others. We work with literally thousands of different innovators, thousands of different manufacturers, thousands of different receipt points. And then we translate that in own, take the risk on, warehouse, distribute to tens of thousands of different customers throughout the country. More and more, that's the foundation of our business, the distribution being the foundation of the business, and we build higher value-add services, higher value add for us, but also for our patients and customers. We're big and getting bigger, over $250 billion in revenue expected for this year. We are very U.S.-centric. This is intentional since I've arrived at the company several years ago, 5 years ago, we have reduced by more than 50% the number of countries in which we operate. We simplified the organization. We're prioritizing in the markets, the customers, the products that matter most for us, and that's getting us to more than 99% of our revenue being in the United States. Not only do we have strong consistent earnings and earnings growth, but we are translating that into significant cash flow, adjusted free cash flow conversion of over 150% over the last 3 years. Of course, our largest most significant business is our Pharmaceutical and Specialty Solutions business. Over 90% of the revenue, nearly 80% of the profit. But more and more, this is being aided by the growth of our small but mighty other business of at-Home Solutions, Nuclear and OptiFreight. I'll say only 3% of our revenue, 3% on a company of this size is $7 billion of revenue. So when you think about high-margin, high-growth business, it hits above its body weight, no doubt, giving us nearly 20% operating earnings segment profit percent for the enterprise. GMPD continues to be our transformation business, stable at roughly mid-single-digit revenue as well as profit. But again, the biggest part of our business is our Pharma and Specialty Solutions business. We think about that as a center of everything that we do. The 3 growth businesses of Nuclear, at-Home and OptiFreight do provide interesting strategic touch points into our Pharma business. GMPD does to a little bit lesser extent. GMPD, of course, being the turnaround. More of our investments are going to the other growth businesses as well as our Pharma and Specialty business. I love the Healthcare Industry. I imagine that unless you're here because you were told to become here by your manager that you have an interest in this industry as well. Many of the items you see on this slide are not unique to just us in the industry, but the broad benefits of our industry. When you think about utilization, that's very much the lifeblood of our business. We need that volume to continue to reduce our unit cost to continue to get better, to continue to grow the business. And when you think about demographics, it's really just math. For the last 30 years or so has been a consistent increase in the number of Americans that are over the age of 65. Why that's always seen as the bright line in utilization is really quite simple. If you're over the age of 65, you have an over 50% chance that you're taking 4 or more pharmaceutical products. If you're under 50, you only have a 10% chance that you're taking 4 or more products. So think about it as a 5x factor if you're over 65 versus under 50. Well, the math is quite simple. There will be more Americans over age of 65 each and every year for the next 30-plus years, 50% more by the time we get to 2060 from where we are today. That's just a fantastic rising tide of opportunity that doesn't even start talking about innovation and solving more of those patients' problems over time. So those are the strong foundational elements of our industry. But then what you've seen with Cardinal Health is that we continue to invest in the faster-growing secular trends in the market place. So we benefit from the broad growth, but we try to benefit even more by focusing on those areas that are growing faster, whether it's Precision Health with nuclear or as we listed here, the site of care shift where we've made more of our inorganic investments, our at-Home business, taking care of patients in their home. That's where they want to have care or near their home with their specialty community physicians. And of course, that's the cornerstone of our specialty and MSO strategy. So we'll continue to organically and inorganically invest into those shifting trends in the marketplace. And while that's great for our business, what's fantastic about this strategy is it also is solving more of the patients' needs and giving them service and care where they wish to receive it. Of course, technology is the baseline of everything that we're doing here. We use technology not only to deliver improved service levels, lower cost, but also to create businesses and higher margin, higher growth type of service businesses. We have a lot of confidence in the resiliency of our business model. We have an announcement on that today as well. Beyond all the facts that I just stated before around the growth in our industry, there's also the resiliency of the industry, the consistent growth that we've seen. Think about some of the more recent types of shocks that industry overall has experienced, whether it was the pandemic or the Great Recession in 2008, 2009. In all these cases, you saw very short-term blips in terms of utilization in the health care pharmaceutical industry. And we would anticipate that under any normal types of situations or even abnormal ones like those big events, we saw very short-term types of trend changes. But we don't just stop there and coast on the industry. We're always making ourselves better because we want to ensure that not only are we building a strong successful business, but we're protecting that and making sure that our customers don't have any better alternative than to work with us. So that's why we're always investing into our capabilities. why we're always looking for broader, deeper relationships with our customers. It's a good place to remind you that we do have 1% margins, and I don't know too many companies out there that are really wanting to come after us for our 1%. And we have always looking for ways to further expand that and to use that 1% base as a way to grow more profitably into other areas. And we have a lot of proof points that this model is resilient and adaptable, whether it's the original fee-for-service migration a couple of decades ago or the more recent insulin price changes or today's announcement that we have now concluded successfully the negotiation on prices related to the IRA items for 2026. Of course, one of the key updates today is the continued momentum as it relates to our earnings, at least $10 EPS per share, broad-based. We're highlighting the strength and growth across the enterprise. But of course, given the size, significance, importance of our pharma business, you can be assured that, that business continues to be a key contributor of the success that we've had to date and anticipate for the balance of the year. Strategic priorities have remained relatively unchanged over the last several years. The one tweak that we had recently in the last year is just the order of #2 and #3. What has not changed is our focus on the Pharma and Specialty Solutions business and our intense focus on investing into organically and inorganically the Specialty business. It's the largest, fastest-growing part of the marketplace, and we are not only relevant, but we are increasingly leading in many different therapeutic areas. The tweak is providing the other businesses of Nuclear, at-Home and OptiFreight in their rifle position as a higher priority in this company. Again, secular trends, the right to win, leadership positions, and we're investing more heavily into those businesses and expecting more from them in terms of their higher growth rates well into the future. With that said, there's still a lot of opportunity to continue to create value with GMPD. Remember, this is a business that had significant losses just several years ago. And we not only turned that around, but we made them solidly profitable, positive free cash flow and still opportunity in front of us. A key component of the earnings growth that we're seeing this year and a part of our long-term plans, of course, is specialty. Pleased to give you the data point today that we're now expecting over $50 billion in revenue in fiscal '26, which gives you about a 16% CAGR over the last 3 years. Our priorities and where we're focused within specialty remain the same. We have capabilities across the therapeutic areas, especially within the MSOs. We're more focused on autoimmune, urology and oncology, about 3,000 providers and really leveraging the specialty alliance leading multi-specialty platform. You're going to hear a little more about our BioPharma Solutions business, over 30% growth we anticipate in fiscal '26 and making a lot of investments and benefiting from that growth within that business. The specialty strategy that we have is very much focused on the customer, truly putting the customer in the middle of everything that we're doing. They have a wide range of needs. It's not just distribution. It's not just MSO support. It's also data and technology. We are very deliberate in looking at their needs, allowing them to stay focused on taking care of the patient, clinical outcomes and let us manage as many aspects of the business as they're willing to provide. That's what we do better than anyone, better than they can, and we want to partner with them so that they can do what they want to do and what they can provide -- where they can provide most value for their customers. Our priorities within the 3 specialty areas that are listed here, autoimmune, urology and oncology have various reasons why we're focused on each of the different areas. Obviously, oncology is growing quickly. We are relevant there with our Navista business and the acquisition about a year ago now in ION, with ION, continue to invest into that platform in that space. We have prioritized and are investing more into the multi-specialty, the other 60% of the specialty market. Autoimmune and neurology have a lot of similar characteristics. So while they are depicted here separately, while we work independently with the different physicians, we have very similar back office, very similar even clinical types of processes like the path labs or infusions, things of that nature. And you can see there's a very similar revenue profile. While drug infusion is a relevant part of their P&L and their revenue, what we like about it as well is it's a very diverse set of financials, sharing with other revenue drivers such as office visits, procedures, things of that nature. What we also like about autoimmune and urology is the fact that it's an incredibly fragmented space. Oncology has matured quite a bit. It has consolidated. The other areas remain quite fragmented. Roughly 80% to 90% of all physicians in those other areas remain unaffiliated with an MSO, a great white space opportunity for us, especially given we're the leader in both of those areas and gives us a lot of opportunity. That today is about a $4.5 billion business when you look at these MSOs in aggregate. And like I said, significant growth opportunities in front of us. Another example of some small but mighty parts of our business is our BioPharma Solutions business. We have a set of plans and actions to achieve $1 billion in revenue by fiscal '28. That would give us about a 20% CAGR. Really pleased to announce today some more recent contract wins that we've had in this space. To step back, we invested heavily in this business over the last several years in our next-generation hub to ensure that we had a much more seamless, efficient platform for our customers and ultimately to take care of patients. That's been well received in the marketplace, and we're really excited to talk about the biggest program in the industry, the Sanofi and Regeneron DUPIXENT MyWay patient support program. That came underneath our Sonexus umbrella earlier this year in the fall. And we also had several other significant wins in the oncology space. So it's a part of the business that is growing quickly in combination with our 3PL that gives us the confidence that we'll grow our revenue in this business by 30% this year and the CAGR of 20% over the next several years. And we see additional opportunities as we look at, again, the Pharma and Specialty Solutions business being at the center of everything we're doing, the other growth businesses have a lot of interesting connection points across the enterprise. One in particular that we're stressing and going a little bit deeper on today is the continued care pathway program. That's a program of a collaboration between our at-Home Solutions business and our Pharma segment. Think about it this way, our large pharmacy customers, they are taking care of a lot of customers' needs, a lot of different payer sets, a lot of different products. Some such as Medicare Part B related to diabetes and CGM is something that they often don't have the ability to fill efficiently. And so we can partner with them and basically take on that referral on their behalf. And when you think about the relationships that we have and the work that we do to be their trusted partner in the distribution side of the business, it has created a lot of opportunities. One that we're really excited about is the recent addition of Publix. This is a business that we just took under our distribution umbrella in the last year. And now we already have an agreement with them to expand into this program for the at-Home Solutions side, so we can take care of their Part B customers and do so in a way that allows them to maintain that relationship. They're not having to give up that patient to another provider in a way that creates a break in their relationship. Another area that more generally, we see a lot of opportunities in urology. Think about all the areas of our business that we are the clear leader in urology. Not only our GPO and distribution, but we are clearly the largest best position MSO. We have the clear lead as it relates to providing urology supplies to the home through our at-Home Solutions business. And we're certainly the lead as it relates to our Nuclear radiopharmaceutical business, not only with the ability to manufacture but also to dispense patient-ready doses to the health systems and community physicians. Going deeper into that nuclear opportunity, this is similar to what we talked about at our Investor Day in June. Both urology and oncology were key -- are key drivers of our current performance. The top growth drivers that we're seeing today in urology, specifically, the growth that you're all seeing more broadly in the industry in products like Pluvicto and Illuccix are products that we dispense on behalf of those manufacturers throughout our 130 pharmacies throughout the United States. And when you look at the next wave, we are highly confident that these products will continue to solve patients' needs and challenges. And when you look at the pipeline, it's significantly overweighted to both urology and oncology, which have interesting connections back to our MSOs. Think about those physicians and those MSOs. They have an in-house expert in the form of radio nuclear radiopharmaceutical products. One thing that you're not going to hear too much from Aaron or I today is any changes to our very disciplined capital allocation framework. It is consistent with what we said before, we continue to prioritize, have table stakes as it relates to driving organic growth, returning a baseline level of capital to our shareholders. We believe every year, they should receive both dividends and some level of share repurchases and to do that while maintaining our investment-grade balance sheet. As I referenced before, given our strong expectations for free cash flow generation over the next several years, we'd anticipate there to be some opportunity for additional capital to be either sent back in the form of additional share repurchases or additional M&A, which we've demonstrated more recently has been quite successful. So we feel great about the setup here. We have our consistent track record, the announcements today giving you both financial and operational progress updates. But as important to that, we're making clear progress on our strategic initiatives, feel really great about the updates there as well and have a clear path in front of us to achieve our 12% to 14% EPS CAGR. And with that, Lisa, we'll turn it over to you, and I'm sure you have some follow-ups.

Great. Thank you so much for all the comments. The first follow-up would be the disclosure that you had today around black pricing. And I think there was a lot of concern in the marketplace of what this would mean to the business model as we saw those changes come about. Can you talk about it from a contractual standpoint? Is this simply you go back to the manufacturer? Did you already have something contractually? I remember back, insulin was a good example back a few years ago. But just if you can help investors understand how to think about this.

Sure. Yes. It's -- we definitely have the contractual ability to go renegotiate prices for changes that are significant like that. So that is a clear part of the majority of our contracts, and that's the type of clause that you utilize to have those discussions. It also just makes sense, right? If you think about it, some of these WAC reductions are 50%. We're paid for a fee-for-service. The value we provide is not going to be dependent upon that price level, especially when the customer, in this case, the manufacturer, they can choose what that level of price is. So we don't have control over that. So we should continue to be compensated in the same economics we had before. And that's our expectation, and that's what we concluded not just with the IRA items. It's just like what we did with insulin, and we have a lot of confidence in the resiliency of that model.

If I go back to the most recent quarter, you had incredible strength in pharmaceutical distribution and accelerated growth sequentially versus normally what we see seasonality wise. Is there anything you'd like to highlight changing in the second half from a cadence perspective versus the first half as we thought about '25. Some people think that perhaps it was Part D and an acceleration in Part D as we go into the back half of the year. CVS, a large customer of yours, bought Bartell's in the Pacific Northwest. They've also gained a lot of share in the last several quarters. Are there anything specific that you would call out as to what was really driving that?

I know that you're looking for the easy single item. In fact, what gives us a lot -- I'm much more pleased that it's not a single driver. It really is broad-based throughout our book of business. Yes, the big customers are performing well. They're growing nicely. But really all categories of products, all categories of customers are benefiting from the utilization that I just described. There are some first half, second half dynamics. I wouldn't call it a change in trend. It's -- when you do the year-over-year comps, though, we did have a fairly large set of new customer wins midyear in 2025 that then anniversaries itself by midyear of this year. So we see that growth, we would expect to be still strong and stable, but not as much from a year-over-year perspective. And we have also the M&A that was completed more over the course of '24 and '25 that while we did the Solaris deal that closed in November, that's the only big one that's been in fiscal -- in the last 12 months that will start to anniversary itself come the second half of the year as well. But in terms of the essence of your question, the core utilization strength and growth we see, it's across brand, specialty, generics, biosimilars, you name it. There's strength across the enterprise. And the industry for the reasons I highlighted before, whether it's demographics or innovation, continues to be robust.

We touched on WAC pricing and IRA pricing. There are also, though, CMMI doing some demos in the market today that could have some impact on Part B, which could have an impact on the Specialty business. Can you spend a few minutes just talking about things that you're looking out for and potential changes that can come about?

Yes. Everything I said about pricing is really focused on the core distribution part of our business. And so when you get into some of the other models, some of the other areas, there could be some impact on MSOs because their pricing is not fee-for-service, it's more of a spread. So while that exists and there's -- we need to know a lot more before we say there is any impact. But even if there is an impact there, just go back and remind yourself of it's roughly 1/3 of our MSO revenue is tied to drug infusion. And so it's a relatively small percent of our business. And when you look at the therapeutic areas that were largest and strongest areas like GI, like urology, those tend to be more overweighted towards commercial payers. So you have a relatively small percent of the book of business being tied to that and a relatively small payer set there, too. So we think that's going to be quite manageable for a business of ours. But those are all things that not only are we tracking closely, we're doing our best to advocate for community physicians. We don't think the administration's intent is to go after those physicians that are already the lowest cost providers in the chain, and they're where patients want to have their care administered. So we think that there's some opportunity for that to be mitigated anyways. But even if it doesn't, it's something we think is quite manageable for our business.

And we hosted a panel this morning with some DC experts who similar to what you just said, feel like there is bipartisan support to really support the community-based physicians because the cost in the hospital, as you well know, is 3x what it is for an outpatient setting. And the -- when you think about the rate of infection, et cetera, I know you do a lot in that area as well, is 50% higher. So when you think about where this ultimately should go, sometimes there are unintended consequences in what they're trying to do, but they ultimately feel it will get fixed.

That's right. So there's a lot of ifs within that. There's also the if perhaps that's good for our business, right? Because if logic prevails in all of that, then perhaps more care will go to the community physicians, and that would be good for our business. So we're not able to anticipate precisely where that's going to go.

I don't think anybody else?

No. And you shouldn't believe me if I told you I could. But our job is to prepare for all these potential elements. We've been intentional with every one of these acquisitions and where we're investing, modeling through all these scenarios. And we can't be entirely risk averse or we'll never do anything. So we have to balance all that. But we feel really good about where we position the business to benefit in certain scenarios where we'll probably have some puts and takes. But, again, back to the resiliency, what we do, how we deliver products, the margin we earn, but compare the margin we earn versus the value we create, we feel really good about the equation. And of anyone in the health care supply chain, I would rather be this model than any others. I think it's the most resilient.

Aaron, when we were at your Analyst Day back a little more than 1.5 years ago now, June or so, we talked about generics and we talked about stability of generics in the marketplace. And it feels like that has held. Can you maybe just talk about what you're seeing in the marketplace around generic pricing and the stability?

Well, our guide, indeed, what we're experiencing in the marketplace is consistent market dynamics, which for us, if you hear us use those words, that the business is chugging along as we would expect it to do. We manage to the same margin -- average margin per unit, if you will. And the real magic for us is when volume is rising, right? And so in the face of strong demand, which we've seen across the portfolio, certainly, that's been a positive for us as we push ahead. We did highlight that, of course, there's a strong LOE coming down the pike. There's more in the next 5 years than there has been in the last 5 years. So that is a positive for our portfolio overall, and we're looking forward to that. On the other side of the equation, of course, we can't ignore the branded part of the portfolio, not as profitable for us. And we are at that time of year when manufacturers are taking their price increases. And so from an inflation perspective, what we can report is what we're seeing is about what we expected to see at this time of year, and we were expecting for this year about what we've seen the last couple of years.

Kind of mid-single digits?

Yes. So there's no real news in that respect for us.

When I go back and I think about generics, you have a long-standing relationship with CVS with Red Oak. And you talked about the number of incremental generics that are going to come down the pipeline in the next several years. Do you see incremental opportunities there?

Well, we are really pleased with Red Oak's performance. For those of you that don't know our story as well, we do have a partnership with CVS, which means that together with CVS, Cardinal has best access and best price really across the generic portfolio. And we are in constant communication with the Red Oak team about how do we do more? How do we continue to take advantage for our customers, both on the first access, particularly in the case of shortage, but also best cost.

I'm going to shift gears for a minute and talk a little bit about some of your newer initiatives, which would be around your MSO. When we -- within your MSO business, you benefit from several drivers, increased utilization, GPO activity, data, other services that you provide. Can you maybe just spend a minute talking about the key drivers of growth and where you see the most opportunity from a margin perspective?

Yes. It's another less than satisfying answer because there's not going to be just any 1 or 2 items. It's the fact that we have across several 3 key therapeutic areas. So we expect all those areas to grow nicely. Really, there's not any part of specialty that we see as a soft spot. We think the overall growth is going to be quite robust. We -- our long-term plans assume about 10% type of industry growth there, and we believe we can at least hold our own there. We're investing into areas like BioPharma Solutions. We're investing into, of course, the actual MSO capabilities as well. And we think there's opportunity for their version of organic growth, whether it's growing the profitability within the MSOs, but there is still also M&A opportunity. We were very clear and have been very clear that we're prioritizing the M&A into those areas. We're not looking to expand significantly at this point in time. And we've made some bigger acquisitions to create the platforms, but now we're really focused on creating more value within that. And the broad-based nature of that gives us confidence that whether the models change and all that, that we're going to continue to build to grow the business.

And so when I think about it from an M&A perspective, maybe you can answer this, Aaron, is are we thinking about you acquiring the physicians? Do you need to acquire incremental capabilities within the specialties?

Yes. Well, look, we're really excited. At this point, just after 2 years of working on the M&A, we've got almost 3,000 providers in 32 states. And our playbook is exactly what we've said is which we've now created the industry-leading platform in gastroenterology, the industry-leading platform in urology coming together as the specialty alliance. And the powerful element of that is that we can drive growth and synergies within the specialty alliance across gastro, across urology, but also now into other therapy areas as well. And if you think about Jason's comments earlier about the practice of medicine, the doctors don't want to do the business part of it. They want to practice medicine where Cardinal can bring capabilities is we can bring technology, right? We can bring how to manage the back office. We can bring capabilities around RCM, specialty pharmacy, anesthesia, infusion. These are all things that we can support the effort. And so the growth for us will come both from the recruitment of additional providers organically and in the form of additional tuck-in acquisitions that make sense. And then as we look at broader therapy areas, where this may go. So we see a lot of opportunity to grow the specialty presence.

That makes a lot of sense. When we think about growth in overall pharma, we can't have a discussion without talking about GLP-1s, which has been a big growth area. You have talked about the margin profile because of the refrigeration needed, the special handling needed. There is an anticipation that we'll see an oral GLP-1 come to the market in 2026. How do we think about that ramping in the next few years? And how do we think about that changing that -- again, the margin profile?

Yes. At the end of the day, it is a large branded product, and so it carries with it a relatively low margin profile. When you think about the logistics and the cost behind supporting a product like that, we do prefer those types of oral solids versus injectables. Injectables not only carry with the requirement to, of course, refrigerate, but it's also bulkier to handle and to ship. So we would expect there to be similar economics, but with some cost advantages. I just don't think -- and there's a lot of questions open still around cannibalization versus true incremental growth and things of that nature. We certainly don't anticipate there to be any significant change in economics in the short term. It's not a part of our guidance. It's not what we would anticipate. Longer term, we do like innovation, right? It helps make us better, helps bring down our overall unit costs, absorb some fixed costs. I suspect you're going to see other initiatives driving profitability much greater than anything here. But at the same time, we see it as just one more example of the benefits of utilization and innovation throughout the industry.

I want to spend a few minutes talking about an area that we don't talk about very often because it is only 3% of your revenue, and that's other. And we think about the 3 businesses within other, right, OptiFreight, nuclear at-Home. Can you maybe just spend a few minutes talking about the dynamics of where the growth is coming from, the competitive marketplace and the future opportunities that you see?

Yes. They have very similar profiles. They all have the different secular trends that they're benefiting from. They all have different specific strategic initiatives that we've invested into. And yet we're seeing strong growth across each of them. In terms of size, the size of the business, you can all see that through the SEC filings, but they're all relevant in terms of the profitability that they contribute to the other segment. But we have strong confidence that we're going to continue to lead, and that's the component we lead in each of these 3 areas, which is why we created the business as we are, even though it's all consolidated into one segment, that's not how we manage it. These are 3 separate businesses, 5, if you include the other 2 segments that all have leaders, presidents that report directly to me so that we can allocate capital, we can move at speed, and we can give them the accountability, the financial incentives and all those things to make sure they're just driving the heck out of those businesses. So there are very different parts of the industry, which is why I wanted to pull them out of the bigger segments is because you tend to kind of average things out if you have it under one leader. These are all businesses that need to be managed independently from one another, very different customers, very different growth vectors, but a lot of strategic ability to benefit our large central pharma segment. So important to keep it within the enterprise, but not something that we wanted to actually be a part of the other -- the bigger segments.

Jason, there's been talk for a long time about shift in patient care to the home. and getting people out of the hospital, et cetera. The path has taken much longer than anticipated, but yet you continue to see growth in that business. What are some of the bigger opportunities you see?

Yes. We've seen very consistent growth. And when you think about the types of products that we're prioritizing, those have been part of the market that's been growing quickly, like diabetes, right? So while there may not be the same growth across the industry, it is absolutely hitting a bit of the sweet spot of where we're at. We benefited more than the industry in terms of the overall growth, especially within our distribution side. When you think about the investments that we've made in our distribution centers, they are the best in the industry. We have 11 DCs throughout the country. We can get to our customers and our patients in a day or 2. We have 3 of those 11 are already new and in service with latest state-of-the-art technology and automation. We have 3 more coming over the next 3 years that will have the same type of technology. So we're going to have a highly capacitized, efficient network that is the best at serving those customers and those patients. So we are the partner of choice with other DMEs. And that will -- that has been a secret to our success here for the last several years and will be a component going forward. As it relates to where we're the provider, the acquisition of ADS has been a huge shot in the arm. When you think about -- they are the best at customer acquisition and retention. They have great processes. We were fantastic at the operational end. Bringing together the best of the best has been a great solution there. And we think we're well positioned to continue to lead in the industry.

It's become a smaller part of your business, which is the medical supply side, GMPD. As I think about that business going forward, you put in this category of a turnaround. And I noticed when you had the chart around talking about making investments that there's maybe less investments in this business. So are you where you need to be to get the business turned around? And how do I think about the fit within Cardinal for that business going forward?

So let me be really clear on what that message is supposed to be there. We are making huge investments into the infrastructure of GMPD, and we have made huge investments. It is a big component of our capital spending. So this is a business that we have invested in to improve performance, to improve service levels. We are at all-time highs as it relates to our service and delivery metrics and KPIs. So this is a business that has benefited greatly and continues to benefit with those investments. So we're not starving the business by any means. We're continuing to invest into it. The investments that I think you're referring to are more of the M&A and those strategic growth investments. It's not a space that we prioritize for M&A. We've been very clear on that. Highest priority is Specialty, then it's the other growth businesses, namely at-Home has had the most opportunity. GMPD is getting their fair share of the organic investments. It's a business that has a great deal of opportunity to create value. There are connections into the rest of the enterprise, less so than what we see with the other businesses. So we see less strategic connection, but there are strategic connections. And importantly, we're staying focused on the primary objective, which is to continue to turn around the business to continue to be closer and closer into best-in-class for all the KPIs. And we think there's still a lot of opportunity there.

And just to add to that, the benefit of the investment profile that Jason has called out is if you look back a couple of years, this business -- the GMPD business has gone from negative profit, negative cash flow to positive cash flow, and that's because we continue to do exactly what we said we would. We have the turnaround plan. We have the GMPD improvement plan, really improving the customer experience, improving our supply chain offering as well. And we're just going to keep going after that business just like that.

In the last minute or so, Jason made a comment that your capital deployment strategy hasn't really changed. You've done a number of M&A in the last year. How do I think about M&A going forward? Do you see a lot of opportunities, Aaron?

Well, we are going to remain disciplined on our capital allocation, right? If we can invest the dollar organically, we would rather do that. We're going to protect our balance sheet as we have. We're going to return capital as we've committed we would. And then we have the bucket of money, which is we will look to see if there are additional opportunities in the marketplace to support our strategic plan from an M&A perspective. And our focus continues to be in the specialty part of the portfolio, right, and in the other businesses. But leaning in, given the number of deals we've done, we're very focused on integration of the assets we've already acquired. And we'll do some tuck-in acquisitions, right? We have flexibility. We do a -- we can do a high ROI investment if one comes down the pipe that we like. But our focus is on integrating that, which we've acquired and continue to support the platforms through the tuck-in acquisitions.

Great. In our last 30 seconds, anything that I didn't touch today? You want to make sure that investors know about Cardinal Health?

I think we covered it all, but I appreciate the opportunity to summarize. Really pleased with the financial performance today that we're announcing, continued momentum that we're seeing in the business, not only in what we -- early stages of closing the books for Q2, but we've seen enough to believe that there's momentum for the rest of the fiscal year as well. So pleased with that as well as the strategic updates we provided today, demonstrating both the resiliency in the core of the business, but also the really interesting and exciting growth opportunity still in front of us.

Great. With that, thanks very much for joining us. Thank you.

Thank you.