Cencora, Inc. (COR) Earnings Call Transcript & Summary

Good morning. Thank you for coming today to AmerisourceBergen's Investor Day. With us in the audience, we have members of the Board, members of the management team. We're very excited to host an Investor Day, which we have not done in a number of years. In this presentation, you will hear -- you'll hear a lot about the company. You can see our -- you'll hear about our purpose. You'll hear about our strategy, you'll hear about our business. In the presentation, you'll hear how we see ourselves today, the opportunities we see for tomorrow and how we are strategically, operationally and financially positioned to capitalize on our strengths as a purpose-driven organization. And today, we will show you how we are building on our leadership in global health care solutions to create healthier futures around the world. Please take note of our cautionary note. Today, you'll hear from Steve Collis, Chairman, President and CEO, who will talk about our purpose strategy and vision; Bob Mauch, EVP Group President, who will speak about our strategic imperatives and how we are position to deliver on that vision; EVP and CFO, Jim Cleary, will talk about how we're building on our strong financial position to drive sustainable growth and create significant shareholder value; and finally, Susan Lorenz-Fisher, SVP of Corporate Responsibility and Sustainability, will talk about our purpose and our ESG commitments and ESG strategy. Finally, at the end of the day, we will have a Q&A session with Steve Collis, Bob Mauch and Jim Cleary. And now I will turn the call -- I will turn the presentation over to video. And Steve Collis will join us right after that. [Presentation]

Good morning, everybody. It's been a couple of years since we did one. I think it was 2013 -- so that's a long time. And we've been working hard to put on a good show for you. What does that mean? It means please listen to the content. And I know all of us aren't used to being in long in-person meetings, but we really appreciate it. The team has worked very hard, and we couldn't be more proud to be here in New York. We had a wonderful experience last year ringing the bell on our 20-year anniversary, and it's good to be back, and that was a spectacular day and we hope today is also going to be a spectacular day. We also -- because we haven't had an Investor Day for a couple of years, we're tremendously excited to be able to share with you the progress that we made at AmerisourceBergen, how we feel we've built the enterprise, how we've deployed capital and that's -- it's a great privilege for us to be able to do that in person. I think post -- in this new phase we're in, post the pandemic, I guess, we are sort of post the pandemic, it is -- I think we just all appreciate the time that we get to have in person with you. So I get to work with this executive management team every day. In putting this slide together, I realized one of the ways you can become an executive management officer at AmerisourceBergen is to have your last name begin with a C. 4 out of the 7 are beginning with C. We also -- I'm very proud to work with -- let me start with Silvana, who is our Head of Human Resources. Silvana comes to us from Merck and Aramark. She's had an extensive background in human resources, and she's really has a vision for our global talent to build it up and it's really a privilege to work with her every day. In September 1 last year, the legendary John Chu announced his retirement and was succeeded by protege of his, Elizabeth Campbell. Elizabeth had worked with John for so long. And it's a great example of internal succession planning, and we just are thrilled to have Elizabeth take over as our General Counsel, actually, the third General Counsel of AmerisourceBergen's history, so wonderful. Gina Clark gets to wear many exciting and diverse hats at AmerisourceBergen. In fact, she's in charge of our diversity inclusion program and also works very closely with Susan Lorenz-Fisher who you'll be hearing today on our sustainability efforts. Leslie Donato has done an incredible job. She's a new recruit into AmerisourceBergen started before the pandemic and came from an oncology background with Bayer and before that with McKinsey. Leslie is doing a great job. We're going to talk a lot today about innovation and Leslie heads up, for example, our venture capital fund, but she also really is helping institutionalize innovation in AmerisourceBergen and help us measure it. I would be remiss if I didn't mention 2 other important members of the team, I hope you're okay with me calling you part of the team. Firstly, our lead Director, Dr. Jane Henney, who was FDA Commissioner in the Clinton administration, and has done a wonderful job, was the first director recruited into AmerisourceBergen post the merger, and we have had a wonderful relationship with Jane and she's added a lot to the company. Also Henry McGee, who heads up our Governance and Nominating Committee. Henry is currently working at Harvard but has a background in, actually the entertainment and distribution industry, so he's been a great board member as well. And we so much appreciate them spending their time with you, and that's really wonderful. The 2 gentlemen that you're going to be most interested in hearing from, of course, is Bob Mauch, who is our Group President. Bob joined us through the founding of Xcenda, which we acquired 15 years ago, and he's had numerous positions at AmerisourceBergen, but he's going to give you, I think, a wealth of knowledge and examples during his talk today. And in the star of our show today, I know you all can't wait for Jim Cleary's presentation, but you have to get through myself first before you get to hear Jim's numbers. So -- and most importantly, and we mean this literally, we take our talent and our culture very seriously. I hope if my presentation can persuade you about anything on that -- about that today, we are supported and really followed and partnered by 42,000 team members across AmerisourceBergen. We added 20,000 team members during the pandemic through our acquisition of Alliance. We're going to talk about that today. But together, we are all driven by our purpose of being united in our responsibility to create healthier futures. And that has really been a very galvanizing and unifying purpose statement that has led to sustainable growth, motivation and guidance for all of our 42,000 team members. So a little bit about AmerisourceBergen. Yesterday, I was talking about us being a Fortune 8 company. So apparently, I learned recently that we slipped to 10, still a very esteemed place to be. We're #10 on the Fortune 500 list. Many times, that's what people know us best for on to the company with the giant revenues. And we are, we have about -- in our last fiscal year, we had $214 billion in revenue. We have 600 global offices. One of our most progressive and interesting and differentiated businesses is World Courier. So World Courier has got so many global offices as they literally help manufacturers find the right type of patients in a global setting. And it's been an incredibly difficult but rewarding business to run during the pandemic due to flight restrictions. So often, we are shipping temperature control products, that's cell and gene therapy products. So World Courier has done a terrific job during the pandemic and has actually given us, in a way, the industrial fortitude, the sort of expertise that allowed us to do the Alliance acquisition. We really had very little global experience before we acquired World Courier in 2013, and it's been a wonderful addition to the AmerisourceBergen family. So let's just talk -- of course, we know the people in front of us in the room know our company so well. Many of you have been sell-side analysts and followers of us for many years. We also have a lot of people on the phone. So the more I see this slide, and I really just love it because you do have the wholesaler in the middle. And I used to think that, that middle man role was somewhat degrading, derogatory, what's the middleman? But then you have a business like AmerisourceBergen has where we are giving access and distributing life-changing products, life sustaining products, and we deal with some of the most coveted customers in health care around the world, both on the provider side and the manufacturer side. And then you look at the opportunity that, that gives you with your distribution foundation and your access to provide complementary solutions. This enables us to create a higher degree of impact because of the breadth and depth of our portfolio of solutions. At any one time, we are managing about over $30 billion in receivables and inventory, and we have close to $50 billion in payables to manufacturers. And that financial fortitude that we have, the strong balance sheet we have, the strong role we have in financing, really leads us to have so many different opportunities. Bob is going to take you through some very tangible examples, whether we're talking about our clinical trial Navigator, our access to digital consultation for vets, value-based care strategies. We will give you lots of great examples of how AmerisourceBergen is tangibly and productively deploying real solutions for our customers. We also have extensive knowledge of our regulatory and legislative support and environment. One of the things that's been so interesting about Alliance for our management team is to learn about all the new health care systems, whether it's in France or Spain or Turkey, how does the health care and how does the pharmaceutical industry work in those countries and how do we best participate in it. I'm very convinced that our expertise and knowledge and the way that AmerisourceBergen has developed a culture of sharing knowledge and of taking best practices and deploying them where those opportunities present themselves will make this a very good acquisition for AmerisourceBergen in the long term. And we've proven this, for example, with MWI and our Good Neighbor Pharmacy. You wouldn't think that perhaps not that there's much synergy between community pharmacists and community veterinarians, but we've learned a lot about business coaching, best practices, e-commerce from one another creating a network. And those are the sort of examples that we believe we'll be able to share in a global platform. So I really like this slide a lot. When we were rehearsing, we told you we're a very close team, our Head of HR, challenged me and said, Steve, you're not talking enough about our people. I want our people to be front and center. So I said, well, find me a slide that embodies it. And this is a terrific slide which talks about what we look for in an associate at AmerisourceBergen. We've been busy, as you know, so we've been doing quite a lot of interviews, bringing some new people in, interviewing people for positions internally. And I so often get asked the question what makes someone successful at AmerisourceBergen? And I just pull this out because we do require you to be a considerate person, a people forward person, someone who engages in business, someone who believes in the power of our enterprise. If there's a remarkable change in AmerisourceBergen since we last met with you in an Investor Day format, it's the real thinking about an enterprise. It's a thinking about AmerisourceBergen as a collective enterprise with businesses in areas like specialty, like veterinarian, like community pharmacy, but how do we bring it all together. And I go back to Dave Yost telling me when we had some struggles with the channel conflict between the specialty group and the drug company in the early days of my career and telling me there is only one cash register. Well, today, we think about there's only one enterprise, and that's been a wonderful change in the way that our 42,000 team members think. And we believe that, that's where we'll get to in Europe as well, with a very strong people culture that Alliance Healthcare has. We like people to be resourceful. At the end of the day, we talk a lot about the $214 billion in revenue last year, but we are very mindful of the 1.5% operating margin that we earn and being very conscientious and productive with that, and that's what our customers require of us. Our customers are under pressure. Even if you're a manufacturer, you're feeling a lot more cost pressure as we move to value-based care systems, as governments and single-pay assistance, for example, are looking for savings wherever they can. We need to have that resource for environment. The ability also to think about the future and how can you impact the future and how can you make that future exciting, positive and productive. How do we create value together? And we want people to be a purpose activist, to promote a progressive workplace, to think about our environment and our sustainability. And you're going to hear from probably the best mind in the industry on that in Susan today. So you've got a terrific opportunity to hear what are the latest trends for supply chain and pharmaceutical wholesale companies in the environmental area. So how are we going to take what is undeniably a lot of momentum and carry on building on this foundation to create the next generation of wealth and creativity at AmerisourceBergen? So I really believe that we can reinforce the strengths of our culture and operating model by investing in our talent and by aligning the organization to support growth. This has been a wonderful opportunity that we've had over the last few years. We've really created a much more alignment. The best example I can give you is specialty. We have taken specialty, and I'm going to show you data on how important specialty is to the future of our industry, and of course, it has been for a long time. But we have taken that specialty expertise that we had, the knowledge of being patient-centric, the knowledge of working with the manufacturer as a customer, truly thinking about partnering with them and use that as an incredible example for us, during the pandemic, to be the distributor for the anti-infective products. So AmerisourceBergen really worked with the first authorized product, emergency use authorization product. And then because of the role we played and because we did it so expertly and because we had such extensive data and tracking capabilities and licensing capabilities, really every manufacturer said, why wouldn't we come for you? You have the model built. But we continue to invest. We continue to communicate with the CDC. We continue to communicate with the communities, looking at where the most distressed areas were during the pandemic, and really did an incredible job of getting these life-sustaining products out in just in time and as quickly as we could, working under the regulatory guidelines that we receive from the CDC. So we are very proud of that. In Europe, in the U.K, we did over 100 million vaccine doses. We did a lot of the lateral flow testing. And throughout the company, we've done a great job of working with our community partners and working with health authorities to get these life-sustaining products out in the marketplace. This has obviously had an impact on our financial results. Many of the accounting ways that we've taken [indiscernible] products have been a little bit unusual, and Jim will, of course, talk about that. but it has led, along with our general performance of our business, the resiliency of the health care economy, particularly here in the United States has led to very strong financial results and momentum. And we want to be thinking about AmerisourceBergen with our capabilities through businesses like World Courier, Alloga, the Alliance Distribution, Alphega, Good Neighbor Pharmacy, Oncology Supply and ION, all these different businesses as a differentiated global partner to biopharmaceutical manufacturers and to providers. So Specialty, we've talked about it a lot. AmerisourceBergen plays most in the light blue, the developed 10. Those are where we have most of our strong presences. And specialty is going to be such a pivotal part of health care spending -- of health care and pharmaceutical spending going forward. AmerisourceBergen has been highly involved in the specialty market for nearly 30 years now. In 1994, we started our Alternate Site Distributors at Bergen Brunswig. And then post the merger, we've made tremendous investments in our specialty capabilities going from just distribution to GPO capabilities, to adherence, to access, to value-based consulting, to health economics outcome. We've added all of these business, our important Lash franchise. All of these have really helped enable an understanding of what the manufacturer's requirements are and what the patient's requirements are. And I believe that we are uniquely focused in this area. When I became CEO of the company, we did, I think, a really good job from a culture and an experience perspective of blending both the specialty group expertise, the progressive nature of the special group, the understanding of the manufacturer, the thought leader in the community oncologists that with so many of our customers with the tremendous operating expertise, the recent SAP implementation that we had completed at our drug wholesale business. And I think that has really powered the enterprise that you see today. We also had Bob Mauch, who you'll hear from come in and really help lead the business in changing the price model for specialty products in the core wholesale business. Too often, the specialty products were not priced appropriately given the way manufacturers are thinking about rewarding wholesalers and paying wholesalers for the type of work that we were doing. It's very different sometimes when you're shipping a $5,000 per box cancer product to an oral solid product. It's just a very different financial model. And we need to take that into account in our contracting. And we did lead the way in that, and we're proud of the capability that AmerisourceBergen has in specialty, and we intend to use this capability more in our global context. So there are some trends that are helping AmerisourceBergen really propel our success. First of all, managing the total cost of care. More and more people are payers and systems are looking for solutions to help them manage the total cost of care. We still aren't post the pandemic, but I think it's going to take some time and the budgets are going to be really squeezed. So people need to be thinking about the cost of the products. A positive trend that is helping AmerisourceBergen manage the cost of care is the biosimilar wave and some very big biological products that will lose their patent protection. This will make way for a new era of specialty products, including cell and gene therapy products. And we believe, and you'll hear in Bob's presentation, we positioned ourselves very well for this change in products. We also have opportunities with digital transformation. So often you wouldn't think about a company like AmerisourceBergen as a digital leader, but we have used technology, we have used analytics, we have used different customer engagement models for many, many years. We've been able to take data out of medical records for many years. And these have really helped propel us. One of the opportunities, again, that I was -- we were most focused on when I first became CEO was really understanding our pricing models better and using data in a different way to help us with customer profitability modeling. And I believe that, that has really led to what you see today in terms of our financial success and our sustainability of our contracts, the ability we've had to keep the market-leading customers. There are also strong dynamics in terms of outsourcing by manufacturers. We will keep on doing more with manufacturers. I believe they want to work with best-in-class providers. They often want to work for regulatory reasons with companies like AmerisourceBergen. And why not work with a company that has a global or top 10 market expertise. So that's our role. We also have during the pandemic really become much more experts and much more capable in contracting with governments and the government in the U.S. The work we did with managing the strategic national stockpile, we could not be more proud of those sort of works. And we believe this will be an opportunity, AmerisourceBergen has traditionally been underserved in those markets, and we'll continue to work on those. So how will we keep our growth going and how will we be differentiated? That's a question that we often get asked. We -- when I do the interviews or when I'm in town halls, how will we keep on differentiating ourselves? So first of all, we have our purpose, which I've talked a lot about. Our areas of focus, specialty medicine and services, community providers. I told you, Gina wears a lot of hats here in our company. She doesn't like this when I talk about the 4 holy grails, but I'm going to do it anyway because I'm on this stage. The 4 Holy Grails for AmerisourceBergen are: Community oncologists; community veterinarians; community pharmacists; and community hospitals. We want to make sure that those are all around to help serve the patients and the communities that they're centered in. This also helps with disparities. When we started working with Good Neighbor Pharmacies to get vaccine distribution, we believe we were helping those pharmacies touch into patients that would otherwise not have had access to the vaccines. And that was a role that we were incredibly proud of, and we took a role both on the legislative front as well as on the patient and product access front to help with that. Customer partnerships. So recently, I attended the NACDS, which was great. It was really wonderful to see people after so many years. But just sitting with various manufacturers, the compliments that are genuinely received on AmerisourceBergen's forward thinking and accessibility from the management team, the genuine interest that we have in our shared success, I think, does differentiate us. And then, of course, we have the global access and opportunity. So 5 strategic imperatives. You're going to hear me talk about this. You're going to hear Bob talk a lot about it. I told you about Leslie Donato, the work he's doing to really institutionalize our strategy and innovation into our core thinking. Of course, it ties into capital deployment, which Jimmy is going to share with you. But we are going to advance our core business by leading with market leaders, by leveraging the tremendous infrastructure that we have, the efficiency that we have to bring advantages to our customers. You're going to hear some really good examples about that. A recent little acquisition we made helps hospitals, large complex hospitals manage their freight costs. And at first, when I looked at this, does this make sense for us? But it really does because AmerisourceBergen has such tremendous knowledge of creating logistics and creating efficiency, why not share that in a consultative manner and in a profit-sharing manner with our customers? We're going to keep on expanding on our leadership in specialty. It's absolutely imperative to us that we participate in specialty in Europe, that we continue with cell and gene therapies, that we take a leading role in biosimilars. And we're going to help our customers as they shift to the value-based care marketplace and as they look at being accountable for the proven success of products. So these are areas that we are very focused on, and we believe we have the intellectual confidence, the experience and the cultural mindset to be able to be successful in that. So Alliance Healthcare acquisition. Why did we do it? There's -- I'll be very candid. There's a couple of reasons we did it. First of all, we got to know the business over a long period of time. We got to see that this was a proven management team with proven leadership in their chosen markets. We also got to have a close relationship with WBA. We shared the WBAD contracting strategy. We also saw that they had a good mixture of services and distribution business with about 40% of the operating income coming from services business. That was very important to AmerisourceBergen. We were very intrigued by the Alphega network of community pharmacists and the role that we could play there. And we felt like from an organizational development perspective, AmerisourceBergen was ready to make a big step like this. So we move forward with the largest acquisition we've made in our history. If you take all the other acquisitions we've made during the 11 years I've been CEO, they equal about $6.5 billion, which is what we paid for Alliance Healthcare. So it's a big step for us. thanks to some terrific work by Jim and [indiscernible], and our Controller and others. We were very well positioned from a financial perspective. We're able to pay half of the acquisition in cash, and we were able to get close to 20%, high teens accretion in the first year on this acquisition. But there's financial outcomes and then there's intellectual outcomes and experience outcomes. And I would say that for everybody, and I'm hoping even for the Board, this has been a tremendously interesting and educational and informative and positive experience. So -- and we'll continue to invest in innovation to further drive differentiation in the European marketplace, where we believe we have opportunities to create a platform that can feed our services businesses, whether it's 3PL, whether it's value-based contracting, whether it's GPOs, we believe we'll have that opportunity. So AmerisourceBergen's vision is to be a global health care leader in the marketplaces where we participate, creating unparalleled access, efficiency and reliability across the global pharmaceutical chain. And we'll do this with our foundation of leadership, our differentiated higher margin services businesses. We focused on the higher margin and the higher growth markets like specialty, like cell and gene therapy, and we look to position ourselves to investors as a sustainable long-term growth company, which will enhance commercial solutions and advance innovation in the markets which we serve. So our long-term vision is to be -- to maintain leading market share of Pharmaceutical Distribution. And we are now going to introduce the team that is going to help share our long-term vision with you on how we're going to grow higher margin and higher-growth businesses within the U.S. and internationally. And then what does our growth algorithm look like. So with that, I have much pleasure to hand the stage over to Bob Mauch, our Group President. And Bob, thanks for joining us up here today.

Thank you, Steve. Hello. Thanks, everyone. Thanks, Steve for a terrific overview and a great way to get us started. So where Steve just ended was that we have a strategy that will do 2 things that are really important: one, continue our leadership in distribution on a global basis; and continue to grow our high-growth, high-margin businesses. So it's not away from distribution, it's leading distribution and grow high-growth, high-margin businesses on a global basis. We have 5 strategic pillars that will hopefully demonstrate to you how well we're going to do that. And I'm really excited to have the privilege to be here today and share that with you. And I also want to give a nod to Leslie for her terrific work and the team's work in helping us pull this together on a yearly basis. So it starts with our terrific portfolio of customers and segments within which we play. So this is not new to any of you, right? So we've been talking for a long time about our leading portfolio of customers, our anchor customers in each of our key segments. But it's core to everything that we do, and I'll pull this throughout the rest of the presentation because what we do in terms of innovation and solutions is many times targeted to making sure that we have long-term strategic relationships with our largest and our best customers. So we're not really interested in transactional relationships. We're not interested in just pick-pack ship of relationships. We're interested in relationships where we can do all of that as a foundation and then work with that leading health care company on their strategy, bringing tremendous resources of AmerisourceBergen to bear -- to help them succeed. And one of the great things about being in our business and just to Steve's point, about being in the middle, is the alignment that we have with our customers. So as we look at a customer, we work with a customer and then we do strategic work together that helps them grow and makes perfect sense for us because when that customer grows, therefore, AmerisourceBergen growth. So it's great alignment. And as you know and, as Steve mentioned, we have leading customers across a broad set of segments from animal health to health systems, government agencies, community and specialty pharmacy, importantly, community physicians as well as the biopharma manufacturers, which you'll hear more about today. So often, we talk about the customers, and we talk about wraparound services and wraparound solutions and that helps us grow with our customers. But we don't always have time to get into what does that mean, right? So when we have an Investor Day, we can actually spend a few minutes talking about the things that we do with our customers that really help them grow, help us create that strategic alignment and therefore, the long-term strategic relationships that we desire and helps us drive growth. So if you just take biopharma manufacturers for a second, you'll hear a lot about clinical trial support today. So at the bottom of that list, whether that's World Courier, whether that's health economic design within clinical trials, we're working on a global basis with manufacturers to help them with their clinical trials. Community and specialty pharmacy, I'll pick one. And again, I'll start at the bottom, which is our PSAO and the reimbursement work that we do with independent community pharmacies. So again, you know about Good Neighbor Pharmacy, you know about Elevate. You know about the long history that we have in supporting community pharmacies. That -- the value proposition for AmerisourceBergen and those community pharmacies has changed over time. We're still very focused on marketing and branding and digital marketing and attracting patients to those stores. But probably the most important thing that we do now is help them negotiate their reimbursement contracts with payers because they are a destination in the community. Patients want to go to those pharmacies, and it's our job to make sure that they have reimbursement contracts with the payers that allows them to continue to provide that service in the community. I'll talk a little bit more about how we're pulling that across our segments as well. Within Specialty Physician Services, this is also very core to everything that we do. You think about our oncology businesses critical to our past, critical to our future. And there, we're really working on inventory management solutions. I'm going to talk about a clinical trial, Navigator, as an example, that's very targeted to this customer segment. And the GPO work that we do there in helping in partnership with the manufacturers and the providers continues to grow, it continues to add value. And again, it helps those providers who are like the community pharmacies, like community veterinarians, critical to access to health care. So all patients can't get to an academic medical center. In many cases, they need to be in a community setting, and we're proud to support those physicians. But moving on to the health systems and the academic medical centers, and those are also very important customer segment for us. And this is an area where disproportionately lately, we've been able to innovate. We've really -- Steve talked about how we changed our approach to those customers by bringing our full-line distribution, our specialty distribution and our services together helped us have a seamless message, that certainly helped us with our pricing algorithms. But most importantly, it's helping us have a different conversation with those health systems, which is aligning with their outcomes. What are their growth goals? What are their strategic goals within their communities and then how can we align with that? Certainly, the distribution services and the right -- having the right price is part of that, but it's table stakes, frankly. It's the other work that we're doing that creates a relationship that, that health system as they expand their footprint, look to AmerisourceBergen more and more. And certainly, last but not least, put our market-leading presence in animal health, both the companion animal and the production animal side is one of our high-margin, high-growth businesses that we intend to continue to highlight and make investments. And I'll give you an example of that as we go through. So that's number one, that's AmerisourceBergen, right, long-term strategic relationships with leading health care companies on a global basis. That's the first thing you should think about us. Secondly, and I talked a good bit about how we're making investments in and with those leading customers, and that leads to our second strategic pillar, which is leverage infrastructure to increase efficiency and support our customers and meeting consumer needs. So we -- got 2-in-1 here, so -- and we're going to touch on both. So the first is -- and it's the very first thing I said when I got here, is we are going to continue to lead in distribution services on a global basis. So what that means is we have to continue to invest in our core business. We have to be more efficient all the time. We have to hire quality all the time. And when you think about leveraging our infrastructure to increase efficiency, that's that part of it, and we continue to make those investments in our business on an ongoing basis. Secondly, we know that our customers have to interact with their consumers, patients, pet parents, whatever it is that they are in a different way, in a digital way. So as we're enhancing our own capabilities to provide distribution services, we're also building capabilities to help our customers interact with their consumers and patients in a new and more modern way. And I'll give you 2 -- I'll give you one example of both. And we'll start with an example, which is a video. So again, this is back to the core distribution services. We're not going to have an opportunity to take a distribution tour. So we're going to have to do this video and virtually. And just as a reminder before I move to the side, this is a U.S. full-line distribution center. You'll see stats that are U.S. centric, and this is one of our large centers within the United States. And as you would imagine, on a global basis, all different shapes and sizes of distribution and logistics centers, but this is one of our premier sites here in the U.S. [Presentation]

Okay. So hopefully, that was helpful and a quick -- reminded me, especially as we were watching the robot going through the distribution center disinfecting and we're not doing a lot of looking back here in terms of our performance in COVID-19, but I do think it's worth a note to the amazing frontline team members at AmerisourceBergen because while all of that was going on, and while many people had the opportunity to work remotely or work from home, those folks were showing up to work every single day, and we never missed a beat through the worst of times. And in the beginning, that was a huge demand surge. Later on, it was managing through COVID infections, but we never missed a beat and a patient never missed a medication. So again, this is -- we're going to talk about the innovation that we're doing in the future, but this is core. We're going to continue to invest in it, and we're going to continue to lead in this area. Additionally, I talked about the things that we'll do with our customers to help them with their consumers. We should say B2B2C, which gets kind of confusing, but I kind of like it. So the B2B part is what we just talked about, and this is a little bit more of the B2C. And our customer is the B2C component of B2B2C. So we used a veterinary example today, and I'm going to describe an ecosystem that we're building for our veterinarian customers that help them attract and retain pet parents and pets and also create broader clinical outcomes for those pets. But while we're using a veterinary example, and again, we want to really emphasize the strength of that business, and it is one of our high-growth, high-margin businesses. We're doing very similar things with our physician customers. We're doing very similar things with our community pharmacy customers. So if you think about that ecosystem of services digitally enabled to make sure that they can interact with their patients, serve their patients, attract patients and create better clinical outcomes. That's something that we're doing across many areas, but we'll focus on the veterinary channel today. So here you see an ecosystem that goes all the way from a pet portal to automated reminders and I'll call out a couple of key areas. So first is a portal. It's powered by our Allied DBM solution, which is owned by AmerisourceBergen. So this is a practice management enablement solution, which has a portal, which can be accessed by the pet parent, by the clinician, where you can see a 360 view of what's going on with your pets. So what's your next appointment, what are the clinical results, lab results just as we might do as we log into whatever hospital we log into to see where we are, when our next appointment is, communicate with the clinician. That's what we can do in the pet portal, which is powered by Allied DBM. If you move to the right of the page, home delivery is also a big part. One of the dynamics in the veterinary space is that other players, whether they be e-commerce or traditional, retailers are also interested in moving in to the veterinary space. So we're focused on helping them keep those prescriptions within the practice in order to do that back to the e-commerce digital part of this, you're going to have to have a home delivery solution to do that. And then I'll move down to the bottom, where it says preventative care plans and wellness plans are the #1 reported need by both pet parents and by veterinarians. So what a wellness -- it's not insurance, what a wellness plan does is it allows you to pay as you go, basically. So you don't have the big surprise bill if your pet becomes ill. So I'll highlight a few of these. Another call out here is some of these are owned solutions. Some of these are done on partnership. And you'll see that again through the presentation. As we think about innovating and growth, we don't have to own everything, right? So we're going to develop some things internally through our innovation engine. We're going to do some things in partnership. And obviously, we'll continue to do acquisitions where that's appropriate. But what you see here is something that we're doing for the community veterinarians that honestly you would expect, and I think you would appreciate in your own life. So we're doing that. And again, we're doing this within physician practices and community pharmacies as well. In addition to the veterinarians, I'll give you a couple of examples of how we're doing this with hospitals, and I talked about the level of innovation that is going there. First and critically important is our drug shortage mitigation solution, which is called -- I just forgot the name what's called SureSupply . Thank you. Wow. SureSupply. Sorry, it's called SureSupply. And this is a really interesting program because we're always with our customers, and we're listening to what they need. And if you go into a health system, you're going to hear what they need is shortage solutions, particularly with generic injectables. So our team, in conjunction with the innovation team, worked hard to develop a solution that allows health systems if they choose to on a proactive basis, work on us carrying more inventory on their behalf in conjunction with the manufacturer. So this is health system that wants to do it. We help them connect with the manufacturer, the manufacturer produces more, right? So this is before there's a shortage. You have to have some predictive analytics on what you think might be in short supply and then we're increasing supply. Importantly, this doesn't change our fair share allocation. None of that changes. This is actually more supply in the network and through our virtual distribution and virtual inventory management capabilities, we can continue to move that product throughout the network. So it doesn't sit in a warehouse and become spoilage. This is a very successful program for us. Our customers are signing up at a pretty rapid pace. And again, the trick here is you've got to be able to predict what's going to be on short supply, which is not easy, but health systems and manufacturers are willing to enter into that arrangement and that we facilitate that for them. So a critically important strategic initiative that we're helping health systems with. And the payer and product access solutions, I want to hit this because it calls in a couple of really important themes for us strategically. And I mentioned earlier and Steve mentioned as well how we're trying to look at parts of our business and find solutions that work well in oncology, for example, that might also work well in other areas. So hopefully, you'll hear we say throughout this, we're using it in this vertical, but also others. And this is a great example under the product and payer access solutions, and I'll just give you 2 quick points. So our ION GPO in oncology, which you all know really well. We're working on that. We actually did a full digital transformation of that, which is working really well, manufacturers and the physician practices like it. While we're doing that, we also realized that we could pull that across 2 health systems. So the same GPO contracting that we're doing with the physician practices, health systems and manufacturers we're interested in, so we now have a health system specialty GPO. So a quick example of core capability that we're using in another area to drive growth. Secondly is the PSAO services. So I mentioned that with the community pharmacies, but the health systems as they expand their footprint, many times outside of the 4 walls of the hospital, they are having specialty pharmacies or other clinics where they also need access to the payer contracts. So we developed a specialty PSAO using the expertise that we had in retail and then applying that to the health system. And there are others. I could spend more time on this slide, but I won't. But I want you to get a feel here for how we're working with our customers to enable a strategy, enable their growth and we're working horizontally and, from a product standpoint, pulling these services across to other areas and then driving growth within AmerisourceBergen. So that's 2. So now we're on 3. So Steve spent a good bit of time here. So what I'll be doing is just reinforcing really what Steve said, right? These are -- this is critical for AmerisourceBergen. I like that it's right in the middle. And I kind of think of it as a pyramid. If you put it in a pyramid, it would actually be sitting -- it'd be sitting at the top. And this is just core to everything that we do. And we're very proud of the nearly 30-year leadership that we've had in the specialty distribution and specialty services space. A huge nod to Steve and his vision for really creating this part of our industry back in the early '90s and all the acquisitions and builds that went after that. And we're proud, we're happy and we're not complacent, right? So we know that in order to continue in that leadership position, we're going to have to evolve with the market, we're going to have to invest in new services and continue the strength of what we currently have. And I'm going to talk about how we think about the strength of our specialty services on a global basis. And Steve also hit this pretty hard in the beginning. But when you think about leadership in specialty, think about that on a global basis, and the Alliance Healthcare footprint really will help us here. So first is we have the broadest portfolio of leading specialty solutions. So globally scaled logistics and 3PL services, we have wholesaling and pre-wholesaling operations in 15 countries. We can do clinical trial logistics in 50-plus countries. We're a leader in temperature control and order monitoring. So as you think about the specialty landscape evolving to even more specialized products and cell and gene is the easy example here. This is core to how we'll continue to lead. Second, is the clinical and commercialization services that we also can implement on a global basis. So the market access and regulatory consulting that we do. So remember, every single product, new and innovative product that comes to market, is going to need to demonstrate their value proposition, their cost effectiveness. That could be out of payer in the United States or it could be at the government level in Europe, right? You're going to have to do that no matter what you do. We have a core competency and a leadership role there. We talked a lot already about the clinical trial support and our data and analytics capabilities are significant and growing. The specialty distribution leadership also on a global basis. We lead in oncology and ophthalmology. I talked about the GPO solutions, and we're continuing to build and grow there. So the broadest portfolio of specialty solutions we have, we have today. We also have significant services across the clinical and commercialization journey. So I hit on a few and this is just to reinforce the point, but meaningful services in the approval phase. So again, that could be health economics. It could be clinical trial logistics, coverage and access. So think about the work that we do in terms of reimbursement support, patient access and adherence. We're working with providers and manufacturers there and accessibility kind of back to the bottom left, bringing -- helping manufacturers bring those innovative products to market is a core of everything that we do. So when you layer our significant specialty capabilities, along with the breadth of our commercialization and innovation solutions, that gives us a tremendous platform to continue to innovate. Cell and gene is the best example of us thinking about we're very proud of our excellent performance over the last 3 decades. And we know in order to lead in cell and gene therapy, we're going to need to continue to invest and innovate. However, we have a terrific start. So we talked about the World Courier capabilities in terms of the specialized logistics on a global basis. That could be clinical trials or that could be commercial services for cell and gene therapy. I'm going to show an example of a partnership that we have with a company called TrakCel that helps with orchestration of cell and gene therapy and another example of where we don't necessarily have to own, we're happy to partner. And then our unique position at the intersection kind of back to the middle of the biopharma innovators and the providers gives us a unique view to all of this and also a unique competitive position in addition to our global reach, which will help us drive leadership here as well. Again, you take the capabilities that we have, the capabilities that we'll build and the global platform, that's a reason that we believe that AmerisourceBergen will continue to lead in specialty and in particular, in cell and gene. So I'm going to do a quick review. How do you want to talk about it? I'm going to do a quick review. So -- these build a bit to contribute to Rx outcomes. So think about our incredible strategic customer relationships on a global basis, and the fact that those relationships are strategic relationships in almost every case. Then think about the way that we're making those strategic and our second pillar is we're becoming more and more efficient all the time, and we're investing with those customers to enable their growth. So that makes us even more aligned to them strategically over the long run. Then continuing our leadership in specialty, which you can count on, leads us to why on a global basis, we believe that we can continue -- contribute to Rx outcomes by expanding our biopharma services beyond what we have today. And I'll spend a minute on why we think that's an attractive market and why we think AmerisourceBergen has the right to win. So number one in the market trend there, the addressable market for outsourced biopharma services is $100 billion and expect it to grow at a 5% to 10% CAGR. If you move to the right, and really everything that we've talked about for the last hour or so, is the significant and meaningful position that AmerisourceBergen has with the downstream clinical customers and the upstream biopharma manufacturers. Secondly, when you think about trends and biopharma is a small and midsized manufacturers, much of the innovation is coming from small and midsized biopharma, and that's on a global basis from a geographic footprint standpoint. So our ability to interact with those small and midsized biopharma customers on a global basis and the fact that many of those customers would like to buy multiple services at the same time. I don't want to call it one-stop shop because I don't think that's necessarily it, but they are more willing than the largest of the manufacturers to buy a portfolio of services from one service provider that will help them bring products to market, we believe, in multiple markets. So again, the global footprint will really matter. Having said that, large pharma is also increasing their outsourcing. The difference is they're more likely to buy a point solution than they are to buy a portfolio of solutions. But that's okay because our point solutions are intended to be best-in-class. And in many cases, they are. And certainly, as we buy and build, they will be. So those amazing customer relationships, the leadership in specialty, the investments that we're making and all of those customer relationships leads us to a strong belief that expanding our biopharma services business, on a global basis, is the right thing to do for AmerisourceBergen, and that will help us grow our high-margin, high business services in addition to strengthening our core. So number 5. So all of this was about innovation all throughout. It's about innovation. So that's a theme throughout. And I think as we made a great call here, we -- this could have been a kind of a horizontal enabler of all of this. But it's so important to us from an execution standpoint and that we get the organization focused on innovation from a cultural standpoint that we wanted to make sure that it was a stand-alone pillar. So I'll talk a bit more about this and give some examples. So our areas of focus for innovation are, as you can see on the left, everything from clinical trial services to home health services. One of the things I didn't talk about in health systems was home health, infusion services that we're helping them build. And as you go to the right, that leads to strategic partnerships and innovation that we're doing again on a global basis. In order to do that, and this is another nod to talent and digital, and they have to go together. In order to do that, we've been pushing the organization and really leading through not only a digital transformation, but a transformation of the types of talent that we need to bring in to AmerisourceBergen. So we've talked a little bit about the horizontal and the product mindset. That's a different skill set than a vertical P&L leader. And we need both. And we have lots of terrific vertical P&L leaders. We're adding product and horizontal leaders that will help us drive the digital transformation that we need. We have amazing technology solutions. It's the cultural part of the digital transformation that we're continuing to work on, and we'll need more talent oriented that way in order to do it. And Steve talked about the leadership competencies that we need, the product mentality. I talked about the horizontal mindset, I talked about -- and then from a digital standpoint, that enterprise fabric -- so instead of having solutions for customer management in each of our businesses, the enterprise approach is to have one solution for customer management, which we're moving to. Obviously, investments in the cloud are really important to us, and we've mentioned our data and analytics capabilities pretty significantly already. So a couple of examples, 3 examples, and then you'll get to the part that I know you're waiting for because Jim is up. We'll have a break next actually, and then Jim will -- Jim will be up. But I did want to talk about the Clinical Trial Navigator, which is an innovation that we just announced within the last 2 weeks. And before I get there, one disclaimer, these are 3 examples of many. These are very early stage. They're illustrative. These are not necessarily things that we're trying to put a marker out there right now for future tracking or updates. We just want you to see the types of interesting work that we're doing. In fact, our innovation portfolio has nearly 50 different projects in it at different stages with meaningful profit contribution in the future, but we're just going to give you 3 examples here today. So Clinical Trial Navigator. So we talked about the investments that we're making with biopharma manufacturers as well as our customers. Clinical Trial Navigator is a great example of something when you think about the problem to be solved, which is clinical trial enrollment is much more difficult than it should be, right? Accruals are too slow. We don't get enough patients, we don't get enough diversity. It's a real challenge in clinical research. So what we have here is a biopharma customer set who is very interested in improving that, right? They have many incentives in terms of speeding products to market, speeding through their clinical trials. Then we have a customer set in our community oncology base who also would like to be more involved in clinical research. Most of this is done in academic medical centers. And then the really important part of moving clinical trials out into the community is that is where you will increase diversity of patients in those sites because they may not have access to the academic medical center and they will be in the community. So what the Clinical Trial Navigator does is it sits on top of the solution that a physician would have in their practice. It plugs into what you see in the middle, which is an advanced IQ, which is our network of physicians who have agreed to be a part of clinical trials. Then there's a Site Assist, which helps from analytics -- really from a machine learning and advanced analytics way helps identify the right sites for certain clinical trials. And then the Patient Identifier then drills down another level to find the patients within that practice who would be candidates for those clinical trials. So again, an automated way. It's not intrusive from a technology standpoint. It sits on top. It connects to the government clearinghouses of clinical trials, and then works in a way that it really feeds to the manufacturer, the site opportunities and then to the clinician, the patient opportunity. So we're excited about this. The biopharma manufacturers are excited about it as well as our oncology physicians. We talked about cell and gene therapy and our partnership with TrakCel. This example is that. So our World Courier, our specialty logistics, our partnership with TrakCel in addition to our Lash Group Fusion platform, which is also very advanced technology and linking the 3 of them together so that we have the specialty logistics. The very important orchestration. And as you know, kind of right now, cell and gene is kind of 1:1. So cells from you to the lab, back to you in time, we'll get some more of an allogenic state where we'll have more patients involved. But right now, it's one-to-one. And the reimbursement and adherence part, that Fusion through the Lash Group can add is really a missing piece out there right now, and this goes together. So we have another video to show you now. [Presentation]

Okay. One more example, and then we are to break. I'll go back one, go back two. Okay, the last example is the AmerisourceBergen Marketplace or AB Marketplace. And if you think about the need, we're going to -- let's go back to community pharmacy as an example, although I'll tell you right up front, this will be very applicable to veterinarians, physicians and we think other sites of care. But really taking out some of the complexity in their day to day. And if you think about a community pharmacy if you walk in, they're selling many products in their front of store that AmerisourceBergen can't stock in our warehouses. It's just not part of our business model. We don't really have the space to carry that many SKUs and that many different sizes. So they often have to find their front-end items. I don't mean their OTC items because they would get those from us, but their front end, so it could be a pencil, it could be a phone charger, it could be a Bluetooth speaker. Any number of things, other kind of consumable CPG-type products, they're not getting from us. So with our infrastructure, leveraging our scale, leveraging our ecosystem, we have the ability to allow those customers to log into our e-commerce platform, which is called AB Order, and then access those products. The financial transaction is done there, and then that product is delivered from the manufacturer or the supplier. So that's what you'd expect, right? This is coming to be more popular in the marketplace. But we have a very unique opportunity because our customers would prefer just go on to one website and buy thing. Right now, they're going to multiple stops including maybe even a trip to a club store, a big box and buying things that they want to sell in their pharmacy. So we're excited about this. We've got more than 200 pharmacies enrolled in a pilot right now. We're getting terrific response. We have our ThoughtSpot Trade Show coming up in Orlando in July, where we'll have a significant -- probably 3,000 or so customers, Good Neighbor Pharmacy customers, where we'll launch this to them at that time on a limited basis, and we'll continue to roll it out. But this is an example of customer focus, reducing complexity, meeting a need for them, and then leveraging our digital capabilities as well as the ecosystem that we have between the manufacturer, suppliers and the customers. So a theme that we've talked about throughout the day. So summary quickly and then to break. So we're going to continue to lead in our core distribution services, and we believe our 5 strategic pillars will help us grow in the long term on a sustainable basis, through great execution, through innovation, through leveraging our global footprint. And I thank you all very much for your attention today.

Thank you, thank you. We will now take a 10-minute break, and we'll start back up -- to the viewers at home, the people in the room, we'll start back up at 10:25, when Jim Cleary walk us through the financial portion of today's presentation. [Break]

Thank you. Now I'll turn the presentation over to our EVP and CFO, Jim Cleary.

Thank you very much, Bennett. As Bennett said, I'm Jim Cleary, CFO. And today, I will talk about our strong financial performance, I'll talk about our long-term growth outlook, and I'll also cover our growth drivers. I really want to thank Bob and Steve for that excellent overview of our business and our strategic priorities. And I also really want to thank all of our sell-side analysts who are here in person today. Thanks for the important and great work that all of you do. We really appreciate it as I'm sure our investors do. And I also want to thank our investors and other key stakeholders who are participating virtually today. As a quick reminder, my comments today will focus primarily on adjusted non-GAAP financials. And for more details on our GAAP financials, please refer to our SEC filings. Fiscal year '22, this year, AmerisourceBergen is demonstrating strong financial, strategic, operational and purpose-driven results. In fiscal '22, we've continued delivering exceptional financial results, and it's driven by execution and momentum across our business. As you know, our EPS guidance this year is at $10.80 to $11.05 a share, which represents growth of 17% to 19% over fiscal year '21. As you know, our adjusted operating income guidance for this year is growth of at least high-teens percentage growth. And our free cash flow guidance or adjusted free cash flow guidance for the year is $2 billion to $2.5 billion. So we feel very good about the year that we're having. We're also honored to be playing a key role in distributing COVID-19 treatments in the U.S. and vaccinations and test internationally. It really is a testament of the important role we're playing in the health care system. It's also an opportunity for us to demonstrate the strength and the efficiency of our operations. And it also shows that we have enhanced relationships with our government stakeholders. And we're also making great progress on integrating the Alliance Healthcare acquisition. As you know, today is the 1-year anniversary of closing that deal. And I'm sure that we have several members of the Alliance team in Europe who are participating in the meeting virtually, and I really want to thank the Alliance management team for their incredible dedication and working on the integration, and I also want to thank them for the strong financial results out of the gate. And we've been very pleased with the Alliance financial results out of the gate, particularly on a constant currency basis. Across AmerisourceBergen, we've also made progress on initiatives to advance our purpose and talent. And as you all know, talent is incredibly key to what we do, and we've made investments to attract, support and retain talent. And we've also continued our commitment to ESG, diversity, equity and inclusion. And ESG is something that is very important to our senior management team, and it's very important to our Board as is diversity, equity and inclusion. And we have Susan Lorenz-Fisher after me, our Senior Vice President of Corporate Responsibility and Sustainability, who will give an update on our ESG initiatives. So our strong performance in fiscal year '22 has been built on a legacy of sustainable growth. This slide shows results since fiscal year '16. And you'll see that EPS has grown at a double-digit compound annual growth rate, with EPS growing at a 10% rate, excluding the impact of COVID sales and all in at a 12% growth rate, including the contribution of COVID sales. And so this double-digit CAGR that you're familiar with, it's driven by organic operating income growth and value-creating capital deployment. Solid execution in our key distribution businesses, which have benefited, as Steve and Bob talked about, from leading customers and have also benefited from rebalanced contracts, and we talked about the great job our team has done over the last few years of rebalancing contracts. So we're not overly leveraged to a particular drug class. Growth has also been supported by being well positioned in key higher-growth areas, including specialty, specialty logistics and Animal Health. In specialty, our specialty position services business and our health systems business have benefited from positive innovation and demographic trends, and also increasing adoption and utilization of biosimilars, which has been a very good profit growth driver for us. In specialty logistics, the World Courier business has seen growth as manufacturers leverage our expertise and our temperature control capabilities to handle high priority shipments. And our Animal Health business is the leading Animal Health distributor in the U.S., and as you know, is benefiting from the many positive long-term trends in the Animal Health market. We've also benefited from the Alliance acquisition and the Alliance acquisition, as we've commented, has delivered a high-teens EPS accretion in its first year. Our business model also generates sustainable and growing adjusted free cash flow, which is a real value creator. Our strong long-term free cash flow growth has allowed us to invest in our business, improving our infrastructure and our efficiency. It's also enabled attractive opportunities to move our business forward and advance strategic imperatives, particularly higher-margin, higher-growth businesses. Bob highlighted just a bit ago our innovation engine, which is powered by our cash flow and by our investments in our talent and also both internal and external strategic investments. These investments have resulted in new solutions that deliver value-added solutions and a differentiated experience for our customers and our partners. Strong cash flow generation also allowed us to acquire Alliance Healthcare, which expands our global scale and reach and broadens our global platform of manufacturer services. And we do expect to repay about $2 billion or 2/3 of the debt related to the acquisition by March of 2023 ahead of our initial schedule to repay. And this is, of course, enabled by our strong free cash flow. And as you'll see on this slide, we've had an 11% compound annual growth rate in free cash flow since fiscal year '17 based on the midpoint of our fiscal year '22 guidance. We have a value-creating capital deployment strategy and a return on invested capital in the high-teens. Our strong cash flow has allowed us to invest in our business through CapEx and M&A, with high returns for our business overall and an average return on invested capital of around 18% since fiscal 2017. We also have been able to return excess cash to our shareholders through share repurchases and our steadily growing dividend. Since 2017, we have repurchased $2.1 billion in shares and, importantly, our Board recently approved a new share repurchase authorization that we announced this morning for $1 billion, enabling us to act on opportunities to repurchase our shares. Our overall capital deployment strategy will be balanced between internal investment, strategic M&A, opportunistic share repurchases and maintaining a reasonable and steadily growing dividend. Our legacy of long-term performance gives us confidence in our ability to drive strong results driven by a differentiated value creation framework. We're focused on growing operating income, which is supported by key factors. Scale, efficiency and leading customer relationships give us a solid growth base, which is bolstered by our leadership in higher-growth, higher-margin businesses. By leveraging our distribution scale and commercial capabilities, we create value for our customers and the broader health care system. Long-term customer relationships allow us to become close partners and understand our customers' businesses to jointly develop solutions to meet their unique needs. Our leadership positions in specialty, biopharma manufacturer services and Animal Health allow us to capture the opportunities presented by positive trends in these markets. Our specialty physician services and biopharma manufacturer services businesses benefit from positive demographic trends and continued pharmaceutical innovation, which will be long-term tailwinds over our long-range plan. Similarly, Animal Health has positive long-term trends, including innovation -- product innovation in the Animal Health market, of course, the human pet bond, which we all know and understand, and also increasing global protein demand. In addition to strong underlying operating income growth, value creation is enhanced by our capital deployment. Our capital deployment strategy centers on 3 key pillars: growth investments; returning capital to shareholders; and a healthy balance sheet and free cash flow generation. Of course, our growth investments include CapEx and M&A, such as the Alliance Healthcare acquisition. Returning capital to shareholders includes, of course, share repurchases and our dividend. And of course, our share repurchases, a key new announcement is the $1 billion new share repurchase authorization that we announced today. And then we're also proud of our healthy balance sheet and our free cash flow generation, and it's really these things, the balance sheet and the free cash flow generation that enable the capital deployment. Now before I turn to our long-term growth outlook, I would like to remind you, and this is just as discussed on our second quarter earnings call, we expect $0.70 of adjusted EPS contribution in fiscal year '22 from COVID product sales. We expect $0.60 of contribution in the U.S. Healthcare Solutions segment from COVID treatment distribution, and we expect $0.10 of contribution in the International Healthcare Solutions segment from COVID vaccine and testing distribution. This would bring our baseline EPS for long-term growth to a range of $10.10 to $10.35 per share. Now I'll turn to our long-term growth outlook. At the midpoint of our range, we expect 10% or double-digit compound annual EPS growth, and we have confidence in our ability to deliver that double-digit EPS CAGR in our long-range plan. Over the long-term, we expect consolidated adjusted operating income to grow organically in the 5% to 8% range, driven by U.S. Healthcare Solutions operating income growth of 5% to 8% and International Healthcare Solutions operating income growth of 5% to 8% on a constant currency basis. In addition, we expect capital deployment to contribute an incremental 3% to 4% to growth. Now capital deployment contributes 4% setting aside fiscal year '23, where it's more like 3% in fiscal year '23 given our debt pay down commitment in fiscal year '22 and '23 as a result of the Alliance Healthcare acquisition. At 3% to 4%, and this is important, contribution from capital deployment -- at the 3% to 4% contribution from capital deployment, our credit metrics and credit capacity increase throughout the LRP, leaving room for additional M&A and additional share repurchases to further enhance growth beyond 4%. And keep in mind that we're currently integrating an acquisition that contributed significantly more to growth. In fact, it contributed high-teens EPS accretion in the first year. So a 5% to 8% organic operating income growth and a 3% to 4% growth from capital deployment, it results in adjusted diluted EPS growth of 8% to 12%, or a double-digit compound annual growth rate at the midpoint of the range for our LRP. Before turning to long-term growth drivers, I will make some early comments on fiscal year '23. Excluding operating income from COVID products, in both fiscal year '22 and '23, we would expect organic consolidated operating income growth to be in the 5% range in fiscal year '23. As it relates to COVID contribution in fiscal year '23, that contribution could easily be less than half of the $0.70 we have in our fiscal year '22 guidance. Excluding the COVID impact, in fiscal year '23, we expect operating income growth in the 5% range and growth from capital deployment in the 3% range. We will provide fiscal year '23 guidance in November once we've completed our bottoms-up planning process. And at that point in time, we'll probably have a better idea of COVID product impact in fiscal year '23, and we'll announce all of that in November when we announce our fiscal year '22 year-end results. And I'll close by saying we are confident in our ability to execute in fiscal year '23 and long-term, and we're confident in our double-digit EPS compound annual growth rate in the long-range plan. With that, I'll turn now to what are the growth drivers in U.S. Healthcare Solutions and then in International Healthcare Solutions. And what you'll hear here is highly consistent, of course, from what you heard from Steve and Bob. Our U.S. Healthcare Solutions segment will continue to benefit from our foundation in pharmaceutical distribution, which has shown solid stable growth and strong cash flow generation. The business is well positioned with long-term strategic relationships with leading customers across channels that enable us to grow as our customers grow. Our investments in infrastructure, technology and innovation and our distribution centers position us to continue supporting our customers' growth. Building off the strong base, we see incremental growth opportunities from our leadership in specialty, biopharma manufacturer solutions and Animal Health. In specialty and biopharma manufacturer solutions, we're uniquely positioned to support complex therapies coming to market in specialty physician practices and health systems, as Bob referenced. Our Animal Health business is a leading distributor of Animal Health products in the U.S. and is well positioned to capitalize on the positive long-term trends. And in both pharmaceutical distribution and our higher-margin, higher-growth businesses, we benefit from the positive demographic trends and increased innovation that further drive growth. And in our International Healthcare Solutions, we also have very key growth drivers like our U.S. Healthcare Solutions segment and International who are centered on the foundation and distribution with complementary higher-margin, higher-growth solutions. The higher-margin, higher-growth solutions represent actually a higher percentage of operating income in the International segment versus in the U.S. segment. Our leadership in distribution spans Europe and beyond, with a mix of established and emerging markets and key anchor customers. Our long-term relationships with key customers in the International segment include, of course, Boots UK, which is signed through 2031, and the Alphega network of independent pharmacies. Our industry-leading biopharma manufacturer services include our World Courier business and Alliance Healthcare's range of manufacturer services businesses, including Alloga, Alcura and Skills. We see meaningful opportunity to use our expanded scale in biopharma manufacturer services to better support manufacturers, bringing innovative products to market. One example of this is opportunities for World Courier and Alloga to work together to serve manufacturers. And then also, like in the U.S., we also provide a range of downstream services to pharmacies and providers. For example, we provide training, branding and retail support for our Alphega pharmacy members, similar to what we do with Good Neighbor Pharmacy in the U.S. Capital deployment also enables us to get to double-digit EPS compound annual growth rate at the midpoint of our range. Capital deployment drivers of our EPS CAGR include of course, a strategic and a disciplined approach to M&A focused on advancing our strategic priorities and delivering strong financial returns. For example, our acquisition of Alliance Healthcare was both highly accretive, as we mentioned, high-teens EPS accretion in the first year, and allowed us to advance our strategic imperatives, as Steve outlined. And then also opportunistic share repurchases help us build on our strong operating income growth and delivered double-digit average EPS growth. And this is, of course, supported by our new $1 billion Board authorization of share repurchases. And we resumed share repurchases in May of 2022 after having paused for a while to prioritize paying down the Alliance Healthcare debt. And so our capital deployment strategy, it's enabled by strong free cash flow generation. And as you know, we expect to generate between $2 billion and $2.5 billion in adjusted free cash flow in fiscal year '22. And we've steadily delivered adjusted free cash flow growth in recent years and stand to benefit from Alliance Healthcare's cash flow generation, which is a good cash flow generating business, just like AmerisourceBergen. And so AmerisourceBergen is well positioned to continue driving value for our stakeholders. We have the foundation and Pharmaceutical Distribution with leading customer relationships in key areas and complementary higher-margin, higher-growth businesses. We have leadership in specialty and biopharma manufacturer services, where we benefit from demographics and innovation and are well positioned to support continued pharmaceutical innovation, and we also benefit from our global platform of biopharma manufacturer services. We focus on both margins and operating income dollars, which are enhanced by our higher growth, higher-margin businesses, our diligent contracting and our rebalancing of contracts and our disciplined expense management, leveraging our scale and efficiency. Capital deployment is a key component of our growth algorithm. We're very mindful of return on invested capital, and we aim to deliver strong returns. As I said, our ROIC has averaged 18% since fiscal year '17. And we have a very strong balance sheet, which gives us confidence in our ability to deploy capital, balance between our 4 key capital allocation priorities: internal investment, strategic M&A, opportunistic share repurchases, and maintaining a reasonable dividend. In addition to these value creation drivers, our ESG strategy create stakeholder value and is critical to delivering our purpose. This is something that is very important to our senior management, to our Board and broadly to our stakeholders. And to provide an overview of our ESG strategy, I'll now turn the presentation over to Susan Lorenz-Fisher, Senior Vice President of Corporate Responsibility and Sustainability.

Thanks so much, Jim, for that great kickoff. I'm really excited to be here today to talk to all of you about environmental, social and governance at AmerisourceBergen and how we're bringing that to life through our company purpose. So as Jim said, I'm Susan Lorenz-Fisher. I lead Corporate Responsibility and Sustainability at AB. And part of that role specifically is our internal management-specific governance on all things ESG as well as our ESG external disclosures and reporting. Let me just start by just giving everyone an overview of how we define ESG at AmerisourceBergen. So it goes without saying that our purpose really grounds and inspires the work of our global team members. And it absolutely guides how we approach our commitment to being good industry stewards, which really ultimately makes a positive impact on our environmental, social and governance commitments. So we're really encouraged by our continued progress on ESG, and we specifically see that globally. Obviously, a year ago today, we entered into the integration process with Alliance Healthcare. And that really gave us a wonderful platform as an organization to look at what Alliance Healthcare was doing in terms of what they define ESG and really find some synergies. And so we went through a total refresh of our programs, and so what I'm presenting to you all today is really our new globally really focused ESG strategy. So we'll talk about how we organize our ESG efforts, and we really look at them in 3 key areas. So purpose-driven team members, this is our first pillar. And we see this as embodying many aspects of the AB culture like team member engagement as well as fostering a diverse and inclusive workforce. Resilient and sustainable operations. In this focus area, we really embed efficiency and responsibility in how we deliver medications and other health care services. Our third pillar, healthy communities at all. With this pillar, we really lean in on equitable access to health care services across the global communities and patient populations that we serve. So now that I've given this high-level overview, we're going to dig in a little bit, and I'm going to go over some specific successes of each of these 3 areas. And then I'm going to close with a review of how we actually integrate and govern ESG at AmerisourceBergen. So we'll start with purpose-driven team members. It goes without saying that we really look to create a positive work environment for our team members. We want everyone to be in a place where they can thrive and find opportunities to grow. Team member development is a really big focus for us as a company, and we've done several new things over the past couple of years to really focus on that. So we have a new integrated talent framework. This includes a leadership competency model that you heard about in the beginning of this presentation, enterprise learning strategy and a much more modern approach to performance management. We have a number of other career advancement tools and opportunities that we offer to leadership, professional development programs, tuition reimbursement and the opportunity to get out there in a community and volunteer. Since the onset of COVID-19, we've really, really focused on prioritizing the health and well-being of our team members. So during this time, this wellness focus, let us really think about what our team members needed as they pivoted and changed in light of the very challenging circumstances we were all facing. So we added emergency daycare coverage, an extra week of caregiver leave and also expanded our parental leave policy. Another thing that we offered to many of our team members during this time is something that we call our AmerisourceBergen Team Member Assistance Fund. And this is really set up to support our team members who are impacted by some type of life-altering catastrophe. So we have about 2,000 team members that pay into this fund and donate into it on an annual basis. And we're really proud to say that over the last year, $125,000 of that donated money has actually gone back to our team members in need. So it's a program we're really proud of that really shows that we step in and support our associates. When we reflect back on the past couple of years, there's been a lot of lessons learned from our operations during the pandemic, and that's let us really create a new framework for flexible work going forward. We call this hybrid model, something called Work Smart, and we see it really being based on principal flexibility with a focus on employee experience, trust and inclusion. So all of this wouldn't be where it is today without our focus on diversity, equity and inclusion. It's so critical to our 42,000 team members around the world, and we have a great Chief Diversity Officer, who's really accelerating our diversity, equity and inclusion journey. Some of the objectives of this team over the next couple of months are really to increase diversity at every level and building a culture of inclusion as well as strengthening our overall community impact. We see a lot of opportunities to look into the business, promote and enable diversity within independent pharmacy ownership, look at DEI-focused training for a number of our people managers and really utilize the United Nations Global Compact relationship that we have in this area. We've also made a lot of progress. Over the past year, we have 8 employee resource groups. That was a new number for us. We added 2, and we saw an 80% improvement in the number of team members who wanted to join on to those groups. So really exciting and impactful statistic for us at AB. Our gender pay equity metrics also show that female employees in the U.S. are paid $0.994 for every dollar that a male employee earns. We're also very proud of this number. And in March 2022, to further show our support of gender equality, AmerisourceBergen signed on to the United Nations Women's Empowerment Principles. We really see and believe that strong ESG and DEI practices create value for our team members, all of our stakeholders and ultimately, shareholders. And that said, our DEI efforts also reach outside of AmerisourceBergen through our supplier diversity initiatives. We see an important role for the company in really championing the success of small and diverse stone businesses as they play a critical role in the economy. We put into place a new supplier diversity strategy and we're working on ways to measure our overall impact in this area. We directed a $25 million money market fund to Liberty Bank, which is a black-owned bank in New Orleans through JPMorgan's and Power Money Market share class. And we also have a number of initiatives in place with many of our functional teams where we're leading supplier diversity into their existing practices as well as many customer-facing initiatives. So we're now going to move on to our second pillar, resilient and sustainable operations. And we really see our purpose of creating healthier futures, aligning with our commitment of addressing climate change and other environmental concerns. To that end, over the past year, we've reduced our greenhouse gas emissions by about 4.6% against our FY 2019 baseline. And we also conducted a very detailed and highly technical Scope 3 emissions assessment, which looks at the carbon footprint of our entire value chain. You might be wondering how we as a company got that 4.6% reduction. I'll give you 2 quick examples. Alliance Healthcare in the Netherlands uses hybrid vans to do a number of their deliveries. These vans make up about 34% of their total fleet. It's been a great practice and one that we're looking to expand in many other parts of the world. Renewables is another big one for us. About 20% of our electricity globally is from renewable energy, and so we're looking more and more opportunities to really expand that. A term many of you have probably been hearing about quite a bit the past year is called the science-based target initiative. AmerisourceBergen formally submitted our science-based target last month for validation, and we're hoping to have that formally validated target in early 2023. We're also strongly committed to recycling and the reduction of waste generation all around our operations. As a quick example, our U.S. Human Health and Alliance Healthcare locations achieved about an 80% waste diversion in 2021. And we're looking at innovative and strategic steps to really apply circular economy principles into other parts of our operations. A great example of this is our American Health packaging location, where we repackage into blister packs for health systems. For years, that team has been trying to find a partner to help them recycle manufacturer stock bottles. They finally did. It's been in a pilot phase for about 6 months now, and they've already recycled thousands of pill bottles in that time. It's a great example, one we're looking to expand. And it also follows a model that we've had in place for years where we recycle the totes that we use, that you saw in many of the videos today. When they reach their end of life, they're recycled and remanufactured into new totes. Another great example of how we're supporting our customers in this area is that at 1 of our distribution centers in Kentucky, our engineering and operations team put into place an automatic packing system that rightsizes customer packages. It's paper-based and it improves employee health and safety. And we also are always looking for ways to partner with our customers to align around shared values and collective action. So in our Animal Health business, we worked with a customer that consolidate orders. And in that, we are able to give them really specific measurement details from those consolidated orders on what their environmental impact savings are, and we continually look for new opportunities to do that in other places. So we'll now move on to our next pillar, and talk a little bit about healthy communities for all. So I'm sure you've heard from many of the speakers today that AmerisourceBergen truly makes a positive impact on our communities through equitable access to healthcare around the world. And what you're going to hear a little bit about from me on this pillar is how we do that both commercially and philanthropically. So through our family of companies during the COVID-19 pandemic, we've really been able to support communities with antibody and antiviral treatments in the U.S., vaccines in 30-plus countries and testing in the U.K. The AB Foundation has also donated over $2 million to nonprofits who are on the front lines of the COVID-19 pandemic. We offer a number of solutions, including home infusion and direct-to-patient clinical trials that improve patient access in more than 75 countries. And we also recently announced a program designed to help hospitals and health systems launch or optimize home infusion service lines. Our biopharma capabilities support global pharmaceutical innovation and bring new therapies to market to improve patient outcomes and advance health equity. To that end, last year, AB collectively supported nearly $5 million in product donations to charities globally, a number we're really proud of. Other ways we've advanced health equity includes our partnership with the federal retail pharmacy program. Through this, Good Neighbor Pharmacy has helped to support allocation of 5 million COVID-19 vaccine doses to more than 1,600 pharmacies nationwide. And one of the interesting statistics here is that nearly 50% of the individuals who are vaccinated by pharmacies in this network live in ZIP codes with a high Social Vulnerability Index. Our efforts to advance health equity extend to the AmerisourceBergen Foundation. This past year, we held our third nonprofit partner conference where we bring together which mean 50 and 100 of our nonprofit partners to best practice share and learn from each other and focus on capacity building. The foundation continues to have a lasting impact. In fiscal year 2021, we granted more than $7.7 million to 100-plus nonprofit organization. And in response to the geopolitical crisis in Eastern Europe, the AB Foundation has committed $0.5 million to support the humanitarian response in and around Ukraine. Recipient organizations include many of our partners like Americares, Direct Relief, International Health Partners, just to name a few. And then another $250,000 came directly from our team members in 30-plus countries who donated into our matching gift program in support of Ukraine relief efforts. And we've also supported through in-kind donations of critical medical supply, something we're really proud of and plan to continue doing as we monitor this situation. So with that, we'll move into our next subject here and talk a little bit about how we really integrate these 3 pillars into a sound governance process across AmerisourceBergen. So at AmerisourceBergen, a foundation of ethics, integrity and transparency truly underpins our approach to integrating ESG considerations into our business decisions and operations. Our ESG strategy and efforts are overseen by the Board and receives support from the highest levels of our company. The Board's Governance, Sustainability and Corporate Responsibility Committee has oversight of the ESG reporting and disclosure practices as well as our ESG strategy. The committee is updated quarterly and provide great partnership in guiding our strategy and monitoring performance. Additionally, the Compensation and Succession Planning Committee is evaluating new ways to integrate an ESG metric and determining executive compensation. At a management level, we have something in place called the Global ESG Council that's comprised of a cross-functional group of senior management. Many of my colleagues who have joined me here today participate in that council. And we really lean on the council to bring AmerisourceBergen's efforts to embrace a company-wide ESG approach, make sure we're integrating ESG considerations throughout the business and ensure accountability. We're about a year into something we have in place called a 3-year ESG integration plan, where we have several different very detailed tactics that are in place to advance our ESG vision and governance, enhance engagement with stakeholders and really build measurements and accountability around our initiatives so that it's cross functional and well understood across the organization. Strong ESG reporting is absolutely critical to how we continue our journey in ESG as a company. It lets us track progress along our journey and also be reflective on where we want to go in the future. So last year, in fiscal '21, we released our 6th Annual Sustainability Report and ESG Reporting Index. We align with several voluntary frameworks and standards. There's a lot of them. I won't mention them all. Just a couple of highlights: Global Reporting Initiative; SASB; Task Force on Climate-related Financial Disclosures; and the United Nations Sustainable Development Goals. And I wanted to call out to you that several key metrics in this report are externally assured, and this is actually the fourth year that we've gone through this process and gotten the information audited. Last August, we joined the United Nations Global Compact and are really excited about releasing our communication on progress in just a couple of months. And we're also partnering with a number of trade organizations as we really want to elevate the understanding of our industry and the critical ESG metrics that are a part of that and help tell our story. So we're really committed to advancing our ESG initiatives in years to come, and we're driven by our purpose and being united in our responsibility to create healthier futures. We really look forward to keeping all of you updated on our journey and efforts to make a positive impact on the planet and communities around the world. So with that, I'll thank everybody for the time today to talk about our ESG journey and hand the mic back over to Bennett.

Thank you, please bear with us as we prepare the stage for Q&A.

Thank you. For the first question, we'll go to Lisa Gill with JPMorgan.

First off, thank you for hosting us today, and it's so nice to see you all in person. Jim, I just want to go back and just have a little bit of a better understanding on what you're talking about for '23. I know you're not giving specific guidance at this time, but you talked about operating profit growth of 5%, half the COVID contribution, which would be $0.35, an overall EPS growth of 8%. So one, that's a little on the lower side, right, when we think about the midpoint of your guidance. So can you talk about what your expectations are in '23 versus the longer term when we think about growth rates? And then secondly, when we think about the COVID contribution, do I have that correct? And when we think about what base it's growing off of, would that then be $10.45 to $10.70 and then 8% on top of that? I just want to make sure we have the numbers right.

Yes, sure. Sure. So let me try to address all of that, Lisa, and thank you very much also for being here in person today. So for fiscal year '23, let me start off by saying it's early. We haven't gone through our full planning process, and we'll be going through that over the summer, and we'll be announcing fiscal year '23 guidance in November. Also, I'll say we're coming off of 3 years of really terrific growth over the next -- over the last 3 years, and it's early. But we did kind of wanted to give an indication of directionally what we're looking at. And yes, if you kind of take our fiscal year '22 guidance of $10.80 to $11.05, and as a kind of a baseline, you back out the $0.70, which is our COVID contribution that we talked about and talked about on our last earnings call for fiscal year '22 and then look at 8% growth which, of course, would be 5% organic operating income growth that we talked about and 3% from capital deployment, it's lower capital deployment growth in fiscal year '23 because we've been deleveraging from Alliance, we've been deleveraging in '22 and in '23. So that impacts capital deployment growth in '23. And then add in a number for COVID benefit on top of that. And what we said today is COVID benefit could easily be less than half of what it was in '22. It could be less than half of that in '23. So pick a number for COVID benefit and add that back in. And so that kind of gives an idea of fiscal year '23. And again, I'll say it's early. But fiscal year '23, we have indicated in the 5% range rather than something at 6%, 7% or 8%, which would be our long-term guidance. And just keep in mind that we've been integrating Alliance. We're coming off of 3 years of terrific growth. We might still be experiencing some inflation, some cost inflation in fiscal year '23. Of course, that impacts our business less than it impacts most, but it still may have some impact. And so we wanted to give that sort of indication. But I'll also say we do have a high degree of confidence in our execution. We have a high degree of confidence in our momentum. And so when we give that kind of indication for '23, it's something that we have a great deal of confidence in, Lisa.

Next, we'll go to Steve Valiquette with Barclays.

So my question, I guess, is somewhat similar to Lisa's. I wanted to just hone in on the 8% to 12% long-term growth guidance. And just to confirm, is that off of the higher fiscal '22 EPS base reported? Or is that off the $0.70 lower EPS base? Or is it meant to incorporate it either way, I guess? I just want to confirm the proper jump-off point for the 8% to 12%.

Yes. And the proper jump-off point, depends upon what's going to be the COVID impact in '23. But I think what the thing to do is to kind of back out the $0.70 to get to the baseline, and then we'd have the long-term growth of 8% to 12%. And we feel -- I said kind of confident in getting to that double-digit EPS CAGR during the LRP. And then you'd have to kind of add in on top of that, what do you think the COVID impact would be, Steve.

Okay. So we could all theoretically adjust that 8% to 12% higher for what's going to be reported, including COVID from what it sounds like? That's hard for you to answer that, but I'll answer that for myself, I guess.

Yes, It would be positively impacted by whatever the COVID impact is in, say, '23 and going forward.

And next, we'll go to Ricky Goldwasser with Morgan Stanley.

So as we think about the long-term guidance beyond '23 and you think about the biosimilar benefit that we kind of like expect to see there's a wave of '23, '24, '25. In a year where you have a relatively higher biosimilars introduction to the market, should we assume sort of a EPS growth at the higher end of the range or at 12%? Just trying to think about how we should incorporate the biosimilar thinking. And then on the capital deployment, for our purposes as we think about modeling, what is your working capital requirements? So how much cash you need to have on your balance sheet, kind of like, every quarter for working capital? And so we can think about what kind of like the excess cash flow that can be deployed into buybacks.

Why don't we start? I'll follow off with the biosimilar. We haven't incorporated into our long-range growth any particular biosimilar launches. Of course, as the audience well knows, most impactful to us is a Part B biosimilars. And we have been participating and have been an early adopter and really encouraged the development of the biosimilar market. We are obviously very interested in the largest patient-administered, self-administered products like Humira will be -- is probably foremost in your mind. We're talking to all of our large customers seeing what our role there could be. We're encouraged by the interchangeability criteria that we sometimes are seeing from the FDA. It really displays some clinical open-mindedness, I guess, to the benefits of these therapies. We're also encouraged by providers' adoption and patients' acceptance. And also the professionalism and the type of companies that are manufacturing biosimilar products. And we have said they are a very strong benefit to AmerisourceBergen particularly with the services portfolio we have, along with businesses like ION and other contracting entities. We also -- when we look at -- one point I wish I'd say in my presentation, I'll say it now, we also are in the non-oncology therapeutics for physician-administered products neurology, ophthalmology, dermatology, rheumatology. We are developing tremendous capabilities there as well, and that's going to be a good growth driver for us further, and we'll look to give you guidance as we get more visibility into those product pipelines. Jim?

Yes. So thanks, Steven. I'll address the working capital part of it, and that's a very good question. And so as you're doing your modeling and looking at receivables and inventory and payables, I would assume that it's comparable to what you'd see at AmerisourceBergen in the recent past. In fact, the funny thing is Steve and I, actually, just this morning, we're talking about working capital and nothing to do with this meeting. We were just kind of talking about receivables and inventories and payables. And I guess that's the sort of thing that we talk about. But as you do your modeling, I would assume the posit kind of -- and working capital is very favorable for our company and our industry. And I would assume in the modeling that, that continues over the LRP, Ricky. Thanks.

Next we'll go to George Hill with Deutsche Bank.

Jim and Steve, I think most U.S. investors have become accustomed to the idea that the international market is a slower growing market than the U.S. market from a profit perspective, at least. I guess can you maybe deconstruct what you're seeing as the growth drivers in the international market versus the U.S. market that allow international operating earnings growth to keep pace what's historically been a faster growing U.S. market?

So thanks, George. Great question. We have -- we start with our U.K. business, which is a tremendous business, anchored by Boots, but also by very strong Alloga and a direct-to-pharmacy business, which also now called the Solus contracts. So Alliance Healthcare has got a tremendous footprint there. We more and more are exporting the Alloga footprint to Europe. We're showing tremendous success in Spain. We've got a lot of effort in Paris. In fact, next week, we're going to be in France and the Netherlands, looking at some of our retail models, but also hopefully visiting some pharmacies and trying to establish what the specialty footprint could look like. In the long range, we also are confident in the synergies. We need a more uniform commercial contracting capability and technology throughout Alliance, and we will be getting that over the next few years. So part of our model assumes a lot of investment into the infrastructure, particularly technology, which will enable us to be the commercialization service partner for businesses like World Courier, ICS, some of the more advanced medical alert notification work that we do in the U.S. But we've had good success with us. We're taking models that are successful in 1 market and really transporting it. I'll give you another example where we are benefiting. Recently, we had 1 of Bob's really former economist in a way you could explain it, really going and trying to help understand how we price specialty products in the U.S. There's just a lot of thinking there. And as we grapple with new pricing models, in fact, 1 of the markets in Europe is more interested in specialty products being dispensed at a pharmacy because post-COVID, they see that as an advantage, and they also see it as a more efficient site of care, more accessible to patients. So we really want to help generate those trends. We also will invest -- there's some interesting capital deployment opportunities. We'd invest to cement and consolidate some businesses. So we -- but very thoughtfully, I think AmerisourceBergen has prided ourselves on being excellent fiduciaries of our shareholders' capital, and you'll see that same discipline and rigor applied to Europe.

Steve, I'll add one quick thing there. And this is one thing we've talked about throughout our meeting today is that our business, we have the foundation and distribution, and then we have the higher margin, higher growth businesses. And as we said during the presentation in Europe at Alliance and including World Courier, of course, the higher margin, higher growth businesses are a higher percentage of operating income in our International Healthcare Solutions segment than in our U.S. Healthcare Solutions segment. And so if those higher-margin businesses are as we expect higher growth, that is one thing that is accretive and helpful to growth of our international business.

And lastly, our International Healthcare segment also includes World Courier, which has been a terrific and consistent grower.

And next, we'll go to Charles Rhyee with Cowen.

I wanted to follow up maybe on the last one there, about international. If we look at the preliminary guides here in '23 right, 5%. Can you maybe talk a little bit assumptions in international, particularly around FX? And then when we think about maybe the longer-term 5% to 8% op income growth in international. Again, maybe sort of your thoughts on where you see FX in that, as well as does that include the $75 million synergies that you announced at the time of the deal? And then I have a follow-up.

Yes, sure. So that long-term growth rate for Alliance of 5% to 8%, that is on a constant currency basis. FX has been a headwind in fiscal year '22, of course, as we've talked about and made apparent. And really, Alliance's performance in fiscal year '22, even on an as-reported basis, has been quite good. And on a constant currency or budgeted currency basis, has been quite good. But as we talk about 5% to 8% long-term at Alliance, it's on a constant currency basis. And in terms of '23, we've just kind of said the 5%, we haven't broken it down by business at this point in time. And we would do that as part of our -- as part of our detailed planning process.

Great. And if I could just follow up. Capital deployment, 3% here in fiscal '23. You guys announced recently, right, the resumption of share repurchases at the time of Walgreens making a sale of shares and kind of signaling to the market that, "Hey, look, we are here to support shareholders, and we've done a great job in terms of deleveraging our balance sheet". Any ability to perhaps accelerate that? And maybe in conjunction with that, in the future, if your large shareholder were to look to do a sale, is that something that you could do in a more structured way where you can intervene versus having a transaction necessarily go to the market?

Yes. So thank you for the question. We are in discussions with Walgreens, and we would expect to cooperate with them on any future sales. And the new Board authorization was very important to that discussion. And we would participate depending on our capital situation. But we do -- if you look at already, enjoyed Jim's slide there, we had looked at how we've deployed capital historically. And obviously, the $6.7 billion over the last 5 years was largely driven by Alliance, and that brought tremendous accretion to our shareholders. But you saw the almost $2 billion in dividends, about $2.1 billion in share repurchases. And at the moment, we think there's tremendous value in our shareholders. We've overall done very well for our shareholders by buying shares back and being capital efficient. And certainly, there's an appetite in the market as we saw a few weeks ago for those shares, and we've continued to work collaboratively to make it as little disruption as possible.

Steve, can I add something?

Sure.

So Charles, also along this line, and I've been involved with the Walgreens relationship since day 1. And there's Walgreens the customer, and then there's Walgreens, the investor. And I just -- as we go through this process and we work through it, it's really important that you all know how strong our relationship is with Walgreens the customer. So the things that we're doing on a day-to-day basis, both operationally and strategically, are as strong as they've been really throughout our relationship. So a different part of your question, but I just think it's important to put that out there.

And next, we'll go to Eric Coldwell with Baird.

I have 2. One is very big picture strategic and then one is a little more tactical. On the first one, I'm curious what your thoughts are on recession planning, the pros and cons of the ABC model. Any strategy or tactical changes that you perhaps might be adopting as you think about the economy, what's going on globally? Just a ton of conversations out there from strategists and pundits on this potential move into a recession. And I'm curious how your scenario planning is playing out as you think about that and how you think about your business activities over the next 1 or 2 years?

Yes, I can start out and maybe we can let Bob give some perspective as well. So look, I made the comment in my talk about the 1.5% operating margins. So the 150 basis points, we're very mindful of all those basis points. A lot of the lower margins get driven by our core distribution business. And that's governed by reimbursement and a contracting process with large customers. And AmerisourceBergen has many of the largest customers in the United States, including Walgreens, but also companies like Kaiser and Express Scripts that demand a very good cost of good sales -- cost of goods. I'm extremely proud of the way we've gone through the contracting process and being able to preserve value for our business and our shareholders. We're dealing with low cube capacity products, so that has been helpful from the transportation perspective. We also have got a lot of logistical expertise prowess. And even some of the ESG work that we're doing has enabled our businesses to be more efficient, our customers are more interested in recycling those sort of aspects, and that does help -- also interested in delivery efficiencies. But they do need often their deliveries at a certain time. We've also been focused on wage inflation. We are seeing a benefit from paying higher wages to the frontline workforce in terms of retention. Typically, we see a worker as they stay with us for over a year, being very -- getting into that purpose and getting into the culture, seeing the strong benefit programs we offer. So there is a benefit to really making sure we bring in an associate at an attractive weight, and then letting them really get inoculated into the company culture. So we're seeing some benefit from that. Look, I anticipate that there's been tremendous spending by governments in most of the large countries we operate in. There will be a budget constraints that come in at some stage. Of course, politicians and electoral will demand that. We maintain that pharmaceuticals are the most efficient form of health care, often overestimated as to what their impact is on global health care spending. Here in the U.S., people think it's 30%, 40%. And it's -- are often surprised to learn it's under 50%. And we also will see benefit from what Ricky talked about the biosimilar wave coming, a lot of patent expirations and new targeted therapies. So we believe that our position is very defensible. And certainly, I feel the economics in AmerisourceBergen is extremely defensible to all the parties that we contract with, including manufacturers and providers. And I'm sorry, last point I just have to make. When the pandemic started, Jim said we were talking this morning about receivables and cash flow and payables. I grew up in South Africa. We would have massive devaluations in the South African rand and the economy was very dependent on the gold price so we used to a lot of cycles. And perhaps part of that reaction process was to really get worried about receivables, same as I did in 2008 and 2009. In 2009, we lost $4 million. It was one of the lowest bad debt years we had in our core business. And I think you just can't understate the resiliency of the healthcare economy, because that does distinguish us, and it's really part of AmerisourceBergen's operating model. And we had very consistent trends throughout the pandemic. We didn't really see our quality of our receivables deteriorate much whatever class of trade we were servicing. And that's something I think you really need to appreciate by AmerisourceBergen. Bob, talk about inflation?

Yes. Yes, Steve, I think I'm going to add a couple of things. One, maybe start where you ended, and I was going to go right through historically, demand holds up in our businesses in recessions, and we've seen that over time. So I think depending on where that goes, I think we're confident we'll see traffic in physician offices, hospitals, pharmacies, veterinary hospitals. Secondly, this was a core part of my presentation, we're always working on being more efficient, right? So that's to make sure that we can meet the needs of our customers. If they're feeling pressure because of a recession, it could be because of inflation. But we're always working on making sure that we can find room to manage that. That's a core part of what we do and certainly a very important part as we go forward. And I think lastly, Eric, I think the innovation that we've talked about kind of in any cycle that we're going through, the kind of the incremental growth that we'll get from new services is really important, and we're committed to doing that.

Bob, if I can just finish up on that. My follow-up was actually about the innovation. And what you see from some observers as they suggest company should maybe back off innovation a little bit and focus on the debt reduction, buybacks, when shares are cheap, cash flow, things of that sort and let the long-term investment strategy come when the market is more willing to accept it and believe in it. So my follow-on question was, can you give us a sense on -- and we've got the broader framework of your earnings outlook. But can you give us a sense on the investment spending, CapEx versus OpEx? How dilutive are these investments? What the payback periods are? Just in -- I know you said 50 different projects. But if you could give us some overarching sense, so we're not maybe caught off guard with a really big M&A event at some point or something else?

Yes, Eric, I'll give you kind of a top line and then I'll kick it over to Jim to see if he wants to take it any deeper. But I will say these are investments that we make within the context of our yearly planning and are certainly contemplated in our LRP. So the numbers that Jim talked about through this period contemplate the level of investment that we're talking about. And secondly, we expect to find room for these investments. So one of the things we work hard on again is if we want to do something new, we want to find something that maybe we can stop doing to fund that. So they're not all incremental, and they are contemplated in our go-forward guidance.

Yes. And Bob, and I'll just quickly add that these innovation types of CapEx and OpEx, they're within the normal range that you've seen historically of AmerisourceBergen's CapEx and OpEx. And I think the point that Bob just made is just so key is that we're always looking for savings opportunities to be able to fund those sorts of things so they aren't incremental. And so then in terms of the capital deployment we have in the LRP, those sorts of acquisitions and share repurchases, they are a key part of our LRP. But these innovation expenditures kind of fall within the normal CapEx and normal OpEx that you would have seen historically.

Next, we'll go to Elizabeth Anderson with Evercore SI.

Just maybe sticking on the capital deployment. You talked about some potential M&A in the future mix. Are there any particular areas that you would call out in terms of things that you're currently interested? I know that right now you're obviously still integrating Alliance, et cetera, but sort of just as we sort of think about the long-term outlook.

Yes. Steve, let me -- I'll start and kind of talk about the financial aspect of it. And then I'm sure you want to finish with areas of interest. So as we look at the LRP and what our contribution is from capital deployment, we said 3% to 4% and really kind of 3% fiscal year '23 because we are deleveraging from Alliance in '22 and '23, and then a 4% CAGR after that. But even at that 4% CAGR in our LRP, the level of capital deployment it takes, which is meaningful to get to that CAGR. Even at that level every year in our LRP, we see our credit metrics improving, and we see our credit availability increasing and our firepower increasing. And so it does leave room for additional M&A and additional share repurchases at the right time. And so keep in mind that we're coming off a year where we had very big accretion from the Alliance acquisition. And as we look at the way our LRP is built, we do have excess credit capacity to do additional things when the right opportunities arise. And we think that, that is -- we think to have that strong balance sheet, to be able to do those sorts of things is strategic, and it's a differentiator and it's what enabled Alliance when we were able to put $3 billion of cash into the Alliance acquisition because we have this excess capacity on our balance sheet to drive even more returns from capital deployment.

We have -- I'd tell you the most e-mails I've had in recent memories when we launched the venture capital fund. I'm kind of a talkative guy, friendly guy so just about everyone I know in the world came out with some idea. And it's actually a very good strategy for us. AmerisourceBergen is well known as a home where we respect entrepreneurs. And we do particularly well with founder-led businesses. They tend to transition well to us. And even though MWI was a public company, there were really aspects of that. And culturally, that has been an excellent acquisition for us. World Courier was also a founder-led company. So -- Xcenda was a founder-led company. But as we're attracting even stronger talent that has been out in broader areas, one area I'd point to where we've shown an ability to invest and really drive further value as the health systems area in the U.S. Such a strong area for AmerisourceBergen wasn't always that way and really helps us because not only do we have high market share, we also are leading with market leaders. We've got some of the best health systems in the country. And we are much more relevant to the overall economics conversation, whether it's helping their pharmacies be more efficient, whether it's helping them with logistics, whether it's helping them with their outpatient strategy. I feel that's a really good example of how we built up an ecosystem. And of course, you know there are very many examples in oncology. So that's one way. We also will do geographic expansion, not only for Alliance, but also for Animal Health, where we find the right opportunities, the right sort of matches. And a clinical trial logistics area, World Courier has been a great home for us. So we've done a couple of more on the investment in development like in cell and gene therapy. We've developed a lot of new technologies that you'll see come into the marketplace in a few years, which will make -- be more efficient, more ESG friendly. And Bob is leading our businesses in the U.S. Tremendous amount of interest in adherence and access services. So Bob, just quickly note any particular areas you are of interest in?

Yes. I think if -- we certainly emphasize biopharma services throughout our presentation today, we believe that our reputation that we have in the U.S. to strong businesses that we have in the U.S., in addition to the footprint that we now have, in particular in Western Europe gives us a real opportunity to add-on services, whether we build by partner and that to make sure that we can go to market to the biopharma manufacturers with new innovations, right? So I think -- when I think about how we're going to deliver the numbers in the longer term, we believe that we'll be providing incremental and new and innovative services to global biopharma manufacturers starting with the small and midsize but certainly not exclusive to them, including the largest. So it's certainly an emphasis in biopharma services. We think our footprint makes that more attractive, and we hope to use the expertise of Alliance Healthcare, the expertise at AmerisourceBergen and the appetite of the biopharma manufacturers to innovate new services.

Okay. Great. That was really helpful. And then maybe just one quick follow-up. Just in terms of when you were talking about the potential FY '23 COVID contribution, maybe at half the rate at least of what we're seeing in '22. Is there anything that you have in terms of visibility into that right now? Or is that kind of just a placeholder until we get sort of more information later in the year?

Honestly, it is a placeholder. It really will depend a lot on the oral therapies, a lot of our business right now and how they develop, do they lose their -- do they become regular-approved products versus EUA products. Because the distribution models, as I said, in my presentation are different than the impact to the financials. Even though we work obviously on a fair fee. But a modest fee we get 100% of the market when we're doing these limited distribution program. So it is something that we expect as these products become more available, including, we believe, the vaccine, we hope that they'll go through the efficiencies of the general distribution channel. What we expect, I'd say, with the therapies we might hope that they stay the way they are, but financially.

And next, we'll go to Michael Cherny with BofA.

Great. Thanks, everyone. So trying to wrap up, I think, a few different questions. But you talked, Jim, a lot about the long-term guidance and what could be upside drivers getting to the 12% or potentially higher M&A and having more balance sheet capability, if biosimilars were to come. As you think about the downside case, 8%, I think, versus your historical CAGR would be on the low end. Obviously, it seems like you're kind of generally pointing us in that ballpark, give or take for next year. But as you think about that long-term trajectory, what has to happen, call it, go wrong, call it grow slower, that puts you in that consistent 8% range, give or take, that's where you end up in various different years?

Yes. So first of all, as we do our business planning internally, and we think about these sorts of things, we're all kind of wired to say what is it that we need to do in order to get to the high end of our range, not what's going to happen to drive us to the low end of our range. And so I think that's probably evidenced in our results and typically coming in towards the higher end, as I'm sure you're all accustomed to. So -- but to answer your question, what are some of the things that could drive one to the lower end of the range -- it would be things like is generic deflation more than we have expected in the plan, is inflation more than we have expected in the plan. So I would have to say it would be like those macro sorts of things that would impact the industry that would drive us to the bottom end of the range. And I think it would be things like our execution that would drive, would kind of keep us from being at the bottom end of the range because we have a high degree of confidence in our ability to execute.

One comment I'll make. We had a lovely chance to have dinner with our 2 Board members who are with us today, and they are our longest tenured Board members, which gives the benefit of being historians. And so we asked them at dinner what are the 2 biggest changes that they've seen in the company? And the one was while the people in AmerisourceBergen have always been well intentioned, but the quality and the knowledge of the health care industry is so vastly improved. And the other one was I was particularly pleased about was we used to be a supply chain and distribution company. And now we really are a health care company that has deep understanding of health care economies and all the countries that we operate in. And I thought that's just such a good example of AmerisourceBergen being well positioned and being in the right markets with the right sort of foundation blocks to build on. We also -- I go back to some of the work we've done with the Board. At once -- we've actually really improved our operating margin, and we're very proud of that. It's -- we're doing so much business at low operating margins in our distribution business in the U.S. with large customers. So the fact that we have done that by the capital deployment and the impact of the higher-margin businesses like our oncology and specialty franchise, I think, should also be noted today.

The next question we'll go to Eric Percher with Nephron Research.

Question on the health system side and 2 questions. I'll start with one and then come to the other. You've talked about the creation of specialty GPO services for health systems that are used to using GPOs. So what was it that you created that was of value? Was it specific to the biosimilar opportunity? And do you see more value creation opportunities having established that?

Thank you for the question, Eric. So if you think about -- let's start with ION before we get to the health systems. What we have there is very integrated proposition kind of from manufacturer contracting through education to distribution. It's not literally integrated, but kind of there's a good workflow there. What we were able to offer and are able to offer the manufacturers and the health systems and these specialty products or some of those very same things. And what the ION network and what these emerging networks and the health systems are able to do is really work on their clinical formulary P&T. They're willing to make some choices of products in terms of clinical effectiveness that is advantageous from a manufacturer relationship standpoint as well as a clinical benefit, obviously. So those are some of the things that we're doing that don't necessarily happen in other traditional GPOs that we're getting some traction.

And then also in health systems, cell and gene therapy came up often. And it was interesting to hear about TrakCel and Lash working together. I think the other difficult part has been the last mile. And you mentioned that you've invested in [ cryo ]. Is there a scenario in which you would try to be the last mile across health system and beyond? And does that require a meaningful investment to get there? And could that be meaningful within this LRP season?

It's exactly, Eric, and I probably didn't emphasize it enough, but it's exactly what World Courier is doing. So that's -- it's a core capability that we do on a global basis, including in North America. So that last mile, that very specialized [ cryo ], whether it's from the patient to the lab or from the lab back to the patient is something that we're a leader in, frankly. So we would expect to continue that and it would be part of our normal growth and certainly contemplated within our LRP.

And before we turn it over to Steve Collis for closing remarks, we'll take our last question from A.J. Rice with Credit Suisse.

It puts a lot of pressure on, of course. But maybe 2 questions. One, to go back to your comments about M&A. It's not often that we see companies doing $6-plus billion deals that are double-digit accretive in the first year. Does that make you look at international in a different way? Was that just a one-off? Or is -- others selling when you're buying, there's opportunities perhaps to find other deals that have similar or attractive financials, does it make you think about international a little more?

Well, 2 tricks to that, and Jim, of course, is the expert. But first of all, we had over half of the acquisition firepower on our balance sheet. So we had a lot of -- we had cash. Second of all, it was a multiple which you can argue about for a distribution business was a fair multiple for the seller, but we're seeing a lot of higher multiples. So now we're getting into a higher interest rate environment, which makes things a little bit more challenging. But also, we expect that potentially the M&A market and the private equity companies, that used to be that we could compete very easily as a strategic with the private equity companies. But we're seeing some very high multiples for the type of businesses that we're interested in, data analytics, high-end commercialization businesses. And those are the areas that we very much would like to play. So we hope we see a market that's a little bit more rational with investors expecting higher returns from sponsors, and I think it could be productive for us. International, there's no panacea there. We also -- Bob, you made some great comments about Walgreens. But part of doing this deal was really we had studied our relationship with Walgreens, which started in earnest in 2013, so nearly 10 years. And this was the way that we wanted to best define our long-range partnership by having 1 global wholesale business. And I think that it was the best solution for how do we work together in the long run and we're going to continue to work with Walgreens and irrespective of their shareholding. We have the Boots investment. We have the Walgreens contract through 2029. We have the WBAD sourcing contracting and many other opportunities that Bob pointed out, including last mile and central full-type opportunities. So I think that's how we think about it.

And then the other question I had was, I think, Steve, in your prepared remarks, you mentioned the pandemic and stuff you've done around the vaccines and so forth, allowed you to enhance your relationship with the federal government, and the government customer, as you described it. Are there anything about that or other things that you did in the pandemic that give you new opportunities as we come out of the pandemic to pursue other business opportunities with some of those customers?

Yes, I think as the budget situation settles down. The administration will look in the U.S. at what the long-range sourcing opportunity is, and should we be doing near sourcing and how do we ensure we have the right type of supply. I think our relationship is really positioning us very well to help be a part of that discussion, and the work we did on the strategic national stockpile. Of course, we have been privileged to be the DoD's distributor for many years, and we enjoy that relationship. We also -- Bob's team, we've contracted with -- for vaccine distribution with the State of California, for example, -- that's gone very well. They've re-upped with us, and there are other states that are working with us. So again, we think that, that AmerisourceBergen's profile being -- rising with a lot of these entities is going to give us opportunity. And Bob has appointed new leadership in that area and the government [indiscernible] because we do see that as a throughput area. And certainly, in Europe, we're working very closely with the different health systems and the vaccine manufacturers, and we'll continue to do so. So I must say that we were very much looking forward to this. And I hope the event met everyone's expectations. I felt the quality of the information was outstanding. Special thanks to Susan, who did this for the first time. And I hope you see that we are serious about our ESG and diversity footprint. I could not be more proud, of course, Jim, of the work that you did. Bennett, you and your team were outstanding. You schooled us so well. And actually, somehow you do without taking too much of my time, which I really appreciate. And Bob, I thought your slides were absolutely outstanding, really helped bringing the strategy and the growth drivers to life with some very tangible examples. And thanks to everyone at -- all the AmerisourceBergen team. People like [ Mel ] and [ Laz ] who had us, support us as well. We really appreciate it. And [ Kelly ] and [ Andrea ], our executive assistant. So we very much appreciate this time. And we do hope that you took note of our key takeaways and note our confidence in our ability to carry on as a purpose-led company that is driving differentiated shareholder value. Thank you for your time today.