Daniel Grosslight

Daniel Grosslight asked how Privia Health's provider recruitment and sales pitch might shift over the next couple of years, given that competitors are now adopting similar risk-taking models, potentially changing conversations with physicians.

Answer

Parth Mehrotra (CEO, Privia Health Group) acknowledged that perceived barriers to entry can be lower, but emphasized that core competence lies in consistent performance and value delivery across cycles. He stated that Privia's pitch remains consistent, backed by its track record and full-service offering (medical group, technology stack, payer contracts, value-based suite), which differentiates it from competitors. He believes that while some competitors may do well, Privia's integrated approach and history will continue to resonate with physician practices seeking comprehensive solutions.

Daniel Grosslight asked about the impact of competitors adopting Privia Health's risk-taking model on provider recruitment, inquiring if conversations with providers have shifted and how the sales pitch has evolved.

Answer

Parth Mehrotra, CEO of Privia Health Group, acknowledged that while perceived barriers to entry for starting an ACO might be low, the challenge lies in consistent performance and delivering value. He stated that Privia Health's pitch remains consistent, backed by its track record. He emphasized the importance of sharing risk among doctors, Privia Health, and payers for long-term viability, contrasting it with "artificial things" that can question business viability. He highlighted Privia Health's differentiated full-service offering, including medical group integration, technology stack, and comprehensive value-based contracts, which many competitors lack. He believes the TAM is large, and Privia Health aims to be a consolidator.

Daniel Grosslight asked about potential concerns for 2026 and whether Privia can continue to operate above its 20% adjusted EBITDA growth target on an organic basis.

Answer

CEO Parth Mehrotra expressed confidence in the sustainability of Privia's model, stating they have been positioned for the current environment for years. He reiterated the importance of their disciplined approach to value-based care. Given the strong sales momentum and performance, he sees no reason why the company would not continue to target 20% EBITDA growth into 2026, noting they have exceeded that target in 2024 and are on track to do so again in 2025.

Daniel Grosslight from Citi asked if the 2% contribution margin on the capitated book is expected to continue in 2025 and inquired about the company's broader thinking on full capitation for 2026 and beyond, given rate environments.

Answer

CEO Parth Mehrotra stated that while the company doesn't guide by program, the goal for any capitated contract is to achieve a positive contribution margin. He reiterated that Privia does not believe taking full risk is necessary to succeed in Medicare Advantage and prefers a shared-risk model. He does not expect a significant ramp-up in capitation unless payers offer contracts with a fair risk-reward payment.

Daniel Grosslight from Citi asked for the company's thoughts on the recent election results, questioning if a Republican-controlled government changes their view on fee-for-service versus value-based care, particularly regarding the MSSP program.

Answer

CEO Parth Mehrotra stated that the company's strategy is independent of the political administration, having operated successfully through three different ones. He emphasized that Privia's model of supporting small, community-based providers is on the 'right side of history' and aligns with bipartisan goals. He noted CMS has been consistent in supporting MSSP and expects that to continue, so nothing fundamentally changes for Privia.

Daniel Grosslight asked for more details on the uptake of GoodRx's new Subscription Offerings, particularly weight loss, and the expected growth in 2026, considering increased competition. He also inquired about how this informs the company's marketing spend for these new offerings.

Answer

Chris McGinnis, Chief Financial Officer, explained that weight loss subscriptions launched late November 2025, with marketing starting late December, so early adoption was largely organic. He noted that oral solids for weight loss are attracting previous compounders, and he expects 4x-5x run rate growth by December 2026, making it an increasingly meaningful part of revenue. He highlighted tailwinds like new drugs and indications. Marketing dollars are being pushed more to condition-specific subscriptions, which also drives a halo effect on the brand. Wendy Barnes, Chief Executive Officer, added that pharmaceutical price points and competitive molecules will influence subscriptions. She emphasized GoodRx's broad retail partnerships for same-day access and mentioned rethinking the Gold offering for 2026.

Daniel Grosslight asked about the uptake of new subscription offerings, particularly weight loss, and how to think about their growth in 2026, considering increasing competition. He also inquired how this informs marketing spend for these new offerings.

Answer

Chris McGinnis (CFO, GoodRx) explained that weight loss subscriptions, launched late November 2025 with marketing starting late December, saw significant organic adoption. He noted that oral solids for weight loss are attracting users from compounded alternatives. While revenue was less than $1 million in Q4 2025, he expects it to grow 4-5x as a run rate by December 2026, becoming increasingly meaningful. He highlighted tailwinds like new drugs and indications. Marketing dollars are being pushed more towards condition-specific subscriptions, which also have a halo effect on the overall brand. Wendy Barnes (CEO, GoodRx) added that future subscription growth, especially for weight loss, will be influenced by pharma price points and competitive molecules, noting that the market resets every 4-6 weeks. She emphasized GoodRx's attractive retail channel for same-day access and mentioned rethinking the Gold offering for 2026.

Daniel Grosslight of Citigroup asked where prescription volume from recent retail pharmacy closures is flowing, particularly to independent pharmacies, and requested an update on the adoption of the new CommunityLink program.

Answer

CEO Wendy Barnes responded that it was too early to definitively track volume flow from Rite Aid closures but noted grocer retailers have anecdotally reported increased traffic. On CommunityLink, she called it the 'right answer' for independents, confirming that participating pharmacies have seen meaningfully higher profitability. She stated GoodRx will increase marketing to grow the program, which also gives independents access to ISP and brand discounts.

Daniel Grosslight of Citigroup Inc. asked where prescription volume from retail store closings is flowing, particularly towards independents, and requested an update on the adoption of the CommunityLink program for independent pharmacies.

Answer

CEO Wendy Barnes responded that it is too early to determine the full impact of volume shifts from Rite Aid, though some grocer partners have seen increased traffic. She expressed strong support for the CommunityLink program, stating that early adopters have seen meaningfully improved profitability. She confirmed GoodRx will increase marketing to grow the program, which gives independents access to better economics and brand drug discounts via ISP.

Daniel Grosslight asked about the opportunity for GoodRx to serve as a larger 'front door' for direct-to-consumer cash-pay programs like those for GLP-1s, leveraging its telehealth assets and pharma relationships.

Answer

CEO Wendy Barnes confirmed this is a key strategic focus. She stated that programs embedded on the GoodRx platform see a significant performance lift compared to standalone manufacturer sites due to GoodRx's brand trust and consumer traffic. She also noted an opportunity to better leverage their telehealth partnership to create a more comprehensive service that includes both the provider visit and the prescription fulfillment.

Daniel Grosslight asked if GoodRx sees an opportunity to serve as a larger 'front door' for direct-to-consumer cash pay programs for GLP-1s, leveraging its telehealth assets and existing relationships with pharma manufacturers.

Answer

CEO Wendy Barnes confirmed this is a key strategic focus. She explained that manufacturer programs embedded on the GoodRx platform see a significant performance lift due to high consumer trust and traffic. She also noted an opportunity to better leverage their telehealth partnership to create a more comprehensive service that includes both the provider visit and the prescription fulfillment, aligning with the direct-to-consumer model.

Daniel Grosslight of Citigroup requested an update on the Kroger direct contract, asking if the initial slow rollout has improved and how quickly Kroger's claim volume on the platform could reach its overall market share.

Answer

Interim CEO Scott Wagner declined to provide specific metrics for an individual retailer but stated that GoodRx is working with Kroger and driving views to them within its platform. He characterized the early-stage KPIs as being where they expected and expressed hope to bring more advanced retail capabilities to the partnership.

Daniel Grosslight asked for a breakdown of the BetterHelp adjusted EBITDA ramp for 2026, noting a steeper ramp than prior years, and the levers that would lead to the bottom and top of the full-year guidance range.

Answer

Chuck Divita, CEO, and Michael Minchak, Head of Investor Relations, explained that the ramp is influenced by advertising spend, investments in scaling insurance, and seasonal ad spend pullbacks. They noted that the first half of the year is impacted by insurance scaling investments, with the fourth quarter typically showing the strongest EBITDA margin due to reduced ad spend.

Daniel Grosslight asked for a breakdown of the cadence for BetterHelp's adjusted EBITDA margin improvement in 2026, the drivers behind the steeper ramp compared to prior years, and the levers influencing the full-year guidance range.

Answer

CEO Chuck Divita and Head of Investor Relations Michael Minchak explained that key drivers include advertising spend levels, investments to scale the insurance offering, and the typical seasonal pullback in ad spend during the fourth quarter. Investments in insurance scaling are particularly impacting the first half of the year.

Daniel Grosslight of Citi requested more detail on the expected "meaningful revenue contribution" from BetterHelp Insurance in 2026 and the cadence of investments required to achieve that scale.

Answer

CFO Mala Murthy explained that investments are already underway, funded by the adjusted EBITDA reduction announced with the Uplift acquisition. These investments focus on scaling talent and back-end operational capabilities like billing. She reiterated that the revenue ramp will occur over a 6-12 month period and that the company needs more proof points before providing a detailed 2026 outlook, promising updates on future calls.

Daniel Grosslight requested details on the expected cadence of BetterHelp's margin improvement in the second half of the year, considering the new costs from the UpLift acquisition. He also asked about UpLift's pricing model and its potential integration with the Integrated Care segment.

Answer

CFO Mala Murthy stated that the second-half margin ramp will be driven by revenue growth from international expansion and new insurance initiatives, along with a more pronounced pullback in Q4 advertising spend compared to last year. CEO Chuck Divita confirmed UpLift uses a visit-based, in-network pricing model and clarified that while it serves a different market than the Integrated Care mental health offering, it aligns with the company's overarching strategic focus on virtual mental health.

Daniel Grosslight from Citigroup asked which Chronic Care programs are growing fastest and how Teladoc helps employers and PBMs manage GLP-1 drug costs without jeopardizing manufacturer rebates.

Answer

CEO Chuck Divita identified bundled services as having the most traction, with weight management being a significant source of interest and growth. Regarding GLP-1s, he noted that employers are still developing strategies and asserted that employers should have the flexibility to design benefits for their employees without being 'held hostage' by PBM rebate structures.

Daniel Grosslight inquired about the modeling of stock-based compensation, given its variability, and the company's capital deployment strategy for 2026, specifically regarding the propensity to buy down debt in the open market due to its significant trading discount.

Answer

CFO Mario Ramos advised maintaining existing stock-based compensation assumptions. He acknowledged the discounted trading of their convertible debt but emphasized that the current focus is on operational execution and deleveraging, while remaining open to liability management opportunities that enhance shareholder value.

Daniel Grosslight asked for guidance on modeling stock-based compensation given its variability, and inquired about the company's capital deployment strategy for 2026, particularly regarding buying back discounted debt for liability management.

Answer

CFO Mario Ramos advised maintaining current stock-based compensation assumptions. He acknowledged awareness of the convertible debt trading at a discount but emphasized focusing on deleveraging through business execution, while remaining open to liability management opportunities that add shareholder value.

Daniel Grosslight of Citigroup Inc. asked for more detail on the Aetna contract's launch timeline being pushed to Q1 2026 and what specific steps are needed before the go-live date.

Answer

CEO Seth Blackley expressed high confidence in the Q1 2026 launch date, explaining the timeline is a strategic choice to be disciplined, ensuring all enhanced partnership elements are in place and data exchange processes are perfected. He framed it as a "slow down to speed up" approach to enable faster expansion to other states later.

Daniel Grosslight of Citi asked about the evolution of the competitive environment, especially with Evolent's new limited-risk Performance Suite model, and whether the company is increasingly competing against rivals like Carelon or EviCore.

Answer

Executive Seth Blackley stated that the competitive landscape has not changed significantly. He asserted that Evolent's offerings, particularly in oncology, are unique and that win rates have remained consistent despite the new contract structure. He cited the doubling of the weighted sales pipeline as evidence of strong demand and competitive differentiation.

Daniel Grosslight asked for clarity on 2026 profitability in relation to the 20% long-term growth target and requested a breakdown of the MA headwind between business segments.

Answer

CFO John Johnson reiterated the company's commitment to a 20%+ annual EBITDA growth target off the 2025 base but declined to comment specifically on 2026, emphasizing the current focus on rebuilding trust with an achievable 2025 outlook. He confirmed the MA headwind impacts both Performance Suite and Technology and Services, affecting some mature-margin risk contracts as well as fee-based clients.

Daniel Grosslight of Citigroup inquired about the negotiability of the $55 million non-mechanical rate increase, particularly with partners who recently provided rate relief.

Answer

John Johnson acknowledged it is a negotiation but emphasized that the request is based on 'incontrovertible' data related to population health changes beyond Evolent's control. He expressed confidence that the company's long-term partnership approach would facilitate a successful outcome. He also noted the negotiations involve both payers from the prior increase and others.

Daniel Grosslight asked for a breakdown of the volume improvement contributing to the 2026 adjusted EBITDA guidance, specifically how much is driven by the Optum agreement versus other contracts. He also sought clarification on net CapEx expectations, given the change in reporting.

Answer

Jonathan Leon, CFO, clarified that preferred provider agreements do not constitute a significant portion of the projected volume growth, which is broadly distributed across various therapy categories. Regarding CapEx, he explained that approximately 30% of the growth would come from sales of patient CapEx, a figure already accounted for in adjusted EBITDA to prevent double-counting.

Daniel Grosslight asked for a breakdown of the volume improvement contributing to Accendra Health's 2026 Adjusted EBITDA guidance, specifically how much is driven by the Optum agreement versus other non-contracted or existing sources. He also sought clarification on the net CapEx guidance, given the change in reporting.

Answer

Jonathan Leon, CFO, clarified that the volume growth is not heavily reliant on preferred provider agreements like Optum, but rather spread across therapy categories and customers, with new contracts taking time to ramp up. Regarding CapEx, he explained that approximately 30% of the growth would be from sales of Patient CapEx, which is already accounted for in Adjusted EBITDA.

Daniel Grosslight inquired about Cardinal Health's Biopharma Solutions, specifically the new business wins for Sonexus, including a significant competitive takeaway. He asked which specific capabilities resonate most with manufacturers and if any significant investments are anticipated to maintain competitiveness in the hub business over the next year.

Answer

CEO Jason Hollar attributed Sonexus's success to its dedicated team, deep customer understanding, and the digitization of its platform, which simplifies operations and enables seamless replication for new products. He emphasized a culture of consistent, elevated investment rather than sporadic spikes, focusing on productivity, efficiency, and leveraging technology like AI to address future opportunities. CFO Aaron Alt reiterated the aspirational goal of achieving $1 billion in revenue for Biopharma Services by fiscal 2028, with Sonexus being a key driver.

Daniel Grosslight inquired about the specific capabilities resonating with manufacturers that led to new business wins for Sonexus within Biopharma Solutions, including a significant competitive takeaway. He also asked about anticipated future investments to maintain competitiveness in the hub business.

Answer

CEO Jason Hollar and CFO Aaron Alt attributed Sonexus's success to a strong team that understands customer needs and a digitized platform that simplifies work and allows seamless replication for other products. Jason emphasized a consistent investment culture focused on productivity and reinvesting savings into future opportunities, rather than large, reactive spikes. Aaron reiterated the goal of $1 billion revenue for biopharma services by fiscal 2028, with Sonexus being a key growth driver.

Daniel Grosslight asked for clarification on whether the accretion from ION and GIA acquisitions includes the onboarding of their distribution businesses, and for an update on the progress of onboarding ION's distribution (starting October) and GIA's (April 2026) versus expectations. He also inquired about the potential timeline for onboarding Solaris Health's distribution.

Answer

CFO Aaron Alt clarified that the distribution onboarding for ION and GIA is included in the current guidance and is progressing well. He stated that while the opportunity to gain distribution for Solaris Health's drug spend is expected later this fiscal year, its contribution is not yet included in the updated guidance.

Daniel Grosslight sought clarification on whether the accretion from ION and GIA acquisitions includes the onboarding of their distribution businesses, how that process is progressing, and when the distribution business for Solaris Health might be integrated.

Answer

CFO Aaron Alt confirmed that the guidance updates include the ongoing process of Cardinal Health taking on the distribution for ION and GIA, which is progressing well. For Solaris Health, while the opportunity to gain its drug spend distribution is expected later this fiscal year, the current guidance does not yet include this potential contribution.

Daniel Grosslight of Citigroup asked about potential pricing headwinds in the At-Home Solutions business, particularly from the return of competitive bidding, and requested the percentage of revenue exposed.

Answer

CEO Jason Hollar stated the company feels well-positioned due to its diverse payer mix and unique capabilities. He noted that for Medicare, CGM products represent less than 15% of total At-Home Solutions revenue and that the company's focus on compliance is an advantage in an environment focused on reducing fraud.

Daniel Grosslight asked about the mechanics of implementing price increases to offset GMPD tariffs, particularly in light of health systems reporting that their supply costs are largely fixed.

Answer

CEO Jason Hollar stated that the majority of the remaining $200-$300 million gross tariff cost would be mitigated through pricing, but only after significant non-pricing actions were exhausted. He emphasized a collaborative approach with customers, noting that price increases would not be uniform and would focus on low-margin, commoditized products sourced from regions like China that are difficult to resource elsewhere.

Daniel Grosslight of Citigroup asked for more detail on the GMPD segment's manufacturing footprint, specifically the breakdown between the U.S. and Mexico, and whether tariff volatility is accelerating the company's onshoring strategy.

Answer

CEO Jason Hollar clarified that of the one-third of GMPD revenue from Cardinal-branded products, about half is sourced from North America, which is split evenly between the U.S. and Mexico. He stated that while the company has the capability to manufacture up to 50% of its branded products in the U.S., a rapid shift is constrained by cost, capacity, and regulatory hurdles. He noted that significant, widespread tariffs would force resourcing, but it's too early to accelerate major investment decisions given the uncertainty.

Daniel Grosslight asked about competitive intensity in the GMPD segment, referencing the recent loss of VA contracts and rumors of a competitor going public.

Answer

CEO Jason Hollar characterized the competitive environment as 'competitive and stable.' He downplayed the significance of the lost VA contracts, describing the business as relatively low-margin with minimal attachment of high-value Cardinal brand products, framing it as part of normal customer rotation in the industry.

Daniel Grosslight focused on the strong operating profit results in the Prescription Technology Solutions (RxTS) segment, asking for more detail on the drivers, the contribution from GLP-1 related programs versus other specialty drugs, and any shifts in prior authorization behavior due to cash-pay or oral GLPs.

Answer

CEO Brian Tyler highlighted the addition of 50 new programs across 43 unique brands in the quarter, spanning loyalty scripts, hub services, and access/affordability solutions, indicating broad market receptiveness. He also noted that efficiency improvements contributed to performance. CFO Britt Vitalone added that annual verification programs are off to a strong start with meaningful volume growth across all new brands and programs, not just GLP-1s, supporting the raised outlook.

Daniel Grosslight focused on the strong operating profit results in the Prescription Technology Solutions (RXTS) segment, asking for more detail on drivers, the contribution from GLP-1 related programs versus other specialty drugs, and any shifts in prior authorization behavior due to oral GLP-1 launches.

Answer

Brian Tyler, CEO, noted that the RXTS segment added 50 new programs across 43 unique brands, not concentrated in any particular area, including loyalty scripts, hub services, and access/affordability programs. He highlighted the constructive impact of new customers and efficient operations. Britt Vitalone, CFO, added that annual verification programs were off to a good start with meaningful volume growth across new brands and programs, not just GLP-1s.

Daniel Grosslight asked about the anticipated impact of an increase in uninsured individuals and cash-pay prescriptions (e.g., through TrumpRx) on McKesson's prior authorization and Rx2S businesses for calendar year 2026, and whether there are plans to integrate technologies with the Trump administration.

Answer

Brian Tyler, CEO, stated that direct-to-patient pharmacy models have existed for over a decade, and based on current assessments, the eligible population for discounted prices remains small, thus not anticipating a significant impact on the prior authorization business. He noted that McKesson possesses tools for automation, patient interface, and last-mile delivery, and is committed to working with all governments and policymakers to improve the U.S. healthcare system.

Daniel Grosslight asked about the anticipated impact of an increase in uninsured and cash-paying patients, potentially through initiatives like TrumpRx, on McKesson's prior authorization and Prescription Technology Solutions (RxTS) businesses for calendar year 2026, and the company's plans for collaboration with the Trump administration.

Answer

Brian Tyler, Chief Executive Officer, stated that direct-to-patient pharmacy has existed for over a decade and the eligible population for discounted prices remains small, thus not anticipating a significant impact on the prior authorization business. He noted McKesson's existing tools for automation, patient interface, and last-mile delivery, and affirmed the company's commitment to working with all governments and policymakers to improve healthcare accessibility, affordability, and quality.

Daniel Grosslight of Citigroup Inc. inquired about the impact of biosimilar adoption, specifically any acceleration in benefits to the bottom line from the Part B channel (retina) and the Part D channel (STELARA), and the effect of PBM in-sourcing.

Answer

CEO & Director Brian Tyler explained that major recent biosimilar launches like HUMIRA and STELARA were in the Part D channel and not material to the bottom line. He highlighted that the Part B channel is most effective for McKesson and expressed excitement for future opportunities in retina, though the Prism acquisition is very recent. EVP & CFO Britt Vitalone added that biosimilars are viewed as a steady, long-term contributor rather than a source of material quarterly gains.

Daniel Grosslight from Citigroup Inc. asked about expectations for GLP-1 access programs, considering potential headwinds from stricter payer controls versus tailwinds from manufacturers' expanding cash-pay programs.

Answer

CEO Brian Tyler noted that McKesson provides a range of access solutions and expects to benefit as more patients become clinically appropriate for GLP-1s, adding that the cash-pay component is currently small. CFO Britt Vitalone confirmed they support all major GLP-1 products and see strong momentum carrying into fiscal 2026. The overall growth outlook blends these various market dynamics.

Daniel Grosslight of Citigroup questioned the timing of the PRISM acquisition, asking if a market shift made it more opportune or if the oncology opportunity was becoming saturated. He also asked for more detail on how expertise from the oncology platform could be applied to the retina space.

Answer

CEO Brian Tyler asserted that oncology remains a central growth pillar and is not tapped out. He explained the PRISM deal's timing was a result of disciplined M&A—finding the right asset at the right valuation that fit their strategy. He noted they can leverage their deep experience in specialty distribution, GPO services, and business support to build an analogous platform for retina care.

Daniel Grosslight asked about the current market size for community oncology, the potential to expand the practice management model into other specialties, and the relative importance of growth drivers within the U.S. Oncology network, such as adding new providers versus increasing contribution from existing ones.

Answer

CFO Britt Vitalone acknowledged the oncology market has grown beyond the previously stated $55 billion, partly due to new areas like cell and gene therapy. He noted that while McKesson serves other specialties, the focus remains on oncology due to the robust drug innovation pipeline. He explained that adding providers is a key growth driver, as scale creates a virtuous cycle of better buying power and enhanced clinical capabilities, which in turn attracts more providers.

Daniel Grosslight requested an update on the accretion from Retina Consultants of America (RCA) in its first full year under Cencora's ownership, asking for quantification of its outperformance against initial expectations and the specific sources of this strong performance.

Answer

Jim Cleary, Executive Vice President and CFO, confirmed very strong performance at RCA, noting good organic growth and successful tuck-in acquisition opportunities. He stated that RCA exceeded expectations, particularly in its clinical trial business, and performed well across the entire business, with growth continuing to ramp. Cleary also took the opportunity to clarify that the previously discussed below-the-operating-income line items related to OneOncology are ongoing and not one-time.

Daniel Grosslight requested an update on the accretion from RCA in its first full year, now that the one-year mark has passed, asking for quantification of its outperformance compared to initial expectations and the sources of that outperformance.

Answer

Jim Cleary, Executive VP and CFO, Cencora, confirmed very strong performance at RCA, exceeding initial expectations. He cited good organic performance and successful tuck-in acquisition opportunities as sources of outperformance, particularly in the clinical trial part of the business. Cleary expressed satisfaction with the acquisition and the continued growth ramp expected throughout the year and in future years. He also clarified that the below-the-operating-income line items for One Oncology are ongoing accounting nuances, not one-time.

Daniel Grosslight asked how Cencora's capital deployment priorities—including increased CapEx, dividend, share repurchases, and the One Oncology call option—are influencing its near-term M&A strategy outside of One Oncology, and when the One Oncology call option is expected to be exercised.

Answer

EVP and CFO Jim Cleary outlined Cencora's four key capital deployment areas: internal investments (infrastructure, technology), strategic M&A (RCA, One Oncology), opportunistic share repurchases, and a reasonable, growing dividend (9% increase announced). He stated that Cencora has a put-call structure in place for One Oncology and ultimately expects to own all of it, but did not provide a specific timeline for exercising the call option.

Daniel Grosslight inquired about Cencora's near-term capital deployment priorities, including increased CapEx, dividend, share repurchases, and the upcoming OneOncology call option exercise, asking if these competing priorities would lead to a slowdown in larger M&A, and when the OneOncology call option is expected to be exercised.

Answer

CFO Jim Cleary outlined Cencora's four key capital deployment areas: internal investments (infrastructure, technology), strategic M&A (RCA, OneOncology), opportunistic share repurchases, and a growing dividend. He confirmed that Cencora ultimately expects to own all of OneOncology due to a put-call structure.

Daniel Grosslight of Citigroup Inc. asked about the potential impact of the proposed hospital outpatient rule on the competitive landscape for Cencora's MSO assets. He also inquired if the company was realizing any meaningful tax benefits from the OBDBA.

Answer

EVP & CFO James Cleary addressed the tax question, stating that the new tax bill will provide some incremental benefits for Cencora, as it does for many companies, which will factor into its consolidated effective tax rate moving forward. The first part of the question regarding the outpatient rule was not addressed before the call moved to the next question.

Daniel Grosslight noted that health systems received more attention this quarter and asked if this was due to particularly strong performance or any new near-term investments in that channel.

Answer

CEO Bob Mauch explained the increased focus was to better communicate Cencora's broad positioning for specialty growth across all sites of care, not just community practices. He clarified it was not due to a specific recent event but an effort to highlight the company's comprehensive strategy for supporting health systems.

Daniel Grosslight of Citigroup inquired about the competitive environment within the ophthalmology-focused MSO space, both for acquiring assets and for attracting physicians, noting a recent competitor move.

Answer

CEO Robert Mauch expressed confidence that Retina Consultants of America (RCA) is the leading retina MSO, citing its superior management, clinical excellence, and research network as key differentiators. He acknowledged that competitors may follow a similar strategy but stated Cencora is very happy with its chosen partners.

Daniel Grosslight questioned if the fluidity in the network solution selling season is linked to unknowns around DTC advertising due to political issues, and what gives confidence that this fluidity won't impact fiscal 2027.

Answer

CFO Balaji Gandhi confirmed that the fluidity is related to the DTC topic and that the company is being measured. He expressed confidence in Phreesia's long-term positioning due to its permission-based product and value to life sciences clients, aligning with regulatory trends, but acknowledged the need for more visibility in the coming weeks.

Daniel Grosslight asked if the fluidity in the Network Solutions selling season was influenced by uncertainties surrounding DTC advertising and political issues, and what gives Phreesia confidence that this fluidity will not extend into fiscal 2027.

Answer

Balaji Gandhi (CFO, Phreesia) confirmed that the fluidity is indeed related to the DTC topic and regulatory discussions. He expressed confidence in Phreesia's long-term positioning due to its product's emphasis on permission-based engagement and the value it delivers to life sciences clients, aligning with regulatory trends, but acknowledged the need for more visibility in the coming weeks.

Daniel Grosslight inquired about Phreesia's AI initiatives, specifically the shift from internal to external monetizable products, investment balance, future roadmap, and pricing strategy.

Answer

CEO Chaim Indig clarified that Phreesia invests in both internal and external AI tools, now more comfortable discussing them publicly. He emphasized building valuable products first, with monetization following naturally, confirming active monetization and rapid growth of multiple AI products.

Daniel Grosslight asked about Phreesia's shift from internal to external AI product development, the balance of investment, the future product roadmap, and the pricing strategy for new AI products.

Answer

Chaim Indig (CEO & Board Member) explained that Phreesia invests in both internal and external AI tools, now comfortable discussing them publicly. The focus is on building valuable products first, with monetization following naturally. Phreesia is actively monetizing AI products today and expects continued investment.

Daniel Grosslight focused on the payments segment, asking if the strong volume in the quarter was driven by any outsized impact from a late flu season or other notable tailwinds.

Answer

CFO Balaji Gandhi clarified that volume fluctuations are typically tied to the number of days in a calendar period and weather, not utilization events like flu season. He added that while the new patient bill pay product is expected to drive future volume growth, its impact was not material in Q1.

Daniel Grosslight inquired about the impact of various macro factors on the business and sales cycle. He also asked about capital deployment priorities for fiscal 2026, specifically the buy-versus-build dynamic.

Answer

Executive Balaji Gandhi stated that while Phreesia is monitoring macro trends, there is nothing significant to call out impacting the business. CEO Chaim Indig reiterated that the capital allocation philosophy remains unchanged, prioritizing investments in profitable, durable growth, whether organic or inorganic.

Daniel Grosslight requested an update on the sales pipeline, specifically asking if the trend of new client contracts having a 20% larger total value was continuing.

Answer

Executive Balaji Gandhi confirmed the trend has remained consistent. He stated that the total dollar value associated with new average healthcare services client contracts, including all three revenue lines, continues to trend approximately 20% larger than at the same time last year.

Daniel Grosslight asked for confirmation of a 20% medium-term top-line growth target and questioned how much of future revenue per AHSC growth will be driven by the Network Solutions business.

Answer

Executive Balaji Gandhi clarified that the company has never set a 20% growth target and will provide updates on fiscal 2026 in December. He noted that Network Solutions was the company's original product line and its growth has been propelled by the significant expansion of the patient visit network, which now attracts over 100 brands.

Daniel Grosslight of Citi requested a bridge from the old to the new EBITDA guidance, sought clarity on the balance sheet value of discontinued operations, and asked about the free cash flow conversion profile of the remaining business.

Answer

EVP & CFO Jon Leon declined to provide a detailed guidance bridge due to the active divestiture but confirmed stranded cost assumptions. He clarified the balance sheet figure is an accounting estimate and unrelated to valuation. For cash flow, Leon outlined the key components (EBITDA, CapEx, interest), suggesting a free cash flow in the $60-70 million range for the year.

Daniel Grosslight from Citigroup questioned the timing of the potential sale of the Products & Healthcare Services (P&HS) segment and asked about the company's long-term capital deployment strategy post-sale. He also sought clarification on whether the 'conservative' $50 million Rotech synergy estimate implied a pull-forward of savings into years one and two.

Answer

Executive Edward Pesicka revealed the sale process was initiated after receiving multiple inbound inquiries for the P&HS asset. He stated that post-transaction, the focus would be on debt reduction and integrating Rotech. On synergies, Pesicka explained that the deal's delay allowed for more planning, leading to confidence in achieving greater savings faster than initially projected, with an acceleration expected in the second half of the first full year.

Daniel Grosslight asked if additional investments are needed to capitalize on the 2025 tariffs and questioned the specific drivers behind the unexpected increase in transportation costs.

Answer

Executive Edward Pesicka stated that no significant incremental capital is required to take advantage of the tariffs, citing a large 2020 investment in their glove factory and available capacity at U.S. facilities. CFO Jonathan Leon clarified that the increased costs were from both shipping, including ocean and ground freight, as well as higher storage costs to manage inventory fluctuations.

Daniel Grosslight asked about the company's long-term growth algorithm for 2026 and beyond, questioning if persistent macroeconomic headwinds would lead to low-to-mid single-digit growth rather than the previously guided range.

Answer

CEO Dan Burton acknowledged the headwinds are likely multi-year and broke down the 2026 growth components, suggesting a potential slight revenue decline for the year. He noted a headwind from lower dollar-based retention (now in the low 90s) and slightly down services revenue would be partially offset by new client additions and strong double-digit growth in the applications business. He expects the platform migration headwind to dissipate by mid-2026, enabling a return to growth. CFO Jason Alger reiterated the company's focus on profitability.

Daniel Grosslight from Citi asked for justification of the implied second-half revenue ramp in the professional services segment, noting it appeared unusually steep.

Answer

CEO Dan Burton detailed several factors driving the anticipated H2 ramp. These include revenue from delayed late-stage deals in Life Sciences and Health Information Exchanges (HIEs) being recognized in the second half, revenue push-outs from increased scope and complexity in ongoing HIE implementations, and the natural lag between Q1 and Q2 bookings converting to revenue, which will primarily materialize in H2 2025.

Daniel Grosslight asked if the pricing model for all clients migrating to Ignite will shift to a more modular, consumption-based model and what provides confidence that clients will adopt more applications to offset Ignite's lower price point.

Answer

CEO Dan Burton confirmed the pricing model is shifting to be more modular and consumption-based, enhancing the client value proposition. COO Dan LeSueur added that Ignite's architecture lowers the barrier to entry for adding new applications. Burton expressed confidence in app adoption because it is already happening, which has helped maintain a strong dollar-based retention rate. He also noted the significant runway for growth, as the average platform client has only adopted one or two apps from their extensive portfolio.

On behalf of Daniel Grosslight from Citi, an analyst asked for an update on the Steward Health situation, particularly regarding the impact of facility sales and the assumed continuation of revenue.

Answer

CEO Dan Burton provided a positive update, stating that Health Catalyst's contract was successfully transferred to the new party acquiring Steward's assets, as Health Catalyst was deemed a critical partner. He confirmed they received full repayment of all outstanding receivables. CFO Jason Alger added that they expect to continue recognizing revenue from the ongoing contract.

Daniel Grosslight from Citigroup requested a framework for 2026 revenue growth given the strong pipeline momentum and questioned why the guidance for the second half of 2025 appears conservative, implying a sequential decline.

Answer

CFO Doug Garis stated that while the company is booking significant new ACV that will convert to revenue in 2026, they prefer to see a few more quarters of stable core performance before providing a 2026 framework. Regarding the 2025 guidance, Garis noted it was the company's first 'beat and raise' and they are aiming for a high 'say-do' ratio, while confirming they are internally planning to perform near the top end of the guided range.

Daniel Grosslight of Citigroup requested a framework for thinking about 2026 revenue growth, given the significant new pipeline wins are expected to convert then. He also questioned the seemingly conservative guidance for the second half of 2025, which implies a sequential decline.

Answer

CFO Doug Garis explained that while the company has a long-term growth plan, they are taking a cautious approach and want to see a few more quarters of core business stability before providing a more aggressive outlook for 2026. Regarding the H2 2025 guidance, Garis acknowledged it was their first 'beat and raise' and stated that while they want to maintain a high 'say-do ratio,' the company is internally planning to perform near the top end of the guided range.

Daniel Grosslight from Citi asked for a more precise timeline for the hormone therapy launch, the required investments, and whether the offerings would be compounded in-house. He also questioned the reasons for the sequential decline in core revenue ex-GLP-1.

Answer

CEO Andrew Dudum indicated the hormone therapy launch is expected 'relatively soon' and will include a wide range of treatments delivered through both Hims & Hers' and partners' facilities. CFO Yemi Okupe confirmed the necessary investments are embedded in guidance and attributed the core revenue softness to the deliberate rotation away from the lower-retention on-demand sexual health business, a multi-quarter transition expected to be accretive by 2026.

Daniel Grosslight asked about the percentage of users transitioning to personalized doses, discussions with Novo Nordisk about limiting them, and the corporate-provider relationship.

Answer

CEO Andrew Dudum stated that the company does not disclose transition percentages. He confirmed discussions with Novo focused on the appropriate, clinically necessary use of personalization, not on imposing limits. He strongly affirmed that a 'very strong wall' exists between the corporate entity and affiliated provider groups, ensuring independent clinical judgment.

Daniel Grosslight requested a more precise breakdown of the GLP-1 revenue contribution in Q4 and inquired about the potential for partnerships with branded GLP-1 manufacturers like Novo Nordisk or Eli Lilly.

Answer

CFO Yemi Okupe did not provide a specific quarterly revenue breakdown but emphasized that the core, non-GLP-1 specialties remain durable and are a key driver of subscriber growth. CEO Andrew Dudum noted that while partnerships with branded pharma are not off the table, they are currently impractical due to unreliable drug supply chains at Hims & Hers' scale and unstable reimbursement rates, which conflict with the company's commitment to price transparency.

Daniel Grosslight sought to confirm the number of users on personalized GLP-1 titration schedules and asked if these compounded dosages could continue once drug shortages end. He also inquired about the investment required for the newly acquired 503(b) pharmacy.

Answer

CEO Andrew Dudum clarified that the 10,000-user figure was from a specific study, not the total on personalized doses. He expressed confidence that personalizing doses to mitigate side effects is a clear clinical need that falls within the compounding exemption, even post-shortage. CFO Yemi Okupe explained that the acquired Medisource pharmacy already has GLP-1 capabilities and future investments will focus on expanding capacity and automation, with CapEx being diversified across multiple personalization initiatives.

Daniel Grosslight sought more details on the three large client wins, asking if they were contemplated in prior guidance, whether they were competitive takeaways, their mix between health system and ambulatory, and the potential for cross-sells.

Answer

CFO Steve Oreskovich confirmed the wins were all competitive takeaways and represented a mix of health system and large ambulatory clients. He explained that their rapid onboarding, which was much faster than the typical 6-12 month timeline, led to an upside surprise in Q2 revenue and was a key reason for the full-year guidance increase.

Daniel Grosslight asked how the improved 2026 rate notice affects growth plans for the class of '26, whether they will be on a glide path, how the class of '25 will transition, and confirmed the planned exit of 29,000 members.

Answer

CEO Steven Sell confirmed the 29,000 member exit at year-end. He stated the goal is to move members to risk as quickly as possible under appropriate economic terms. The favorable rate notice improves the economics for both the class of '26 and for graduating the class of '25 off their care coordination glide path, but it is too early to provide specifics.

Daniel Grosslight asked for more detail on the 'glide path' model, including who decides to move to full risk and if the 2026 class would also use this model.

Answer

CEO Steven Sell explained that the decision to move to full risk is made mutually and collaboratively with the payor partner. He noted that payors' need for effective primary care models provides flexibility. The risk structure for the 2026 class will be determined situationally, based on market dynamics, payor bids, and the final 2026 MA rate notice.

Daniel Grosslight asked about the revenue recognition mechanics for the new 'glide path' contracts and posed a broader question on whether recent challenges might force a strategic shift away from a 100% fully capitated model.

Answer

CEO Steven Sell addressed the strategy, stating that while the glide path is a prudent adaptation to the current environment, the company remains committed to full-risk, value-based care as the ultimate goal for delivering the best outcomes. He emphasized the need for aligned economics and data access to succeed. CFO Jeffrey Schwaneke handled the accounting question, confirming that these new contract terms could indeed lead to net revenue recognition instead of gross.

Inquired about 2025 growth metrics excluding the impact of a large client attrition, the potential for revenue growth acceleration in 2026, and the outlook for contract renewals and pricing in that year.

Answer

Excluding the one large client, the business is expected to grow mid-single digits in 2025. The company is cautious about 2026 guidance but stated the long-term goal is mid-to-high single-digit growth, with a focus on achieving a 'Rule of 70' (EBITDA margin + revenue growth). The next major contract renewals are in the next 12-24 months, and early discussions are underway to package more products and demonstrate increased value.

Inquired about the persistent take rate degradation, potential impacts from IV shortages on procedure volumes, and the qualitative outlook for 2025 growth and cost structure in relation to the new Vision 2030 plan and prior long-term targets.

Answer

The take rate decline is primarily due to the impact of one large client, and the rate appears to be stabilizing. The company has not seen significant disruptions from issues like IV shortages. The Vision 2030 plan focuses on core business investment and new product growth, funded by significant cost efficiencies (10-20% of cost base over time) without materially changing the cost structure or strong margins.

Inquired about the specific drivers of the ongoing revenue yield volatility, the company's plans for addressing its capital structure and debt maturities, and whether the long-term growth outlook remains intact.

Answer

Revenue yield volatility is attributed to client/program mix shifts and temporary credits, not contract changes, and is expected to stabilize. The company has flexibility with its capital structure and is in active dialogue with investors but is not being forced into hasty decisions. The long-term growth algorithm remains the goal, though the timeline is extended.

Asked a macro question about the managed care environment, specifically if headwinds in Medicare Advantage could lead to increased utilization management, impacting collections and incentive fees, and potentially driving more demand for R1's modular solutions.

Answer

The executive agreed that challenges in the Medicare Advantage space do drive demand for their solutions, as clients need technology partners to help manage payment timelines and reimbursement complexity. While they are watching the trend closely, the overall macro outlook is considered balanced, and it reinforces the value proposition of their services.

Asked for details on the cadence of revenue and investment for the Providence deal in 2024, the timing of the pediatrics attrition, and the potential for margin expansion from the company's operations in the Philippines.

Answer

Executives stated that Providence revenue is expected in the second half of 2024, with investments beginning in Q1. The pediatrics attrition is expected around mid-year. The Philippines operation, with over 2,000 employees, is a key area for future expansion and margin improvement as it matures.