Elizabeth Anderson

Elizabeth Anderson asked about the evolving monetization opportunity for Doximity's AI, including its potential model and how it might integrate into the broader advertising portfolio.

Answer

Jeff Tangney, CEO and Co-Founder, identified a new Total Addressable Market (TAM) in 'paid search' within healthcare, referencing an eMarketer report indicating 55% of digital marketing spend in healthcare is for search. He expressed excitement about this large opportunity and strong client interest, while refraining from detailing specific monetization plans to maintain competitive advantage.

Elizabeth Anderson asked about the evolving monetization opportunity for Doximity's AI, including the potential model and how it might integrate into the broader advertising portfolio, especially with products launching later in the year.

Answer

Jeff Tangney, Co-founder and CEO, identified a new Total Addressable Market (TAM) in 'paid search,' citing an eMarketer report indicating 55% of digital marketing spend in healthcare is for search. He expressed excitement about this large opportunity and client interest, while declining to provide specific plans to avoid tipping off competitors.

Elizabeth Anderson asked about the "tipping point" for clients to adopt multimodal (integrated) programs and the long-term potential for these programs (e.g., 50%, 80%, or 100% of business). She also inquired about the enterprise-level adoption of AI engagement tools by hospital systems, similar to Dialer.

Answer

CEO Jeff Tangney stated that integrated programs could become the "vast majority" of Doximity's business, citing the effectiveness of AI optimization and strong ROI results. He confirmed that Doximity works with over 300 health systems (45% of U.S. physicians) and many have already signed on to the AI suite, with top 20 health systems having purchased it, indicating comfort with HIPAA security and PHI handling.

Elizabeth Anderson asked Jeff Tangney about the 'tipping point' that encourages clients to adopt multimodal integrated programs and the long-term potential for these programs to become the majority of Doximity's business. She also followed up on Doximity's AI strategy, asking about the adoption process for engagement tools and the potential for selling them at an enterprise level to hospital systems, similar to Dialer.

Answer

Jeff Tangney, Co-founder and CEO, stated that integrated programs could become the 'vast majority' of the business, citing the effectiveness of AI optimization in delivering meaningful ROI for clients, similar to Google PMax. He confirmed that Doximity works with over 300 health systems, representing 45% of U.S. physicians, and many have already signed onto the AI suite. He expects more details on numbers in future quarters, emphasizing Doximity's trusted partner status and HIPAA compliance.

Elizabeth Anderson of Evercore ISI asked about the key drivers behind increased provider utilization on the platform and the potential for AI to create operational efficiencies and impact OpEx.

Answer

CEO Jeff Tangney cited sticky workflow tools like Scheduler and Dialer, along with an AI-enhanced newsfeed, as primary drivers of user engagement. CFO Anna Bryson added that internal use of AI has boosted productivity, allowing headcount to remain flat for two years while growing the business. This efficiency enables Doximity to maintain a 55% adjusted EBITDA margin despite significant investments in AI.

Elizabeth Anderson inquired about the growth assumptions for fiscal 2026 in businesses outside of core pharma marketing, such as physician recruitment and point-of-care, and asked for more detail on the drivers behind the company's market share gains.

Answer

CFO Anna Bryson explained that the pharma business, particularly formulary and point-of-care products, is expected to remain the fastest-growing segment. While the health systems business has seen marginal improvement, guidance remains cautious. She attributed market share gains to two key factors: the establishment of workflow modules as a core, diversified channel and the client portal's real-time ROI data influencing buying decisions.

Elizabeth Anderson asked about the expected evolution of the client mix between direct relationships and those involving agency partners.

Answer

CEO Jeff Tangney clarified that agencies are not resellers and that Doximity maintains the direct relationship with the end client. He described the partnership as symbiotic: Doximity provides agencies with data insights to enhance their strategic value, while agencies provide introductions to a long tail of clients that are difficult for Doximity to reach directly.

Elizabeth Anderson asked about the early learnings and impact of Doximity's new agency partnerships, focusing on internal efficiencies and customer leverage.

Answer

CEO Jeff Tangney described the agency partnerships as a 'win-win,' explaining that allowing agencies to author content within the portal improves Doximity's margins, accelerates client program launches, and results in higher ROI. He emphasized that this strategy has already generated new six-figure client referrals and that agencies are enthusiastic about the portal's streamlined analytics, which reduces their manual reporting workload.

Elizabeth Anderson asked Paul Keel about Envista's strategic focus areas for 2026 and beyond, considering the business stabilization, new product pipeline, and potential for organic or M&A-driven growth, as the company moves into its next phase of development.

Answer

Paul Keel, President and Chief Executive Officer, explained that the focus is on executing the value creation plan introduced a year ago, centered on growth, operations, and people. He highlighted past efforts to correct market guidance, make aggressive but measured investments in new product development (with more in the pipeline for 2026 and beyond), and rebuild organizational confidence and employee engagement. He emphasized that the plan is working, and the company will continue to build on this momentum.

Elizabeth Anderson asked Paul Keel about Envista's strategic focus areas for 2026 and beyond, considering the business stabilization and positive momentum, specifically whether the focus would be on refining existing strategies or exploring new organic or M&A-driven growth vectors.

Answer

CEO Paul Keel explained that the initial focus was on correcting inappropriate market guidance, reinvesting in growth (especially new products), and rebuilding organizational confidence. He stated that the company is now squarely focused on executing the existing Value Creation Plan, centered on growth, operations, and people, as the plan has shown to be effective in driving financial output.

Elizabeth Anderson inquired about the drivers behind Envista's strong quarterly performance, questioning whether it was market-driven or company-specific, and asked for an outlook on the broader dental macro environment. She also sought details on the outsized growth in the brackets and wires business.

Answer

CEO Paul Keel noted that while the overall dental market remains slow but stable, Envista's performance was driven by strong, balanced growth across its portfolio, including orthodontics (both brackets and aligners), consumables, and implants. He attributed the brackets and wires strength to increased sales and marketing investments and intentional execution, rather than a significant shift from clear aligners.

Elizabeth Anderson inquired about the expected timing and impact of the Orthodontics Volume-Based Procurement (VBP) in China and the drivers behind strong consumable sales in the quarter.

Answer

President and CEO Paul Keel explained that the Ortho VBP is progressing as expected, with a procedural VBP in H1 followed by a supply VBP, which should be a net benefit to Envista due to its strong market share. He attributed the strength in consumables to their non-elective nature in an uncertain economy and to improved operational execution, which has reduced channel inventory and increased stability.

Elizabeth Anderson asked about the potential upside and risks associated with Envista's 2025 guidance and requested more detail on the drivers behind the implant business's return to growth.

Answer

CEO Paul Keel framed the 2025 guidance (1-3% core growth, ~14% EBITDA margin) as being based on stable market conditions. He identified potential upside from Spark, implants, and a diagnostics recovery. CFO Eric Hammes added that margin upside could come from higher growth, faster Spark profitability, and G&A savings. Regarding implants, Keel attributed the Q4 growth to internal improvements in leadership, commercial strategy, and innovation, which are building momentum for 2025.

Elizabeth Anderson of Morgan Stanley inquired about the drivers of Q3 performance, asking whether it was due to market improvement or better execution, and sought details on channel inventory reduction progress.

Answer

CEO Paul Keel stated that market conditions were not a contributor, attributing the performance to improved execution and a renewed focus on fundamentals. CFO Eric Hammes added that guidance aims to be motivating yet achievable and highlighted strong free cash flow generation driven by working capital improvements.

Elizabeth Anderson from Evercore ISI asked about large pharma's use of AI for trial efficiency, specifically if IQVIA has observed any changes in behavior or requests from this segment that might impact FSP seats or revenue. She also requested insights into the cadence of profitability for the current year compared to previous years.

Answer

IQVIA CEO Ari Bousbib stated that IQVIA has not seen any changes in demand dynamics due to large pharma's AI efforts, particularly regarding trial efficiency, as IQVIA has long been involved in developing AI-driven tools for this purpose. He clarified that most large pharma AI discussions focus on upstream discovery, which does not directly affect IQVIA's clinical trial business. Bousbib affirmed that IQVIA views AI as an opportunity for productivity improvements, working in partnership with clients, and expects continued stable growth and market share gains. He also noted no significant differences in the cadence of profitability.

Elizabeth Anderson, a Senior Managing Director and Healthcare Services Equity Research Analyst at Evercore ISI, asked if large pharmaceutical companies' use of AI for trial efficiency, particularly in preclinical stages, has led to any changes in their demand for IQVIA's services, such as a reduction in FSP seats. She also inquired about the expected cadence of profitability for the current year compared to prior years.

Answer

Ari Bousbib, Chairman and CEO of IQVIA, stated that there has been no change in demand dynamics from large pharma clients due to their AI efforts. He clarified that large pharma's primary AI focus is on upstream discovery and simulation tools, which does not impact IQVIA's core business of clinical trials. Bousbib emphasized that IQVIA has long been involved in leveraging AI for trial efficiency and partners with clients on these improvements, seeing only opportunities for productivity gains. He also confirmed that there is nothing different regarding the cadence of profitability for the year.

Elizabeth Anderson asked about the differing dynamics between large pharma and biotech clients, specifically focusing on trends within the large pharma segment.

Answer

Chairman and CEO Ari Bousbib stated that large pharma's internal reprioritization activities, influenced by the IRA, are largely complete. This has led to normalized cancellation rates. He noted strong RFP flow growth of 20% year-over-year for both large pharma and emerging biotech partners (EBP), supported by an improving biotech funding environment.

Elizabeth Anderson asked for insights into the differing trends between large pharma and biotech, specifically focusing on the large pharma segment.

Answer

Ari Bousbib, Chairman and Chief Executive Officer, noted that large pharma's pipeline reprioritization and elevated cancellations from the IRA are largely complete. He reported strong RFP flow growth (20% year-over-year) for large pharma, with cancellations returning to normal patterns, alongside improving biotech funding.

Elizabeth Anderson from Evercore ISI asked about the revenue cadence for the second half of the year, particularly the timing of a previously delayed large trial, and also inquired about gross margin trends and drivers.

Answer

CEO & Chairman Ari Bousbib confirmed the large delayed trial is still on track to resume in late 2025, which will contribute to a stronger Q4. EVP & CFO Ron Bruehlman addressed the gross margin, stating that the compression was driven one-third by FX and two-thirds by product mix, specifically higher growth in lower-margin real-world evidence and increased pass-through revenues in RDS. He noted strong SG&A cost control partially offset this.

Elizabeth Anderson inquired about the current biotech environment, including RFP flow and the deployment of raised capital, and also asked about the key drivers behind the acceleration in real-world evidence (RWE) growth.

Answer

Ari Bousbib, Chairman and CEO, noted that the biotech funding environment was very strong in 2024, which serves as a positive leading indicator for future trial awards. He specified that RFP flow from the Emerging Biopharma (EBP) segment was higher than the company's mid-single-digit average. The acceleration in RWE was driven by a return of delayed, but essential, client spending related to product launches.

Elizabeth Anderson of Evercore ISI asked about the company's progress in the large pharma strategic partnership renewal cycle and requested the expected interest expense for 2024.

Answer

CEO Ari Bousbib responded that the company is 'largely through' the partnership renewal process, which was driven by clients' cost-management programs, and that most large pharma reviews are complete. CFO Ron Bruehlman provided a 2024 interest expense forecast of approximately $625 million and suggested the 2025 figure would be 'flattish'.

Elizabeth Anderson asked for a detailed breakdown of the 'other segment' performance, specifically questioning if the Advanced Diabetes Supply (ADS) acquisition was exceeding expectations, the impact of an improved competitive position, and the underlying dynamics within the nuclear business.

Answer

CEO Jason Hollar explained that all three businesses within the 'other segment' (at-Home Solutions, Nuclear and Precision Health Solutions, and OptiFreight Logistics) demonstrated strong double-digit organic growth, independent of the ADS acquisition. He noted that ADS integration was progressing as anticipated or slightly better. He highlighted organic investments in distribution network automation for at-Home, Theranostics growth for Nuclear, and OptiFreight's expansion into pharmacy. CFO Aaron Alt emphasized strong positioning, positive secular trends, and double-digit core profit growth across these businesses.

Elizabeth Anderson asked for a detailed analysis of the 'other' segment's performance, specifically inquiring if Advanced Diabetes Supply (ADS) was exceeding expectations and about the underlying dynamics driving outperformance in Nuclear and Precision Health Solutions and OptiFreight Logistics.

Answer

CEO Jason Hollar and CFO Aaron Alt stated that all three businesses within the 'other' segment (At-Home Solutions, Nuclear and Precision Health Solutions, OptiFreight Logistics) showed strong double-digit organic growth, with the ADS acquisition performing as anticipated or better. They highlighted organic investments in distribution network automation, Theranostics growth, and expansion into pharmacy logistics, while noting upcoming tougher comparisons for Nuclear in Q3 due to prior year product launches.

Elizabeth Anderson of Evercore ISI sought confirmation that the Q4 Pharma profit shortfall was due to routine items like bad debt, not strategic investments, and asked for specific drivers behind the increased FY26 Pharma profit guidance.

Answer

CFO Aaron Alt confirmed the Q4 shortfall resulted from individually immaterial items like bad debt and contract resolutions, not strategic investments. CEO Jason Hollar added that strong momentum and confidence in underlying KPIs across the enterprise supported the decision to raise the FY26 guidance.

On behalf of Elizabeth Anderson, Joanna asked for an update on the profit contribution of Cardinal Health branded products within the GMPD segment and the percentage of products expected to be recovered under USMCA.

Answer

CEO Jason Hollar confirmed that Cardinal Health brand revenue is approximately $4 billion and carries a higher margin than national brand products but declined to provide a specific profit percentage. He noted its normalized volume growth was strong at around 5%. CFO Aaron Alt added that the team is actively pursuing USMCA exemptions to mitigate tariff impacts.

Elizabeth Anderson of Evercore ISI asked about the Global Medical Products and Distribution (GMPD) segment, seeking clarity on the cadence of investments and opportunities in the core business, excluding one-time items and potential tariff impacts.

Answer

CFO Aaron Alt explained that the GMPD improvement plan is on track, despite a $15 million charge for uncollectible receivables in the WaveMark business and a prior $17 million impact from healthcare costs. He reiterated expectations for sequential quarterly profit improvement, with Q4 being the high point. CEO Jason Hollar added that the team has managed supply chain complexities well and is prepared to manage potential tariff impacts through its diverse sourcing and pricing strategies, though widespread tariffs would likely lead to price increases.

Elizabeth Anderson inquired about the progress of the company's simplification efforts and asked for a timeline on the resolution of the supply shortage impacting the Nuclear business.

Answer

CEO Jason Hollar described simplification as an ongoing journey yielding results, evidenced by record safety and efficiency metrics. Regarding the Nuclear business, he explained the shortage was due to simultaneous reactor downtimes in Europe and was expected to be a one-month issue resolved within Q2. Executive Aaron Alt added that the full-year guidance for the 'Other' segment remains unchanged, as the impact is primarily a matter of timing.

Elizabeth Anderson asked about the drivers behind Align Technology's improved volume performance, seeking to understand if it's due to underlying market trends or a shift in sales and marketing strategy. She also inquired about the parameters for positive average selling price (ASP) growth in the first quarter.

Answer

President and CEO Joseph Hogan attributed the improved volume to market stability combined with strong execution in Dental Service Organizations (DSOs), the robust product portfolio for young patients (Palate Expander, MAOB, Invisalign First), and growth in DSP and touch-up cases. CFO John Morici added that positive ASP growth is expected from a favorable mix shift to higher-priced countries and comprehensive products.

Elizabeth Anderson asked about the drivers behind Align Technology's improved volume performance, seeking to understand if it's due to accelerating underlying market trends or a shift in sales and marketing strategy. She also inquired about parameters for positive Q1 ASP growth.

Answer

President and CEO Joseph Hogan attributed improved volume to market stability, strong execution in DSOs globally, and a robust product portfolio for young patients, including Palate Expander, MAOB, and Invisalign First. CFO John Morici explained that positive ASPs are expected from a mix shift to higher-priced countries and comprehensive products, balancing ASP with gross margin.

Elizabeth Anderson of Evercore ISI asked about the trend in patient case conversion during Q2, its current stability, and the strategies Align Technology is using to counter the shift by some orthodontists back to traditional wires and brackets.

Answer

President & CEO Joe Hogan explained that case conversion was stable until June, when the typical seasonal uptick failed to materialize. He noted that the shift to wires and brackets is primarily from orthodontists not fully committed to digital who leverage existing inventory during uncertain times. Align's strategy involves helping doctors improve efficiency with digital tools and connecting patients seeking Invisalign directly with providers.

Elizabeth Anderson asked about Q2 demand trends, specifically whether the tariff announcements had impacted demand, and inquired about the expected uptake of the new iTero Lumina scanner with restorative software.

Answer

CFO John Morici stated that the Q2 guidance for sequential volume growth is based on their standard process and reflects the global breadth of the business and stability in the Americas. President and CEO Joe Hogan added that the iTero Lumina for restorative dentistry is a transformative solution for the GP segment, offering superior imaging for labs and strengthening Align's competitive position, though he did not provide a specific growth forecast.

Elizabeth Anderson inquired about expectations for the iTero Lumina scanner's restorative launch, the impact of leasing versus capital sales on unit growth, and the growth dynamics between DSO and non-DSO customers.

Answer

CEO Joe Hogan expressed high expectations for the iTero Lumina restorative launch in March, citing positive feedback on its wider field of view and lighter wand. CFO John Morici explained that offering a full portfolio of acquisition options, including leasing and rentals, caters to diverse customer capital preferences and helps expand the overall user base.

Elizabeth Anderson inquired about the strategic impact of Frank Quinn's return to the company, how Align plans to get closer to the consumer, and requested more detail on the strong performance observed in the China market.

Answer

CEO Joe Hogan highlighted that Frank Quinn brings deep industry relationships, technology expertise, and a proven track record in digital dentistry, which is key for customer engagement. CFO John Morici added that the strong performance in China was driven by a successful teen season, with high utilization and good adoption of products like Invisalign First.

Elizabeth Anderson asked if McKesson's capital allocation priorities are shifting more towards internal growth investments, given recent IT investments, or if the company expects to continue its historical pattern of balancing internal growth with acquisitions.

Answer

CEO Brian Tyler stated that McKesson's capital allocation philosophy remains unchanged, prioritizing investment back into the business for innovation and differentiation, both internally and through strategic acquisitions that align with the business model and financial returns. CFO Britt Vitalone emphasized the company's strong cash flows and balance sheet as a competitive advantage, enabling simultaneous investment in growth, strategic acquisitions, and returning capital to shareholders while maintaining an investment-grade credit rating.

Elizabeth Anderson asked if the company's capital allocation priorities would shift more towards internal growth investments, given recent IT investments, or if the historical pattern of balancing internal and acquisitive growth would continue.

Answer

Brian Tyler, CEO, stated that the capital allocation philosophy remains unchanged, emphasizing continuous investment in businesses for innovation and differentiation, alongside inorganic acquisitions that align with strategy and financial returns. He highlighted a successful track record of both internal and inorganic growth. Britt Vitalone, CFO, added that McKesson's strong balance sheet and cash flows enable investment in growth initiatives, return of capital to shareholders, and maintenance of an investment-grade credit rating.

Elizabeth Anderson asked for more details on the strength observed in the health system business during the quarter, noting that it is a segment not frequently discussed.

Answer

Brian Tyler, CEO, expressed satisfaction with the health system business's performance, highlighting its market-leading share, strong volumes, and the benefits derived from increased traffic flow through customer settings, attributing it to the quality of their health system partners.

Elizabeth Anderson requested more detailed information regarding the strength observed in McKesson's health system business during the quarter.

Answer

Brian Tyler, Chief Executive Officer, expressed satisfaction with the health system business's continued performance, noting market-leading share and strong volumes. He emphasized that McKesson benefits from robust traffic flow through their health system partners, reflecting the quality of these partnerships.

Elizabeth Anderson of Evercore ISI inquired about the long-term strategy for McKesson's MSO platform, particularly regarding potential cross-platform synergies between the newly acquired Prism (ophthalmology) and the established U.S. Oncology network.

Answer

CEO & Director Brian Tyler explained that while the U.S. Oncology MSO is a mature and differentiated offering, Prism is viewed as a new platform where they will apply a similar value-add playbook over time. He stated that the platforms currently run on separate, fit-for-purpose IT systems, and while future knowledge transfer (e.g., AI insights) could provide upside, it is not a core part of the current strategy.

Elizabeth Anderson from Evercore ISI asked how changing PBM reimbursement models are impacting conversations with independent pharmacy customers and what services those customers are primarily requesting from McKesson.

Answer

CEO Brian Tyler stated that while McKesson is evaluating the new models, there has not yet been a significant behavioral shift among independent pharmacies. He detailed that customers primarily ask for help with patient attraction, operational efficiency, supply consistency, competitive costs, and market insights to manage their businesses effectively.

Elizabeth Anderson inquired about the evolving needs of community oncologists and their adoption of McKesson's full suite of services, and whether McKesson gained any lasting opportunities from assisting customers during the Change Healthcare cyberattack.

Answer

CFO Britt Vitalone explained that oncologists are increasingly attracted to the full platform, including the EMR, data insights from Ontada, and expanded clinical trial access via the Sarah Cannon JV, as it helps them practice more efficiently. Regarding the Change Healthcare incident, he stated the primary goal was to help customers, and while some stayed, the focus was on support, not opportunistic gains.

Elizabeth Anderson inquired about the specific short-term and longer-term opportunities for accelerating Adjusted Operating Income (AOI) growth within Cencora's MSO platform, considering the one-year ownership of Retina Consultants of America (RCA) and the recent acquisition of OneOncology.

Answer

Bob Mauch, President and CEO, explained that the MSO strategy naturally extends Cencora's relationships with specialty providers and biopharma. He highlighted short-term opportunities to leverage existing capabilities across the two market-leading MSOs, such as RCA's clinical trial excellence and enhanced Revenue Cycle Management. Mauch also noted that medium and longer-term opportunities involve building new capabilities and services to support physicians, enabling them to focus more on patient care and clinical excellence, which will be deployed at scale across the expanded MSO footprint.

Elizabeth Anderson asked for more details on the MSO platform's adjusted operating income (AOI) accelerators, focusing on both short-term opportunities from leveraging capabilities across RCA and One Oncology, and longer-term drivers for the platform's growth.

Answer

Bob Motsch, President and CEO, Cencora, explained that MSOs are a natural extension of Cencora's specialty strategy. He highlighted short-term opportunities to leverage clinical trial excellence from RCA across the platform and strengthen Revenue Cycle Management. Motsch also noted that medium and longer-term opportunities involve building new capabilities and services to support physicians, which can now be deployed significantly due to the MSOs' scale and footprint.

Elizabeth Anderson inquired about the next steps in the evolution of Cencora's MSO platform, including capabilities that can be leveraged across the MSO businesses once fully consolidated, and incremental learnings from the first year of RCA's contribution.

Answer

CEO Bob Mauch outlined plans to leverage capabilities like clinical trial expertise and back-office activities (e.g., revenue cycle management) across the MSO platforms (Retina and Oncology) to improve physician care and access. EVP and CFO Jim Cleary noted that RCA's clinical trial sites have exceeded financial expectations and helped attract fellows, benefiting inorganic growth.

Elizabeth Anderson inquired about the next steps in the evolution of Cencora's MSO platform, what capabilities can be leveraged once OneOncology is fully consolidated, and incremental learnings from RCA's first year of contribution.

Answer

CEO Bob Mauch explained that future steps involve leveraging capabilities like clinical trial expertise and revenue cycle management across all MSO platforms. CFO Jim Cleary noted that RCA's clinical trial sites have exceeded financial expectations and have been instrumental in attracting fellows, contributing to inorganic growth.

Elizabeth Anderson of Evercore Inc. asked about the performance of the Retina Consultants of America (RCA) acquisition relative to initial expectations and early customer feedback. She also inquired about the potential impact of political discussions around Most Favored Nation (MFN) pricing on specialty medical businesses like RCA.

Answer

President & CEO Robert Mauch expressed high satisfaction with the RCA acquisition, highlighting a strong cultural fit and the value Cencora brings to the practices. He noted that the market understands Cencora's investments in MSOs as an evolution of its long-standing support for community providers. Regarding MFN and policy, Mauch stated it is too early to predict outcomes but emphasized Cencora's engagement in Washington to ensure policymakers understand the importance of maintaining patient access to community providers and avoiding unintended consequences on physician reimbursement.

Elizabeth Anderson asked about the key drivers behind the strong adjusted operating income in the U.S. Healthcare Solutions segment and the long-term sustainability of this performance.

Answer

CEO Bob Mauch attributed the sustained strength to three core factors: Cencora's leading position in high-growth pharmaceutical markets like specialty, deep partnerships with providers across all sites of care, and a proactive team focused on long-term innovation and learning from industry stakeholders.

Elizabeth Anderson from Evercore ISI asked for details on the performance of the World Courier business in Q1, its outlook for FY25, and the current state of the broader pharma services demand cycle.

Answer

CFO James Cleary acknowledged a challenging quarter for the global specialty logistics business due to subdued clinical trial activity but stated that performance is expected to improve later in fiscal 2025. CEO Robert Mauch added that Cencora's global footprint is a key long-term differentiator, particularly for supporting specialty drug launches in Europe.

Elizabeth Anderson asked for more details on the acquisition of Retina Consultants of America (RCA) and Cencora's broader strategy regarding its Management Services Organization (MSO) capabilities.

Answer

CEO Bob Mauch explained that the MSO model is central to Cencora's strategy of supporting community providers, especially in the specialty pharmaceutical market. He emphasized that MSOs help physicians navigate a complex operating environment, thereby preserving cost-effective and accessible sites of care for patients.

Elizabeth Anderson asked about the impact of better-than-expected 2025 MA enrollment declines on short-term numbers, such as Q4 MLR, and how the focus on retention for next year contributes to doubling the 2026 margin.

Answer

Celeste Mellet, CFO, explained that the better-than-expected 2025 membership was driven by improved retention and sales, particularly later in the year. She confirmed that this trend does not impact Humana's prior MLR expectations for 2025.

Elizabeth Anderson asked about the impact of this year's lower-than-expected MA membership decline on short-term numbers, specifically Q4 MLR, and how next year's retention focus contributes to the plan to double the margin for 2026.

Answer

Celeste Mellet, CFO, explained that the lower-than-expected decline in MA membership for the current year was due to better retention and slightly better sales, particularly later in the year. She stated that this does not impact their prior MLR expectations.

Elizabeth Anderson inquired about the stabilization of gross margin in Henry Schein's distribution business, particularly in U.S. dental, and how management foresees its development in Q4 and beyond.

Answer

Ron South, Senior Vice President and Chief Financial Officer, attributed U.S. dental margin stabilization to consistent glove pricing and normalized promotional activity, expecting these trends to continue into Q4. He also noted product mix impacts in medical from flu vaccine sales and pharmaceuticals. Stanley Bergman, Chairman and CEO, added comments on October trends and equipment backlog.

Elizabeth Anderson asked for more details on the stabilization of gross margin in the distribution business, specifically the puts and takes influencing it, and how the company anticipates its development in the fourth quarter and beyond.

Answer

Ron South, Senior Vice President and Chief Financial Officer, explained that U.S. dental gross margins stabilized due to consistent glove pricing and a return to normal promotional activity, expecting this trend to continue into Q4. He noted that medical gross margins were impacted by product mix, with lower-margin influenza vaccine sales and pharmaceutical products contributing to strong sales growth but diluting overall medical margins.

Elizabeth Anderson inquired about the expected EPS cadence for the second half of the year, considering the current guidance and year-to-date performance. She also asked for an update on the orthodontics business turnaround and the broader orthodontic market environment.

Answer

Senior VP & CFO Ronald South confirmed that EPS is expected to be weighted to the second half of 2025, with Q4 potentially stronger than Q3, driven by sales momentum, equipment backlog recovery, and growth in Specialty Products and Technology. He also noted that remeasurement gains could create some lumpiness. Executive Chairman & CEO Stanley Bergman added that the orthodontics business is small (under $100M) and, while being reorganized for profitability, is not a primary strategic focus.

Elizabeth Anderson asked about the impact of the International Dental Show (IDS) on the equipment business and the flexibility and timeline for shifting private label sourcing if Chinese tariffs persist.

Answer

CEO Stanley Bergman stated that the IDS impact was balanced by holiday timing and that the show highlighted key trends like 3D printing, with good underlying momentum in Europe. On sourcing, he reiterated that the process of diversifying corporate brand sourcing away from single countries has been underway for several years, providing flexibility to manage tariff impacts by working with alternate manufacturers.

Elizabeth Anderson from Evercore ISI followed up on the potential tariff impact included in guidance and asked for more detail on the transition within the orthodontics business, including the patent loss and the path back to profitability.

Answer

CEO Stanley Bergman reiterated that no material bottom-line impact from tariffs is contemplated in guidance due to proactive supply chain management. He explained the orthodontics business, a small part of the company, is being rightsized after a patent loss caused an operating loss in 2024. He expects the segment to return to profitability by the end of 2025.

Elizabeth Anderson asked for an update on dental and medical market trends in October and November, and questioned why full-year revenue guidance was slightly lowered despite several positive one-time items and sales push-outs from Q3 to Q4.

Answer

Stanley Bergman, Chairman and CEO, described the dental market as stable, with a shift to lower-priced brands impacting sales dollars but not profitability, and noted October trends were consistent with September. Ron South, SVP and CFO, explained the guidance considers stable market dynamics, a Q4 benefit from the DS World event timing, and close monitoring of the flu season's impact on the medical business.

Elizabeth Anderson asked for more details on the 100 basis points of provider liabilities impacting the medical benefit ratio (MBR) in Q3 2025, inquiring about their nature, whether they are a one-time item, and if they are expected to continue in future quarters.

Answer

Brian Newman, CFO, explained that the 100 basis points impact on the MBR consisted of approximately 50 basis points from provider liabilities dating back to 2018 and worsening expectations for individual exchange risk adjustment. He noted that adjusting for these items would bring the core MBR to roughly 91.8%, indicating outperformance driven by individual Medicare Advantage.

Elizabeth Anderson of Evercore ISI asked about the 2026 pharmacy reimbursement landscape, particularly with the transition of government business to CostVantage, and whether generally flat reimbursement is a reasonable expectation.

Answer

EVP & Group President, Prem Shah, explained that CostVantage aims to create a more stable and transparent model by aligning reimbursement with drug costs and that the focus is now on transitioning government programs for 2026. CEO David Joyner added that the PBM, Caremark, is also innovating with new pricing models to drive market-wide efficiency.

Elizabeth Anderson asked if the Wegovy announcement would change financial guidance and inquired about the potential impact of tariffs on the front-of-store business and the broader company.

Answer

President and CEO David Joyner stated that the Wegovy deal is not factored into the current guidance, as the savings will primarily benefit customers. Regarding tariffs, he described the situation as fluid but noted the front-store impact is not expected to be significant due to sourcing from U.S.-based companies. For the broader business, he mentioned that Wegovy is manufactured in the U.S. and that Aetna is monitoring potential impacts for its 2026 plan bids.

Elizabeth Anderson asked for more detail on how the 4.5% Medicaid rate improvement will be realized over the course of 2025, given that 40% of the book was repriced in January.

Answer

Executive Steve Nelson confirmed the 4.5% year-over-year rate increase to start 2025 and noted that the team continues to work with state partners on actuarial soundness. CFO Tom Cowhey clarified that while the initial repricing is a great start, the company's forward outlook is cautious and does not assume the same robust level of rate increase for the next group of renewals, which occurs around the third quarter.

Elizabeth Anderson asked about the OpEx mechanics of the PDR in Q4, questioning if it becomes a positive, and requested more detail on the strength and future cadence of the Pharmacy & Consumer Wellness (PCW) segment.

Answer

CFO Tom Cowhey confirmed the PDR creates a Q4 benefit, as the deferred acquisition costs written off in Q3 will not be expensed in Q4. Group President Prem Shah attributed PCW strength to an early immunization season, strong service levels driving script share to 27.3%, and improving front-store trends. CEO J. Joyner praised the segment's execution in a challenging retail environment.

Elizabeth Anderson of Evercore ISI (question asked by Joanna) questioned the wide $0.35 EPS guidance range for 2025, seeking clarification on the major factors that could lead to the high or low end of this range, given only one quarter remains.

Answer

Chairman and CEO Adam Schechter explained that while revenue and diagnostic guidance ranges were narrowed, the Biopharma Laboratory Services (BLS) range was intentionally kept wider. This is due to uncertainty regarding the precise timing of divestitures and site consolidation within early development, which could impact the current quarter's results.

Elizabeth Anderson of Evercore ISI requested more detail on the Biopharma Laboratory Services (BLS) segment, particularly trends between biotech and pharma clients, and asked for a clarification on how foreign exchange (FX) impacts flow down the P&L.

Answer

President, CEO, and Chairman Adam Schechter explained that the Central Labs business is heavily skewed towards stable, large pharma clients, while the Early Development business is more exposed to smaller biotech companies, which they monitor closely. EVP & CFO Julia Wang clarified that FX exposure is concentrated in the global BLS business, primarily with the Swiss franc and British pound, and contributed a favorable 60 basis point impact to Q2 enterprise revenue.

Elizabeth Anderson sought clarification on the mention of higher personnel costs, asking if this was a broader trend or a Q1-specific issue, and inquired about any one-time items to consider for Q2.

Answer

Chairman and CEO Adam Schechter clarified that the higher personnel costs reflect standard annual wage inflation of 3-3.5%, which the company aims to offset via its LaunchPad initiative. Both Schechter and CFO Julia Wang confirmed there were no specific one-time items to call out for Q2, adding that the strong Diagnostic volume seen in March continued into April.

Elizabeth Anderson of Evercore ISI asked for clarification on one-time items, seeking the total weather impact for 2024 and confirming whether the number of payroll days would be a headwind or tailwind for fiscal 2025.

Answer

CEO Adam Schechter confirmed a $0.10 per share impact from weather in January 2025 is already built into the guidance and noted that payroll days will be a tailwind for the year. CFO Julia Wang added that for the full year 2025, the calendar is largely not a factor, with one less revenue day being partially offset by one less payroll day, though this could affect quarterly phasing.

Elizabeth Anderson asked about the growth momentum and expectations for the consumer-facing business, Labcorp OnDemand, and how its margins compare to the corporate average.

Answer

CEO Adam Schechter noted that the Labcorp OnDemand platform continues to expand its test offerings and is experiencing substantial growth. However, he stated that the revenue is not yet material enough to be broken out separately. CFO Glenn Eisenberg added that due to its current scale and ongoing investments to fuel growth, the business does not have a significant rounding impact on the company's overall margins.

Elizabeth Anderson asked about the dynamics of elevated cancellations, seeking clarity on whether these trends are expected to persist into Q4 2025 before tapering down in 2026, and the underlying drivers.

Answer

CEO Barry Balfe explained that cancellations were broadly in line with projections, with a bias towards studies awarded prior to Q3 2025 but canceled before enrollment. He anticipates similar conditions in Q4 2025 but expects moderation in 2026, believing the company is closer to the end of elevated cancellations.

Elizabeth Anderson inquired about ICON plc's cancellation dynamics, seeking insights into future trends, the likelihood of elevated levels in Q4, and the underlying drivers of these cancellations.

Answer

CEO Barry Balfe explained that cancellations were broadly in line with projections, with significant activity in pharma. He noted a bias towards studies awarded prior to Q3 but canceled before enrollment. Balfe anticipates conditions will remain similar in Q4 but expects moderation into 2026, suggesting the company is closer to the end of elevated cancellations.

Elizabeth Anderson of Evercore ISI inquired about demand inflection across different market segments, specifically comparing biotech versus large pharma, and by clinical trial phase.

Answer

CEO Steve Cutler responded that while the environment hasn't changed dramatically, there has been a modest mid-single-digit uptick in RFP volume, driven more by the biotech segment than large pharma. He noted positive momentum in early-phase and Phase III business and highlighted the successful leveraging of large pharma partnerships established over the last 18 months.

Elizabeth Anderson asked about the growth of FSP in bookings compared to a year ago and whether there would be any change to the company's typical free cash flow conversion in 2025 versus 2024.

Answer

COO Barry Bell reiterated that FSP has not fundamentally changed as a proportion of the business. CFO Nigel Clerkin stated that free cash flow is expected to be lower in 2025 than in 2024. This is primarily due to an increase in unbilled revenue during 2024, creating a disconnect of over $300 million where revenue was recognized ahead of billings, which will negatively impact 2025 cash collections.

Elizabeth Anderson inquired about ICON's confidence in 2025 large pharma budgets, particularly regarding visibility into spending levels and the timeline for top customers to bottom out on cost-cutting measures.

Answer

Incoming CFO Nigel Clerkin stated that while the overall large pharma market is expected to grow in the low to mid-single digits, two of ICON's largest customers present a different story. He expressed confidence that these specific customers would reach a trough in 2025, with a potential recovery toward the latter half of the year, noting visibility is clearer for one than the other.

Elizabeth Anderson inquired about the factors influencing Q4 margins, particularly the ramp-up of Project Nova expenses, and other positive and negative drivers, to understand the margin trajectory into 2026.

Answer

CFO Sam Samad highlighted strong Q3 operating margins of 16.3%, driven by utilization and mix, but noted a 40-50 basis point headwind from higher-than-expected employee medical expenses, which are expected to continue into Q4. He confirmed a ramp in Project Nova investments in Q4 due to timing with Epic Systems. CEO Jim Davis emphasized that year-to-date operating margin improvement of 60 basis points reflects ongoing productivity efforts from the Invigorate program.

Elizabeth Anderson inquired about the factors influencing fourth-quarter margins, specifically the ramp-up in Project Nova expenses, and other positive and negative drivers, to understand the jump-off point for 2026 margins, excluding PAMA impacts.

Answer

CFO Sam Samad explained that strong Q3 operating margins (16.3%) were driven by utilization and favorable test mix, but were partially offset by higher-than-expected employee medical expenses (40-50 basis points impact), which are anticipated to continue into Q4. He also confirmed a ramp-up in Project Nova investments in Q4 due to timing, and noted traditional Q4 seasonality typically sees a 50-100 basis point margin decline from Q3. CEO Jim Davis added that productivity efforts from the Invigorate program continue to yield benefits.

Elizabeth Anderson of Evercore ISI followed up on the potential impact of the uninsured, asking what assumptions Quest is making about the utilization rates for this population and how that might offset the previously mentioned headwinds.

Answer

CEO James Davis clarified that the uninsured population represents a very small portion of Quest's revenue. He explained the company believes most individuals leaving the ACA exchange will find alternative coverage, such as paying higher premiums or joining an employer's plan, rather than becoming uninsured, given that they have incomes. He reiterated the estimated impact is limited to about 30 basis points on volume in 2026.

Elizabeth Anderson asked if potential hospital reimbursement challenges are creating more opportunities for Quest in the hospital lab management and outreach acquisition space.

Answer

James Davis, Chairman, CEO and President, clarified that while it's a bit too soon to see a direct impact, the funnel of opportunities for their collaborative lab services remains very robust. He agreed that increased cost pressures on health systems, such as from tariffs, could potentially accelerate these partnership and acquisition discussions.

Speaking for Elizabeth Anderson of Evercore ISI, an analyst asked if the $0.20 per share investment in IT and LDT regulation for 2025 is a one-time expense or if it should be expected to recur in future years.

Answer

CEO Jim Davis clarified that the majority of the investment is for modernizing IT infrastructure, which will continue, while the FDA readiness portion's future depends on a pending court case. CFO Sam Samad added that while IT investments will continue, they are factored into the company's reaffirmed long-term guide for high single-digit EPS growth.

Elizabeth Anderson asked for confirmation of the deferred compensation plan's (DCP) financial impact in the quarter and for clarification on the unit pricing outlook for 2025.

Answer

CFO Sam Samad confirmed the DCP had a negative year-over-year impact of nearly $10 million in Q3. For 2025 pricing, he reiterated the expectation for it to be flat to slightly positive, reflecting a balance between a challenging health system pricing environment and modestly positive trends with health plans.

Johanna Robinson, on behalf of Elizabeth Anderson, inquired about the performance of Health Catalyst's Life Sciences business, CareVive, and the investment level needed for its growth.

Answer

CEO Dan Burton explained that the CareVive business has experienced delays in late-stage opportunities due to recent research funding cuts impacting the life sciences industry. He noted that while the company is confident in its differentiated offering, it has removed the associated revenue from its 2025 forecast, viewing any potential deal closures as upside.

Elizabeth Anderson from Evercore ISI asked about the services component and contract lengths for new Ignite customers, wanting to understand how the model has evolved.

Answer

CEO Dan Burton explained that while there is still a services component for implementation and domain expertise, the revenue mix for new Ignite clients has shifted significantly to approximately 80% technology and 20% services, compared to the 50/50 mix with the legacy DOS platform. He also confirmed that contract lengths remain consistent with the company's long-term partnership model, typically spanning three or five years.

Representing Elizabeth Anderson of Evercore ISI, a question was asked about whether the 2025 bookings mix would resemble 2024's, with a significant contribution from international and Health Information Exchange (HIE) customers.

Answer

CEO Dan Burton confirmed that Health Catalyst sees a strong and meaningful pipeline in both international and HIE segments for 2025. He noted that while these deals are higher-margin and skew toward technology revenue, they often involve more complex and longer initial implementations, which presents a near-term challenge but offers long-term benefits like sticky, recurring revenue.

Asked about progress with the CVS partnership and what's resonating with that client base, and how the company plans to evolve its high user retention, particularly with new tools like AI.

Answer

The CVS partnership shows promising early signs, but material impact is not expected until 2026 due to long enterprise sales cycles. The company's pricing model directly links revenue to user engagement, so they are focused on using innovations like AI (e.g., food scanner) to enhance the user experience, which they believe will maintain and improve retention and drive growth.

Elizabeth Anderson of Evercore ISI inquired about the overall state of the dental market to distinguish between macro trends and company-specific factors, and also asked about any notable distributor inventory changes in the quarter.

Answer

CEO Dan Scavilla stated that Q2 surveys indicated stable patient volumes but continued softness in elective procedures like implants and orthodontics. He emphasized a long-term focus on the customer over reacting to short-term macro noise. CFO Matt Garth added that there was no significant year-over-year revenue impact from distributor inventory levels, which he described as being in a healthy position.

Elizabeth Anderson inquired about the financial impact of new tariffs on the company's guidance and requested an update on the ongoing search for a permanent Chief Financial Officer.

Answer

CEO Simon Campion confirmed that an approximate $0.10 per share impact from current tariffs is already incorporated into the 2025 guidance, representing an annualized impact of about $50 million. He added that the company has mitigation plans for any further changes. Regarding the CFO search, he stated that it is in the late phases with a number of candidates being considered.

Elizabeth Anderson inquired about the strategic alternatives for the Wellspect HealthCare business, asking about new product opportunities and whether manufacturing entanglements with the dental business have been resolved since the last review.

Answer

CEO Simon Campion explained that Wellspect is now largely a stand-alone business, minimizing separation complexities. He noted that a recently launched sleeved intermittent catheter has driven growth but declined to disclose details on other innovations for competitive reasons.

Elizabeth Anderson asked why Privia Health is demonstrating strong performance while peers face challenges, and what aspects of its business model investors may be underappreciating.

Answer

CEO Parth Mehrotra attributed the company's success to its differentiated business model. He highlighted three key pillars: 1) a stable, recurring fee for its technology and services platform, 2) a deeply integrated medical group structure that enhances provider economics and ensures high retention, and 3) a diversified, risk-managed value-based care portfolio where risk is shared with payers and physicians.

Elizabeth Anderson of Evercore ISI inquired about the current demand environment, seeking details on the differences between biotech segments, large pharma's perspective, and any recent trends. She also asked for clarification on the updated revenue guidance not requiring a book-to-bill ratio above 1.0x.

Answer

CEO James Foster explained that the demand environment is stabilizing, with global biopharma demand having bottomed and beginning to move upward. He described the biotech environment as a "tale of two cities," where smaller biotechs remain cash-constrained while mid-sized biotechs are performing better. CFO Flavia Pease added that to meet the updated guidance, the net book-to-bill is expected to remain within the range seen over the last 18 months (0.80x to 0.93x) rather than needing to surpass 1.0x.

Elizabeth Anderson asked whether customers are taking immediate action following the FDA's NAMs announcement and if the strong Q1 bookings contained any one-time items or if the positive trend continued into the second quarter.

Answer

CEO James Foster noted that clients are still digesting the FDA news and not making immediate, dramatic changes, with a hybrid approach of animal and NAMs data likely in the long term. CFO Flavia Pease confirmed that the strong Q1 bookings were broad-based with no one-time items, driven by higher gross bookings and lower cancellations across all client segments.

Elizabeth Anderson inquired about Charles River's bookings expectations, noting that her calculations suggested a sequential step-down in the Q4 book-to-bill ratio, and asked for clarification on booking trends for 2025.

Answer

EVP & CFO Flavia Pease clarified that the net book-to-bill ratio was stable sequentially in Q4. Chair, President & CEO James Foster added that while Q1 has typical seasonality, they anticipate stable biopharmaceutical and biotech demand throughout 2025, with no further deterioration expected, though DSA pricing will be a headwind.

Elizabeth Anderson of Evercore ISI asked what biopharma customers are asking for differently in the current cycle and whether the recent stock repurchases signal a broader shift in capital allocation strategy.

Answer

Chairman, President and CEO James Foster explained that biotech clients are more cautious and focused on funding, but as net outsourcers, they continue to rely on CRL's responsive services. Regarding capital allocation, he noted that repurchases to offset dilution have been a historical practice and the recent activity was a contextual decision based on share price and balance sheet health, not necessarily a permanent strategic shift, leaving flexibility for M&A and debt repayment.

Elizabeth Anderson from Evercore ISI sought clarification on the second-half outlook, asking why the increase in revenue guidance did not translate to a higher EBITDA forecast and requesting details on the moving parts, including FX exposure and investments.

Answer

CFO Jill McConnell clarified that the revenue guidance increase was driven by operational factors, such as projects advancing to more intensive phases, not by foreign exchange. She explained that maintaining the existing EBITDA guidance range was the most prudent course of action at this time, reflecting a balance between progress on margin initiatives and other business dynamics for the remainder of the year.

Elizabeth Anderson asked for more detail on the expected cash flow improvement, particularly the trajectory of Days Sales Outstanding (DSO), and requested an update on the timing of the new CEO search.

Answer

CFO Jill McConnell addressed cash flow, explaining the Q1 DSO increase to 51 days was a planned result of an ERP system transition and that she expects DSOs to improve to the low-to-mid-40s by year-end. Interim CEO Peter Neupert commented on the CEO search, stating the process is 'far along' and the board is optimistic about making an appointment in the 'not-too-distant future.'

Elizabeth Anderson asked for an assessment of the current operating environment, including demand, pricing, and cancellation trends, noting that some industry peers have highlighted concerns.

Answer

CEO Tom Pike responded that the environment is substantially similar to the prior quarter, with a solid pipeline of opportunities from both large pharma and biotech clients. He explicitly stated that Fortrea's cancellation rates are not elevated and remain stable, and that despite general macro uncertainty, the industry appears to be pressing ahead with clinical trials.

Elizabeth Anderson inquired about the structural reasons for the typical fourth-quarter step-down in SG&A and asked if the previously noted volatility in biotech trial starts and decision-making was stabilizing.

Answer

CFO Jill McConnell explained the Q4 SG&A trend is due to year-end budget tightening, variable compensation accruals, and the cumulative impact of cost actions. CEO Tom Pike noted that biotech decision-making was managed through intense commercial focus and a more predictable large pharma mix in the second half, though the industry must adapt to biotech cycles.

Elizabeth Anderson requested more details on the business model for Hinge Select and asked about the new ROI study for the fully insured book of business, including its duration and implications.

Answer

Co-Founder & CEO Daniel Perez explained that the Hinge Select business model involves taking a percentage-based admin fee on the medical claim, which will be reported as net revenue, with a pilot starting late 2025. President Jim Pursley added that the market reception has been phenomenally strong. Regarding the ROI study, Jim Pursley stated it analyzed nearly 5,000 fully insured members over 24 months and was validated by Gallagher, showing a 2.4x ROI. This result affirms the value proposition for that key growth market.

Elizabeth Anderson of Evercore inquired about the potential for positive prior period development in Q3 and whether agilon health would adjust its 2026 growth strategy for new practices given current cost instability.

Answer

CFO Jeff Schwaneke clarified that while medical cost trends were in line, prior period development was negatively impacted by risk adjustment and Part D issues, some of which are non-recurring. He stated that 2026 growth plans are currently under review, with a primary focus on improving near-term profitability and being highly selective with new partnerships.

Elizabeth Anderson asked for clarification on any lingering financial impacts from previously exited markets to better understand the business's current run-rate performance.

Answer

CFO Jeffrey Schwaneke specified a $7 million unfavorable development from exited markets that pertains to 2024 and does not affect 2025 performance, adding that remaining IBNR is minimal. CEO Steven Sell reiterated that the financial benefits of these exits were previously disclosed.

Elizabeth Anderson asked if the repricing of 40% of contracts represents a full catch-up and inquired about the expected medical cost cadence in 2025.

Answer

CEO Steven Sell stated that with another 50% of membership up for renewal for 2026, repricing remains a significant ongoing opportunity and a potential tailwind. CFO Jeffrey Schwaneke explained that 2025 medical cost seasonality is expected to follow a normal pattern, with lower costs in the first half and higher costs in the second half, peaking in Q4.

Elizabeth Anderson requested a more detailed explanation of the analysis behind the 'One Big Beautiful Bill Act,' specifically how a hypothetical 15% cut in Medicaid funding would result in less than a 1% revenue impact for Waystar.

Answer

CEO Matt Hawkins explained that Waystar's resilience stems from its diverse client base and its platform serving all payer types. He noted that such a scenario would likely increase demand for other Waystar solutions like insurance coverage detection. CFO Steve Oreskovich added that the analysis represented a full downside case and did not factor in potential revenue offsets from clients adopting these other solutions.

Representing Elizabeth Anderson, Joanna asked for Waystar's updated thoughts on 2025 utilization trends given recent payer commentary, and how to think about seasonality for the patient payment and provider businesses.

Answer

CEO Matt Hawkins stated that while Waystar typically models 1-2% annual utilization increases, recent trends have been higher, which benefits their volume-based business and aligns with provider reports of higher patient visits. CFO Steve Oreskovich clarified seasonality, noting that the provider solutions business (70% of revenue) has little seasonality, while patient payments (30% of revenue) are stronger in the first half as deductibles reset. He confirmed no change to this expected pattern for 2025.

Elizabeth Anderson inquired about progress on direct payer connectivity and asked for quantification of the M&A contribution from the Health Pay and Olive AI acquisitions.

Answer

CEO Matt Hawkins stated that efforts to expand direct payer connections are ongoing and progressing well. CFO Steve Oreskovich added that acquisitions made in 2023 accounted for approximately 3% of the year-over-year revenue growth in 2024. He noted that integration is still in process, with opportunities for margin expansion in 2025 as clients are migrated to Waystar's single platform.

Speaking for Elizabeth Anderson, Samir Patel asked about the upsell traction with newly onboarded customers from the competitor disruption and whether the $12 million revenue contribution was from clearinghouse services or included upsells.

Answer

CEO Matthew Hawkins confirmed that their dedicated growth teams begin cross-selling conversations immediately after onboarding new clients. CFO Steven Oreskovich specified that the vast majority of the $12 million revenue uplift in Q3 was related to clearinghouse services.

Elizabeth Anderson of Evercore ISI highlighted the strong international growth and asked how it fits into the broader portfolio strategy and whether the company is changing its emphasis on this business.

Answer

CFO Mala Murthy detailed the dual nature of the international business, with Integrated Care delivering reliable mid-teens growth and BetterHelp expanding into new localized markets. CEO Charles Divita added that the international Integrated Care business is an "underappreciated part of Teladoc," praising the team's creative solutions, such as using hospital tech to support public health systems in rural areas.

Representing Elizabeth Anderson, an analyst inquired about further opportunities for cost savings, specifically within the technology and development and G&A expense lines.

Answer

CFO Mala Murthy confirmed that Teladoc is ahead of its cost-saving targets and continues to find efficiencies. She highlighted a specific focus on reducing technology and development spend in absolute dollars year-over-year, maintaining G&A discipline, and significantly lowering the outlook for stock-based compensation.

Speaking on behalf of Elizabeth Anderson, Sameer Patel asked about the significant step-up in G&A expense during the quarter. He questioned whether this should be considered a new normalized baseline or if there were one-time factors to call out.

Answer

Chief Financial Officer Mala Murthy clarified that the G&A increase was due to a few one-off investments in the quarter and should be treated as a one-time event, not a new run rate. She emphasized that as the company plans for 2025, it will pay close attention to the entire expense base relative to revenue growth, with a continued focus on managing the business effectively and generating financial returns.

Asked about the company's confidence in achieving positive free cash flow for the full year and the pacing of the micro-fulfillment center (MFC) rollout.

Answer

The company did not provide full-year free cash flow guidance but noted Q1 improvement from higher adjusted EBITDA and lower CapEx. For MFCs, they are pleased with operational improvements and plan to expand service from over 4,500 stores today to nearly 6,000 over the next 12 months, which helps free up pharmacists for higher-value clinical services.

Elizabeth Anderson asked about management's confidence in achieving positive free cash flow for the full year and requested an update on the pacing of the micro-fulfillment center (MFC) rollout.

Answer

CFO Manmohan Mahajan did not provide specific full-year free cash flow guidance but noted Q1 benefited from higher adjusted EBITDA (ex-sale leasebacks) and lower CapEx. He reiterated that while CapEx opportunities exist, investments are planned for later in the year. CEO Tim Wentworth added that the MFCs now service over 4,500 stores, with plans to reach nearly 6,000 over the next 12 months. He highlighted significant improvements in MFC operating efficiency and the in-store experience, which now allows pharmacists more time for clinical services.

Elizabeth Anderson requested a breakdown of the drivers for working capital improvements and asked about the remaining opportunity for operating expense reductions, particularly at the corporate level.

Answer

Global CFO Manmohan Mahajan attributed working capital gains to a holistic approach, including optimizing retail and Rx inventory and managing payables and receivables. CEO Tim Wentworth added that significant opportunity exists to reduce stranded corporate costs associated with the 1,200 planned store closures. He stressed that cost discipline is now part of the culture, but investments will be directed into stores, not further destaffing.

Elizabeth Anderson from Evercore ISI asked for a breakdown of the sources for the projected working capital improvements, such as supplier terms or store closure inventory optimization. She also questioned how much opportunity remains for OpEx reduction at the corporate level, separate from store-level costs.

Answer

CFO Manmohan Mahajan detailed that working capital improvements come from all parts of the cash conversion cycle, including optimizing unproductive retail inventory, using micro-fulfillment to lower Rx inventory, and improving accounts receivable and payable terms. CEO Tim Wentworth added that while the biggest cost-cutting opportunities are past, there are still meaningful efficiencies to be gained at the corporate level, particularly by eliminating stranded costs from store closures, which will fund investments back into stores.

Asked for free cash flow expectations for the fourth quarter and any directional outlook for 2025, and also inquired about the status of payer negotiations and whether any new terms have been agreed upon for 2025.

Answer

Q4 free cash flow is expected to be positive, similar to Q3. For payer conversations, they noted a collaborative understanding that current models need to change and that they are actively reshaping negotiations, but did not confirm any finalized agreements for 2025.

Elizabeth Anderson of Evercore ISI inquired about free cash flow expectations for the fourth quarter and fiscal 2025, and asked for an update on payer conversations, specifically if any new terms have been agreed upon for 2025.

Answer

CFO Manmohan Mahajan projected positive free cash flow for Q4, similar to Q3, even with a ~$150 million opioid-related payment. Mary Langowski, President of U.S. Healthcare, stated that while not discussing specific negotiations, there is a collaborative understanding with payers that reimbursement models need to change to better align incentives and reflect the value pharmacists provide.

Elizabeth Anderson asked for expectations for Q4 free cash flow, any directional color on FY25 cash flow, and whether any payers have agreed to new, more stable contract terms for 2025.

Answer

Global CFO Manmohan Mahajan projected positive free cash flow for Q4, similar to Q3, despite a ~$150 million opioid-related payment. President of U.S. Healthcare Mary Langowski declined to discuss specific negotiations but stated there is collaborative understanding with payers that reimbursement models need to change and that they are actively reshaping current discussions.

Asked for any public comments on the May 6 waiver, details on the increased harmonization with Acclara, and how these efforts better position the company for 2025.

Answer

The company declined to comment on the waiver beyond public information. Regarding Acclara, the integration is on track, and they are positive about the acquisition. The harmonization involves exiting unprofitable solutions and contracts to improve margins heading into 2025, which will impact revenue but not EBITDA, as well as aligning revenue streams related to the Providence contract.

Asked for more detail on the previously mentioned 'customer approach change' and for an update on the pipeline for new deals in 2024, including potential timing.

Answer

The new customer approach involves more flexibility in go-to-market strategy and contracting, leveraging Cloudmed's position, and being more data-driven. The new deal pipeline is healthy across all segments, with the next phase of large deals expected to be in the $2-5 billion NPR range, and another strong year of modular bookings is anticipated.

Asked about the contribution from private label products, opportunities in the specialty dental market, and the impact of incentive comp from last year on the Q4 outlook.

Answer

The company stated that private label products are performing well and contributing to growth. They are interested in the specialty market but would need the right opportunity to enter. They expect normal Q4 OpEx leverage despite last year's tough incentive comp comparison.

Elizabeth Anderson inquired about the financial impact of reduced COVID-19 vaccine and testing volumes, the expected trend of benefits from new pharmacy adherence programs, and the implications of exiting the individual Medicare Part D market, including the number of lives and scripts affected.

Answer

Matt Schroeder, Executive VP and CFO, detailed the significant year-over-year drop in COVID-19 vaccines from 1.7 million to under 500,000. He stated that adherence initiatives are driving script growth and are expected to continue, while front-end improvements will have more of a back-half impact. Regarding the Part D exit, he confirmed it affects approximately 300,000 lives, which are currently unprofitable from an underwriting standpoint, and the company is now working to rationalize the associated cost structure.