Aaron Alt
Chief Financial Officer at Cardinal Health
Thanks Jason and good morning. From a financial perspective, we continued our momentum in Q2 with outstanding results from the pharma segment, strong performance from the businesses included. In other and continued operational progress in GMPD, we grew operating earnings by 9% while overcoming the headwinds of the prior customer contract expiration and the as anticipated COVID 19 seasonal timing. In summary, we had a lot going on and we are pleased to report that the profit growth across the business resulted in a much better than expected EPS of $1.93. We are raising our EPS guidance to a range of $7.85 to $8.
Let's review the results starting with slide 4. Total company revenue decreased 4% to $55 billion on a reported basis adjusting for the contract expiration, revenue increased 16% versus the prior year, primarily reflecting strong demand across Pharma and all three of the businesses included another total company gross margin increased 5% with contributions from all of our operating segments. As you can see from the financials, our team continued to control our costs across the enterprise with SGA increasing a modest 3% covering the impact of rising health care costs, the iron acquisition and investments against the businesses. This led to operating earnings growth of 9% versus the prior year.
Moving below the line interest and other increased $45 million to $38 million, primarily driven by financing impacts related to the recent acquisitions, including the Q2 proactive debt issuance. Our second quarter effective tax rate finished at 21.4%, flat to our rate a year ago. Q2 average diluted shares outstanding were 243 million shares, 1% lower than a year ago due to our previous share repurchases. Excluding that, revenue increased 17% driven by brand and specialty sales growth from existing and new customers. This included approximately 6.5 percentage points of revenue growth from GLP1 sales. As we indicated at a recent industry conference during Q2 we saw strong pharmaceutical demand across our business in brand, specialty, consumer health and generics and from our largest customers.
The team delivered segment profit of $531 million in the second quarter, an increase of 7% driven by growth from Biopharma Solutions, including contributions from specialty networks and a higher contribution from brand and specialty products, only partially offset by the customer contract expiration in specialty. We saw strong performance across specialty distribution. We also continued to be pleased with the progress of integrating specialty networks, which is benefiting our overall specialty strategy and tracking consistent with our original expectations.
As expected, the distribution of COVID 19 vaccines was a headwind in the quarter as we compared to last year's peak during Q2. We do not expect a meaningful contribution from COVID 19 vaccines for the remainder of the fiscal year. Our generics program continued to see positive performance, including strong volume growth and consistent market dynamics. Operationally, our large customer onboardings and expansions are in progress. While each customer's needs are unique and timelines vary, we are pleased with the performance of our pharma business and how that business has prepared for the future.
Let's turn now to our turnaround business, the GMPD segment, which continues to advance the GMPD Improvement plan. Revenue increased 1% in Q2 to $3.2 billion, driven by volume growth from existing customers. And as previewed earlier this month, volume growth was less than we expected, in part driven by softness with respiratory products. In our lab business, GMPD segment profit increased to $18 million, slightly below our initial expectations for the quarter, reflecting the softer volumes I just referenced and an unanticipated $15 million impact in our Wavemark business, largely from the write off of uncollectible receivables. While we were disappointed with the Wavemark adjustments this quarter, the business model is resonating with customers as they continue to realize substantial benefit from the products and value creating services we provide.
On the positive side, it should be noted that the GMPD team managed to mostly offset the shortfall to expectations in the quarter with aggressive SGA management and a better than expected impact from our cost optimization initiatives. Finishing with the businesses reported in other as seen on Slide 7, second quarter revenue increased 13% to $1.3 billion due to the growth across all three businesses at home Solutions, Nuclear and Precision Health Solutions and Optifreight Logistics. The businesses collectively grew segment profit in the quarter by 11% driven by OptiFreight and Nuclear. I'm especially pleased that our Nuclear business managed through the Mali 99 shortage astutely and posted better than expected results.
We are looking forward to talking about At Home's progress against its automation and efficiency efforts in future quarters. Now turning to the balance sheet, we ended the quarter with a cash position of $3.8 billion which included $2.8 billion which was used today to close the acquisition of 73% of GI Alliance. Adjusted free cash flow was a use of approximately $250 million for the quarter, primarily reflecting unfavorable quarter end day of the week timing.
During the second quarter we continued to deploy capital according to our Disciplined Capital allocation framework. We invested nearly $100 million in capex back into the businesses to drive organic growth. We returned approximately $125 million to shareholders through dividends and we closed on the Ion acquisition and obtained the financing that we're using to complete the GIA acquisition today.
Now let's turn our gaze forward. Some context notes before we begin. We have reached the midyear point and are now focused in the back half on significant customer onboarding and expansions. The third element of our large customer nonrenewal mitigation plans. We've closed our acquisitions of ION and GIA alliance and early positive views of those businesses are incorporated into today's update to Guidance. We do not yet have visibility to a closing date on ADSG given customary closing conditions, so we'll wait to incorporate ADSG into our guidance until after closing together ION and gia. While positive profit generators are not meaningful to our fiscal 25 EPS, given the partial remaining year, the increased interest expense to fund the transactions, and the timing of our investments in Synerti Achievement plans. We will provide more details beyond this fiscal year when providing fiscal year 26 guidance on future calls.
With that out of the way, let's talk about our updated fiscal 25 guidance. After another strong quarter, we are raising our fiscal 25 EPS guidance to a range of $7.85 to $8.00, a $0.10 increase at the midpoint from our prior guidance of $7.75 to $7.90. This is primarily driven by strong growth in the pharma segment offset by GMPD and higher interest costs reflecting our acquisitions. Interest in other is increased to a range of $200 million to $230 million driven by the new debt financing and foregone interest income.
Moving on to our segments Starting on slide 10 for PhRMA, we are improving our revenue outlook to a decline of 1% to 3% reflecting the additions of GI alliance and ION into our guidance and the strong year to date utilization we've seen normalizing for the customer transition and our acquisitions. Fiscal 25 revenue growth at the midpoint would now be approximately 20% for segment profit. We are raising our pharma segment profit guidance for the full year to 10 to 12% growth excluding the contributions of GIA and ionization. This would equate to high single digit underlying segment profit growth. You should note that GIA holds meaningful minority equity positions in many of the ambulatory surgical centers in which their procedures are conducted. The ASC tied profit streams in GIA will not show up in our pharma segment, but will rather show up as a positive item in in O's other income. For reference, we expect about $15 million of other income coming from GAA's equity method investments in fiscal 25.
Regarding pharma's cadence, we continue to expect significant incremental volume over the back half of the year from new customer wins and expansions. And we also continue to expect Q3 to be the highest profit dollar quarter of the year driven by the timing of manufacturer price increases which have traded generally consistent with our expectations for GMPD.
Our revenue outlook remains unchanged at 2% to 4% growth, which is also what we now expect for Cardinal brand revenue growth as we think about the GMPD improvement plan and the efforts I referenced earlier. While we are pleased with the progress the team is making, the efforts do take time for the rest of this year. We recognize the impact of the healthcare costs, the wavemark write offs and the Q2 soft volume headwinds that we have experienced.
As a result, we are adjusting our GMPD guidance on segment profit to be in the $130 million to $150 million range, still a significant improvement from last year. As I have commented before, we continue to expect improvements in profit in the back half of the year with Q4 being the high point of the fiscal year similar to last year. We are not providing an update to our fiscal 26 or long term profit guide on GMPT today. While our financial objectives are clear, we are scrutinizing volume trends and the current highly fluid tariff environment in Mexico and the United States and we are awaiting clarity on whether there will be industry wide dislocations or exceptions which may present both risks and opportunities for us. This is a highly fluid situation.
The one certainty is that our GMPD team continues to aggressively work to improve our business. In other we are reiterating our expectations for 10% to 12% revenue growth and approximately 10% segment profit. One note on others cadence we expect stronger year over year profit growth in Q4 than in Q3 due to the timing of our growth oriented technology investments and associated benefits.
Before I wrap up, a couple of comments on capital deployment we remain committed to creating continued shareholder value over the long term. Nothing is changing regarding our disciplined capital allocation strategy. Invest in the business, protect our investment grade rating, return a baseline of capital and assess additional MA and return of capital opportunities following the closures of our deals. We will take a disciplined approach to paying down debt. We anticipate retaining our BBB AAA 2 investment grade rating by quickly getting back within Moody's post deal. Updated targeted leverage range for us of 2.75 times the 3.25 times adjusted debt to EBITDA. We will also execute on our previously committed fiscal year 25 additional share repurchases of $375 million.
As for MA, we are focused on executing against the integration and improvement plans that surround the acquisitions we have announced in the last year. We will continue to evaluate high quality assets in strategic areas of importance, but we'll focus on integration and tuck in acquisitions to the multi specialty and oncology platforms that we have just acquired to close. Cardinal Health continues to benefit from our disciplined focus on our core while also making important investments securing our growth for the long term. Our shareholder value creation efforts span our enterprise and both the progress to date and the roadmap of what we have in front of us gives Jason and I confidence to raise our guidance again for the remainder of this year. We look forward to updating you on this in coming months.
With that, I will turn it back over to Jason.
