UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C FORM 8-K

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 6, 2018 Diplomat Pharmacy, Inc. (Exact Name of Registrant as Specified in its Charter) Michigan (State or Other Jurisdiction of Incorporation) (Commission File Number) 4100 S. Saginaw St. Flint, Michigan (Address of Principal Executive Offices) (Zip Code) (888) (Registrant s Telephone Number, Including Area Code) (IRS Employer Identification No.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below): o Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) o o o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 ( of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 ( b-2 of this chapter). Emerging growth company o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

2 Item 2.02 Results of Operations and Financial Condition. On August 6, 2018, Diplomat Pharmacy, Inc. (the Company ) publicly announced its financial results for the second quarter ended June 30, A copy of the Company s news release and a related supplemental slide presentation for the quarter are attached hereto as Exhibits 99.1 and 99.2, respectively, each of which is incorporated herein by reference. The information in this Item 2.02 and the attached exhibits shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act ), nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as shall be expressly stated by specific reference in such filing. Item 9.01 (d) Exhibits Financial Statements and Exhibits. Exhibit 99.1 Company news release dated August 6, 2018 concerning financial results. Exhibit 99.2 Supplemental slide presentation for the quarter ended June 30,

3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Diplomat Pharmacy, Inc. By: /s/ Atul Kavthekar Atul Kavthekar Chief Financial Officer Date: August 6,

4 Exhibit 99.1 Diplomat Announces 2 Quarter Financial Results 2 nd Quarter Revenue of $1,416 Million, an increase of 26%, Net (Loss) Income Attributable to Diplomat of $(4.0) Million compared to $3.6 Million, Adjusted EBITDA of $42.7 Million, an increase of 70% FLINT, Mich., August 6, 2018 Diplomat Pharmacy, Inc. (NYSE: DPLO), the nation s largest independent provider of specialty pharmacy services, announced financial results for the quarter ended June 30, All comparisons, unless otherwise noted, are to the quarter ended June 30, Prior period financials have been recast to include certain direct expenses as part of cost of sales instead of selling, general and administrative expense ( SG&A ) for our specialty segment. This change is a reclassification only and has no impact on overall results. Second Quarter 2018 Highlights include: Revenue of $1,416 million, compared to $1,126 million, an increase of 26% Specialty segment revenue of $1,234 million, compared to $1,126 million PBM segment revenue of $189 million, which was not part of the business in the prior year period Specialty segment total prescriptions dispensed of 236,000, compared to 220,000 PBM segment total volume, adjusted to 30-day equivalent, of 2,123,000 Gross margin of 6.9% versus 5.9% Specialty segment gross margin of 5.9% versus 5.9% PBM segment gross margin of 13.7% EPS of $(0.05) per diluted common share versus $0.05 Adjusted EPS of $0.17 versus $0.25 Adjusted EBITDA of $42.7 million, compared to $25.2 million Adjusted EBITDA margin of 3.0% versus 2.2% Net cash provided by operating activities was $18.1 million, compared to $23.0 million Net debt, including contingent consideration, reduced to $609.2 million, from $618.2 million at March 31, 2018 Brian Griffin, Chairman and CEO of Diplomat, commented The Diplomat team delivered another great quarter with record revenue and adjusted EBITDA, driven by continued solid execution of our plan. Our PBM integration is reaching its conclusion with CastiaRx demonstrating strong results in the quarter, as well as continued momentum on our growth and profitability initiatives across the entire enterprise. I am truly excited to join such a highly energized organization and look forward to exploring our growth potential for the benefit of all of our stakeholders. Second Quarter Financial Summary: nd Revenue for the second quarter of 2018 was $1,416 million, compared to $1,126 million in the second quarter of 2017, an increase of $290 million or 26%. Revenue was comprised of $1,234 million and $189 million from our Specialty segment and our Pharmacy Benefit Management ( PBM ) segment, respectively. There was a $6.4 million inter-company elimination of revenue, and associated cost of sales, between the segments. The increase in our Specialty segment revenue was primarily driven by $29 million of revenue from our acquisitions. The remaining increase in our Specialty segment was driven by manufacturer price increases, access to dispense drugs that were new in the past year and increased volume due to both payor and physician relationships.

5 Gross profit in the second quarter of 2018 was $98.4 million and generated an 6.9% gross margin, compared to $66.7 million gross profit and 5.9% gross margin in the second quarter of Gross profit was comprised of $72.5 million and $25.9 million from our Specialty segment and PBM segment, respectively. The gross margin increase in the quarter was primarily due to the impact of our PBM acquisitions, as well as the impact of the acquired entities in our Specialty segment versus the prior year period. SG&A for the second quarter of 2018 were $90.6 million, an increase of $28.8 million, compared to $61.9 million in the second quarter of This increase is primarily driven by approximately $12.7 million related to employee cost, including employee cost for our acquired entities, a $4.1 million increase in share-based compensation, and approximately $0.6 million of non-recurring severance expense. Also contributing to the SG&A expense increase was a $7.3 million increase in amortization expense from definite-lived intangible assets, including capitalized software for internal use, and a $2.3 million increase in the fair value of contingent consideration, both of which are associated with our acquired entities. We also experienced increases in other SG&A; including, building and equipment with the addition of our Chandler, Arizona facility, recruiting primarily related to our CEO search, travel, and other miscellaneous expenses. Net (loss) income attributable to Diplomat for the second quarter of 2018 was $(4.0) million compared to $3.6 million in the second quarter of This decrease was primarily driven by an $8.5 million increase in interest expense due to a significant increase in outstanding debt to fund our PBM acquisitions. Adjusted EBITDA for the second quarter of 2018 was $42.7 million compared to $25.2 million in the second quarter of 2017, an increase of $17.5 million. Earnings per share for the second quarter of 2018 was $(0.05) per basic/diluted common share, compared to $0.05 per basic/diluted common share for the second quarter of Diluted non-gaap adjusted earnings per share ( Adjusted EPS ) was $0.17 in the second quarter of this year compared to $0.25 in the second quarter of Financial Outlook For the full-year 2018, we are updating our previous financial guidance: Revenue between $5.5 and $5.9 billion, no change to previous range Net (loss) income attributable to Diplomat between $(11.0) and $0.5 million, versus the previous range of $4.5 and $13.0 million Adjusted EBITDA between $164 and $170 million, no change to previous range Diluted EPS between $(0.15) and $0.01, versus the previous range of $0.06 and $0.17 Our EPS expectations assume approximately 74,300,000 weighted average common shares outstanding on a diluted basis and a tax rate of (5)% and 32%, for the low- and high-end of the range, respectively, for the full year 2018, each of which could differ materially.

6 Earnings Conference Call Information As previously announced, the Company will hold a conference call to discuss its second quarter performance this evening, August 6, 2018, at 5:00 p.m. Eastern Time. Shareholders and interested participants may listen to a live broadcast of the conference call by dialing ( for international callers) and referencing participant code approximately 15 minutes prior to the call. A live webcast of the conference call and associated slide presentation will be available on the investor relations section of the Company s website for approximately 90 days at ir.diplomat.is. About Diplomat Diplomat (NYSE: DPLO) is the nation s largest independent provider of specialty pharmacy services helping people with complex health conditions in all 50 states. Rooted in this patient care expertise, Diplomat also provides industry-focused specialty solutions through two brands: CastiaRx, which serves payers as a leading specialty benefit manager, and EnvoyHealth, which offers tailored solutions for healthcare innovators. Diplomat opened its doors in 1975 as a neighborhood pharmacy with one essential tenet: Take good care of patients and the rest falls into place. Today, that tradition continues always focused on improving patient care. For more information, visit diplomat.is. Non-GAAP Information Adjusted EPS adds back, net of income taxes, the impact of all merger and acquisition related expenses, including amortization of intangible assets, the change in fair value of contingent consideration, as well as transaction-related costs. We exclude merger and acquisition-related expenses from Adjusted EPS because we believe the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and such expenses can vary significantly between periods as a result of new acquisitions, full amortization of previously acquired intangible assets, or ultimate realization of contingent consideration. Investors should note that acquisitions, once consummated, contribute to revenue in the periods presented as well as future periods and should also note that amortization and contingent consideration expenses may recur in future periods. A reconciliation of Adjusted EPS, a non-gaap measure, to EPS as prepared in accordance with accounting principles generally accepted in the United States ( GAAP ) can be found below. Please note that going forward Diplomat will no longer present, or provide guidance with respect to, Adjusted EPS. We define Adjusted EBITDA as net income (loss) attributable to Diplomat before interest expense, income taxes, depreciation and amortization, share-based compensation, change in fair value of contingent consideration and other merger and acquisition-related expenses, restructuring and impairment charges, and certain other items that we do not consider indicative of our ongoing operating performance (which are itemized below in the reconciliation to net (loss) income attributable to Diplomat). Adjusted EBITDA is not in accordance with, or an alternative to, GAAP. In addition, this non-gaap measure is not based on any comprehensive set of accounting rules or principles. You should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in the presentation, and we do not infer that our future results will be unaffected by unusual or non-recurring items. We consider Adjusted EBITDA and Adjusted EPS to be supplemental measures of our operating performance. We present Adjusted EBITDA and Adjusted EPS because they are used by our Board of Directors and management to evaluate our operating performance. Adjusted EBITDA is also used as a factor in determining incentive compensation, for budgetary planning and forecasting overall financial and operational expectations, for identifying underlying trends, and for evaluating the effectiveness of our business strategies. Further, we believe they assist us, as well as investors, in comparing performance from period-to-period on a consistent basis. Other companies in our industry may calculate Adjusted EBITDA and Adjusted EPS differently than we do and these calculations may not be comparable to our Adjusted EBITDA and Adjusted EPS metrics. A reconciliation of Adjusted EBITDA, a non-gaap measure, to net (loss) income attributable to Diplomat can be found below.

7 Forward Looking Statements This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance, and include Diplomat s expectations regarding revenues, net (loss) income attributable to Diplomat, Adjusted EBITDA, EPS, market share, the expected benefits and performance of acquisitions and growth strategies. The forward-looking statements contained in this press release are based on management s good-faith belief and reasonable judgment based on current information. These statements are qualified by important risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those forecasted or indicated by such forward-looking statements. These risks and uncertainties include: our ability to adapt to changes or trends within the specialty pharmacy industry; significant and increasing pricing pressure from third-party payors; the amount of direct and indirect remuneration fees, as well as the timing of assessing such fees and the methodology used to calculate such fees; the outcome of material legal proceedings; our relationships with wholesalers and key pharmaceutical manufacturers; bad publicity about, or market withdrawal of, specialty drugs we dispense; a significant increase in competition from a variety of companies in the health care industry; our ability to expand the number of specialty drugs we dispense and related services; maintaining existing patients; revenue concentration of the top specialty drugs we dispense; increasing consolidation in the healthcare industry; managing our growth effectively; our ability to drive volume through a refreshed marketing strategy in traditional specialty pharmacy; our capability to penetrate the fragmented infusion market; the success of our strategy in the PBM space; our ability to effectively execute our acquisition strategy or successfully integrate acquired businesses, including any delays or difficulties in integrating the combined businesses, and the ability to achieve cost savings and operating synergies and the timing thereof; the dependence on our senior management and key employees and managing recent turnover among key employees; and the additional factors set forth in Risk Factors in Diplomat s Annual Report on Form 10-K for the year ended December 31, 2017 and in subsequent reports filed with or furnished to the Securities and Exchange Commission. Except as may be required by any applicable laws, Diplomat assumes no obligation to publicly update such forwardlooking statements, which are made as of the date hereof or the earlier date specified herein, whether as a result of new information, future developments, or otherwise. CONTACT: Terri Anne Powers, Vice President Investor Relations tpowers@diplomat.is

8 DIPLOMAT PHARMACY, INC. Condensed Consolidated Balance Sheets (Unaudited) (Dollars in thousands) June 30, 2018 December 31, 2017 ASSETS Current assets: Cash and equivalents $ 7,360 $ 84,251 Receivables, net 349, ,091 Inventories 170, ,603 Prepaid expenses and other current assets 18,012 11,125 Total current assets 545, ,070 Property and equipment, net 38,838 38,990 Capitalized software for internal use, net 33,865 36,520 Goodwill 836, ,624 Definite-lived intangible assets, net 357, ,011 Other noncurrent assets 5,507 6,208 Total assets $ 1,817,870 $ 1,940,423 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Accounts payable $ 383,969 $ 384,719 Rebates payable 25,257 28,744 Borrowings on line of credit 135, ,250 Short-term debt, including current portion of long-term debt 11,500 11,500 Accrued expenses: Compensation and benefits 13,641 9,584 Contingent consideration 5,300 8,100 Other 22,005 20,560 Total current liabilities 596, ,457 Long-term debt, less current portion 442, ,098 Deferred income taxes 13,515 14,367 Contingent consideration 5,870 4,000 Other 1,507 Total liabilities 1,060,398 1,190,922 Commitments and contingencies Shareholders equity: Preferred stock (10,000,000 shares authorized; none issued and outstanding) Common stock (no par value, 590,000,000 shares authorized; 74,282,135 and 73,871,424 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively) 625, ,235 Additional paid-in capital 45,804 38,450 Retained earnings 87,276 91,816 Accumulated other comprehensive loss (962) Total shareholders equity 757, ,501 Total liabilities and shareholders equity $ 1,817,870 $ 1,940,423

9 DIPLOMAT PHARMACY, INC. Condensed Consolidated Statements of Operations (Unaudited) (dollars in thousands, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, Net sales $ 1,416,078 $ 1,126,464 $ 2,758,562 $ 2,205,204 Cost of sales (1,317,662) (1,059,750) (2,569,768) (2,068,728) Gross profit 98,416 66, , ,476 Selling, general and administrative expenses (90,642) (61,871) (172,329) (123,085) Income from operations Other (expense) income: 7,774 4,843 16,465 13,391 Interest expense (10,392) (1,931) (20,819) (3,980) Other Total other expense (9,998) (1,897) (20,008) (3,914) (Loss) income before income taxes (2,224) 2,946 (3,543) 9,477 Income tax (expense) benefit (1,740) 544 (871) (1,763) Net (loss) income (3,964) 3,490 (4,414) 7,714 Less: net loss attributable to noncontrolling interest (101) (244) Net (loss) income attributable to Diplomat Pharmacy, Inc. $ (3,964) $ 3,591 $ (4,414) $ 7,958 Net (loss) income per common share: Basic $ (0.05) $ 0.05 $ (0.06) $ 0.12 Diluted $ (0.05) $ 0.05 $ (0.06) $ 0.12 Weighted average common shares outstanding: Basic Diluted 74,158,622 74,158,622 67,528,151 68,211,882 74,077,916 74,077,916 67,209,280 67,997,929

10 DIPLOMAT PHARMACY, INC. Condensed Consolidated Statements of Operations, Inclusive of Reportable Segment Breakout (Unaudited) (dollars in thousands, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, Net sales - Specialty $ 1,233,746 $ 1,126,464 $ 2,386,725 $ 2,205,204 Net sales - PBM 188, ,215 Inter-segment elimination (6,415) (8,378) Net sales 1,416,078 1,126,464 2,758,562 2,205,204 Cost of sales - Specialty (1,161,206) (1,059,750) (2,241,365) (2,068,728) Cost of sales - PBM (162,871) (336,781) Inter-segment elimination 6,415 8,378 Cost of sales (1,317,662) (1,059,750) (2,569,768) (2,068,728) Gross profit - Specialty 72,540 66, , ,476 Gross profit - PBM 25,876 43,434 Gross profit 98,416 66, , ,476 Selling, general and administrative expenses (90,642) (61,871) (172,329) (123,085) Income from operations Other (expense) income: 7,774 4,843 16,465 13,391 Interest expense (10,392) (1,931) (20,819) (3,980) Other Total other expense (9,998) (1,897) (20,008) (3,914) (Loss) income before income taxes (2,224) 2,946 (3,543) 9,477 Income tax (expense) benefit (1,740) 544 (871) (1,763) Net (loss) income (3,964) 3,490 (4,414) 7,714 Less: net loss attributable to noncontrolling interest (101) (244) Net (loss) income attributable to Diplomat Pharmacy, Inc. $ (3,964) $ 3,591 $ (4,414) $ 7,958 Net (loss) income per common share: Basic $ (0.05) $ 0.05 $ (0.06) $ 0.12 Diluted $ (0.05) $ 0.05 $ (0.06) $ 0.12 Weighted average common shares outstanding: Basic 74,158,622 67,528,151 74,077,916 67,209,280 Diluted 74,158,622 68,211,882 74,077,916 67,997,929

11 DIPLOMAT PHARMACY, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) (dollars in thousands) Six Months Ended June 30, Cash flows from operating activities: Net (loss) income $ (4,414) $ Adjustments to reconcile net (loss) income to net cash provided by operating activities: 7,714 Depreciation and amortization 48,170 31,935 Share-based compensation expense 10,122 3,798 Net provision for doubtful accounts 3,919 5,401 Amortization of debt issuance costs 2, Changes in fair values of contingent consideration 2,339 Contingent consideration payments (2,704) Deferred income tax expense (632) 979 Other 6 Changes in operating assets and liabilities, net of business acquisitions: Accounts receivable (22,732) (3,024) Inventories 36,407 37,179 Accounts payable (8,013) (14,353) Other assets and liabilities 1,448 (2,977) Net cash provided by operating activities 66,652 67,253 Cash flows from investing activities: Expenditures for capitalized software for internal use (5,878) (2,459) Expenditures for property and equipment (5,487) (2,289) Payments to acquire businesses, net of cash acquired (1,289) (53,571) Other 46 (43) Net cash used in investing activities (12,608) (58,362) Cash flows from financing activities: Net payments on line of credit (53,150) (36,734) Payments on long-term debt (79,750) (3,313) Proceeds from long-term debt 25,000 Proceeds from issuance of stock upon stock option exercises 3,351 6,007 Payments of debt issuance costs (821) Contingent consideration payments (565) Net cash used in financing activities (130,935) (9,040) Net decrease in cash and equivalents (76,891) (149) Cash and equivalents at beginning of period 84,251 7,953 Cash and equivalents at end of period $ 7,360 $ 7,804 Supplemental disclosures of cash flow information: Cash paid for interest $ 18,589 $ Cash paid for income taxes 1,741 3,386 4,458

12 Adjusted EBITDA The table below presents a reconciliation of net (loss) income attributable to Diplomat Pharmacy, Inc. to Adjusted EBITDA for the periods indicated (dollars in thousands) (unaudited) Net (loss) income attributable to Diplomat Pharmacy, Inc. $ (3,964) $ 3,591 $ (4,414) $ 7,958 Depreciation and amortization 24,219 16,538 48,170 31,935 Interest expense 10,392 1,931 20,819 3,980 Income tax expense (benefit) 1,740 (544) 871 1,763 EBITDA $ 32,387 $ 21,516 $ 65,446 $ 45,636 Contingent consideration and other merger and acquisition expense $ 3,122 $ 569 $ 5,123 $ 1,117 Share-based compensation expense 6,961 2,826 10,122 3,798 Employer payroll taxes - option repurchases and exercises Severance and related fees , Other items (440) 116 (440) 544 Adjusted EBITDA $ 42,704 $ 25,167 $ 82,342 $ 51,982 Adjusted EPS (diluted) Below is a reconciliation of net (loss) income attributable to Diplomat Pharmacy, Inc. per diluted share to Adjusted EPS for the periods indicated. Please note that this will be the last time this table is provided, going forward Diplomat will no longer present, or provide guidance with respect to, Adjusted EPS (dollars in thousands, except per share amounts) (unaudited) Net (loss) income attributable to Diplomat Pharmacy, Inc. $ (3,964) $ 3,591 $ (4,414) $ 7,958 Amortization of acquisition-related definite-lived intangible assets 17,072 10,927 34,082 20,612 Amortization of acquisition-related capitalized software for internal use Contingent consideration and other merger and acquisition 2,511 2,017 4,722 4,033 expense 3, ,123 1,117 Income tax impact of adjustments (1) (6,130) (362) (11,860) (4,288) Adjusted non-gaap net income $ 12,611 $ 16,742 $ 27,653 $ 29,432 Net (loss) income attributable to Diplomat Pharmacy, Inc. $ (0.05) $ 0.05 $ (0.06) $ 0.12 Amortization of acquisition-related definite-lived intangible assets Amortization of acquisition-related capitalized software for internal use Contingent consideration and other merger and acquisition expense Income tax impact of adjustments (0.08) (0.01) (0.16) (0.06) Adjusted EPS $ 0.17 $ 0.25 $ 0.37 $ 0.43 Weighted average common shares outstanding: Basic Diluted 74,158,622 74,532,702 67,528,151 68,211,882 74,077,916 74,475,967 67,209,280 67,997,929 (1) 27 percent tax rate used for the three months and six months ended June 30, 2018; 2.7 percent used in the three months ended June 30, 2017; 16.6 percent used in the six months ended June 30, 2017.

13 2018 Full Year Guidance: GAAP to Non-GAAP Reconciliation The tables below present a reconciliation of net income attributable to Diplomat Pharmacy, Inc. to Adjusted EBITDA for the year ended December 31, Reconciliation of GAAP to Adjusted EBITDA (dollars in thousands) (unaudited) Range Low High Net (loss) income attributable to Diplomat Pharmacy, Inc. $ (11,000) $ 500 Depreciation and amortization 98,000 97,000 Interest expense 42,000 40,000 Income tax expense (1) EBITDA $ 129,540 $ 137,740 Contingent consideration and other merger and acquisition expense $ 7,000 $ 6,000 Share-based compensation expense 24,500 24,000 Employer payroll taxes - option repurchases and exercises Severance and related fees 2,900 2,400 Other items (440) (440) Adjusted EBITDA $ 164,000 $ 170,000 (1) Assumes a tax rate of (5) and 32 percent, for the low- and high-end, respectively.

14 Second Quarter 2018 Operating Results August 6, 2018 Exhibit 99.2

15 Disclaimers 2 NON-GAAP INFORMATION Adjusted non-gaap net income and Adjusted EPS add back, net of income taxes, the impact of all merger and acquisition related expenses, including amortization of intangible assets, the change in fair value of contingent consideration, as well as transaction-related costs. We exclude merger and acquisition-related expenses from Adjusted non-gaap net income and Adjusted EPS because we believe the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and such expenses can vary significantly between periods as a result of new acquisitions, full amortization of previously acquired intangible assets, or ultimate realization of contingent consideration. Investors should note that acquisitions, once consummated, contribute to revenue in the periods presented as well as future periods and should also note that amortization and contingent consideration expenses may recur in future periods. A reconciliation of Adjusted non-gaap net income and Adjusted EPS, both non-gaap measures, to net (loss) income attributable to Diplomat and EPS, respectively, each as prepared in accordance with accounting principles generally accepted in the United States ( GAAP ) can be found in the Appendix to this presentation. Please note that going forward; Diplomat will no longer present, or provide guidance with respect to Adjusted Non-GAAP net income or Adjusted EPS. We define Adjusted EBITDA as net income (loss) attributable to Diplomat before interest expense, income taxes, depreciation and amortization, share-based compensation, change in fair value of contingent consideration and other merger and acquisition-related expenses, restructuring and impairment charges, and certain other items that we do not consider indicative of our ongoing operating performance (which are itemized above in the reconciliation to net income (loss) attributable to Diplomat). Adjusted EBITDA is not in accordance with, or an alternative to, GAAP. In addition, this non-gaap measure is not based on any comprehensive set of accounting rules or principles. You should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in the presentation, and we do not infer that our future results will be unaffected by unusual or non-recurring items. We consider Adjusted EBITDA and Adjusted EPS to be supplemental measures of our operating performance. We present Adjusted EBITDA and Adjusted EPS because they are used by our Board of Directors and management to evaluate our operating performance. Adjusted EBITDA is also used as a factor in determining incentive compensation, for budgetary planning and forecasting overall financial and operational expectations, for identifying underlying trends, and for evaluating the effectiveness of our business strategies. Further, we believe they assist us, as well as investors, in comparing performance from period-to-period on a consistent basis. Other companies in our industry may calculate Adjusted EBITDA and Adjusted EPS differently than we do and these calculations may not be comparable to our Adjusted EBITDA and Adjusted EPS metrics. A reconciliation of Adjusted EBITDA, a non-gaap measure, to net (loss) income attributable to Diplomat as prepared in accordance with GAAP can be found in the Appendix to this presentation. FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance and include Diplomat s expectations regarding revenues, net (loss) income attributable to Diplomat, EPS, Adjusted EBITDA, operating cash flow, reduction of our debt burden, market share, growth trends within the industry and drug pipeline, the expected benefits and performance of acquisitions and growth strategies. The forward-looking statements in this presentation are based on management s good-faith belief and reasonable judgment based on current information. These statements are qualified by important risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those forecasted or indicated by such forward-looking statements. For a discussion of such risks and uncertainties, including but not limited to risks related to: our ability to adapt to changes or trends within the specialty pharmacy industry; our relationships with wholesalers and key pharmaceutical manufacturers; revenue concentration of the top specialty drugs we dispense; competition within the prescription benefit management marketplace, and an inability to effectively differentiate our products and services from those of our competitors; our ability to expand the number of specialty drugs we dispense and related services; client losses and/or the failure to win new business; maintaining existing patients; our hub services dependence on the willingness of participants in the specialty pharmacy system to continue outsourcing work and on our reputation for independent, high-quality service; fluctuations in operating results; debt service obligations; our ability to effectively execute our acquisition strategy or successfully integrate acquired businesses, including any delays or difficulties in integrating the combined businesses, and the ability to achieve cost savings and operating synergies and the timing thereof; and the dependence on our senior management and key employees, review Diplomat's filings with the Securities and Exchange Commission, including Risk Factors in Diplomat s Annual Report on Form 10-K for the year ended Dec. 31, 2017, and in subsequent reports filed with or furnished to the Securities and Exchange Commission. Except as may be required by any applicable laws, Diplomat assumes no obligation to publicly update such forward-looking statements, which are made as of the date hereof or the earlier date specified herein, whether as a result of new information, future developments, or otherwise. INDUSTRY AND MARKET DATA Certain information in this presentation concerning our industry and the markets in which we operate is derived from publicly available information released by third-party sources, including independent industry and research organizations, and management estimates. Management estimates are derived from publicly available information released by independent industry and research analysts and other third-party sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing such data and our knowledge of such industry and markets, which we believe to be reasonable. We believe the data from these third-party sources is reliable. In addition, projections, assumptions, and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, as discussed in Diplomat s reports filed with the Securities and Exchange Commission. These and other factors could cause results to differ materially from those expressed in the estimates made by these third-party sources.

16 Opening Remarks Brian Griffin, Chairman & CEO

17 1 A reconciliation of Adjusted EBITDA, a non-gaap measure, to net (loss) income attributable to Diplomat, as prepared in accordance with GAAP can be found in the Appendix to this presentation. 2Q 2018 Highlights $1.4B (+26%) Revenue $43M (+70%) Adjusted EBITDA1 4 Solid growth in specialty and infusion Additional 8 LDDs added in the quarter Contribution from acquired PBM businesses Strong revenue growth PBM integration outperformance Investing in operational excellence New, state-of-the-art distribution and contact center Several other operational and process enhancements

18 CastiaRx Highlights 5 2Q 2018 Integration almost complete $3M in 2Q synergies achieved, YTD total of $4M Now expect $8M-$10M in synergies in 2018 (vs. prior expectation of $4M-$6M) Process begun to move legacy PBM patients on LDDs to Diplomat specialty pharmacy Proposal volume remains double a year ago

19 Putting Patients First 6 Specialty Pharmacy Solutions PBM Manufacturer Services Infrastructure Innovation Infusion Employees The industry s largest independent provider of specialty pharmacy services Specialty-focused PBM targeting middle market clients Nationwide provider of infusion management services Tailored manufacturer services to meet the needs of our partners JAY DIPLOMAT PATIENT

20 Financial Results Atul Kavthekar, CFO

21 ($0.05) ($4.0M) A reconciliation of Adjusted EBITDA, a non-gaap measure, to net (loss) income attributable to Diplomat as prepared in accordance with GAAP, can be found in the Appendix to this presentation. A reconciliation of Adjusted non-gaap net income and Adjusted EPS, both non-gaap measures, to net (loss) income attributable to Diplomat and EPS, respectively, each as prepared in accordance with GAAP, can be found in the Appendix to this presentation. Please note that going forward Diplomat will no longer present, or provide guidance with respect to Adjusted non-gaap net income or Adjusted EPS. Including contingent consideration 2Q 2018 Financial Results 8 Revenue $1.1B $1.4B 2Q17 2Q18 Adj. EBITDA1 $25M $43M 2Q17 2Q18 Adj. EPS2 $16.7M $12.6M 2Q17 2Q18 Cash Flow from Operations Adj. Non-GAAP Net Income2 GAAP EPS GAAP Net Income Net Debt3 $0.05 2Q17 2Q18 $3.6M 2Q17 2Q18 $0.25 $0.17 2Q17 2Q18 $67M $67M 1H17 1H18 $666M $609M

22 2Q 2018 Segment Details 9 Specialty PBM Revenue: $1.2B Gross margin1: 5.9% Rx volume: 236,000 Net Sales / Rx: $5,218 Gross profit / Rx1: $301 Revenue: $0.2B Gross margin: 13.7% Rx volume2: 2,123,000 Gross profit / Rx: $12 Beginning with the second quarter of 2018, certain direct expenses have been reclassified as part of cost of sales instead of SG&A in the Specialty segment. See slide 10 for further detail. Adjusted to 30-day equivalent, where a 90-day prescription is counted as three 30-day prescriptions filled.

23 Specialty Segment Cost of Sales Reclassification In the Specialty segment, certain direct expenses (shipping & handling costs and nursing costs), that were previously classified in SG&A, are now presented in cost of sales. Changes are only a reclassification and do not impact Adjusted EBITDA, Income from Operations or Net Income. 10 *As reported for the quarter ended June 30, 2018 CONSOLIDATED - PRIOR METHOD 1Q Q Q Q Q Q 2018 Revenue 1,078,740 1,126,464 1,124,957 1,155,069 4,485,230 1,342,484 1,416,078 Cost of Sales 993,691 1,041,630 1,039,654 1,061,577 4,136,552 1,231,871 1,295,264 Gross Profit 85,049 84,834 85,303 93, , , ,814 Gross Margin 7.9% 7.5% 7.6% 8.1% 7.8% 8.2% 8.5% SG&A 76,501 79,991 82,995 90, , , ,040 % of Revenue 7.1% 7.1% 7.4% 7.8% 7.4% 7.6% 8.0% Income from Operations $8,548 $4,843 $2,308 $2,866 $18,565 $8,691 $7,774 Adjustment 15,288 18,120 20,213 20,912 74,533 20,235 22,398 CONSOLIDATED - NEW METHOD 1Q Q Q Q Q Q 2018* Revenue 1,078,740 1,126,464 1,124,957 1,155,069 4,485,230 1,342,484 1,416,078 Cost of Sales 1,008,979 1,059,750 1,059,867 1,082,489 4,211,085 1,252,106 1,317,662 Gross Profit 69,761 66,714 65,090 72, ,145 90,378 98,416 Gross Margin 6.5% 5.9% 5.8% 6.3% 6.1% 6.7% 6.9% SG&A 61,214 61,871 62,782 69, ,580 81,687 90,642 % of Revenue 5.7% 5.5% 5.6% 6.0% 5.7% 6.1% 6.4% Income from Operations $8,548 $4,843 $2,308 $2,866 $18,565 $8,691 $7,774

24 Revised 2018 Full Year Outlook Investing for long-term growth and operational efficiency Stable margins with potential upside Deleveraging to 2-3x adjusted EBITDA in 2019 TOTAL REVENUE $5.5B - $5.9B TOTAL ADJUSTED EBITDA1 $164M - $170M 11 GAAP EPS ($0.15) - $0.01 CASH FLOW FROM OPERATIONS $115M - $130M 1 A reconciliation of Adjusted EBITDA, a non-gaap measure, to net (loss) income attributable to Diplomat, as prepared in accordance with GAAP can be found in the Appendix to this presentation.

25 Putting Patients First 12 Specialty Pharmacy Solutions PBM Manufacturer Services Infrastructure Innovation Infusion Employees JAY DIPLOMAT PATIENT

26 Appendix Supplemental Financial Information

27 Reconciliation of Net (Loss) Income Attributable to Diplomat to Adjusted EBITDA 14

28 Reconciliation of net (loss) income attributable to Diplomat Pharmacy, Inc. per diluted share to Adjusted EPS for the periods indicated. Please note that this will be the last time this table is provided. Going forward, Diplomat will no longer present, or provide guidance with respect to Adjusted non-gaap net income or Adjusted EPS percent tax rate used for the three months and six months ended June 30, 2018; 2.7 percent used in the three months ended June 30, 2017; 16.6 percent used in the six months ended June 30, Reconciliation of Net (Loss) Income Attributable to Diplomat Per Diluted Share to Adjusted EPS Net (loss) income attributable to Diplomat Pharmacy, Inc. (3,964) $ 3,591 $ (4,414) $ 7,958 $ Amortization of acquisition-related definite-lived intangible assets 17,072 10,927 34,082 20,612 Amortization of acquisition-related capitalized software for internal use 2,511 2,017 4,722 4,033 Contingent consideration and other merger and acquisition expense 3, ,123 1,117 Income tax impact of adjustments 1 (6,130) (362) (11,860) (4,288) Adjusted non-gaap net income 12,611 $ 16,742 $ 27,653 $ 29,432 $ Net (loss) income attributable to Diplomat Pharmacy, Inc. (0.05) $ 0.05 $ (0.06) $ 0.12 $ Amortization of acquisition-related definite-lived intangible assets Amortization of acquisition-related capitalized software for internal use Contingent consideration and other merger and acquisition expense Income tax impact of adjustments (0.08) (0.01) (0.16) (0.06) Adjusted EPS 0.17 $ 0.25 $ 0.37 $ 0.43 $ Weighted average common shares outstanding: Basic 74,158,622 67,528,151 74,077,916 67,209,280 Diluted 74,532,702 68,211,882 74,475,967 67,997,929 For the three months ended June 30, For the six months ended June 30, (dollars in thousands, except per share amounts) (unaudited)

29 2018 Full Year Guidance: GAAP to Non-GAAP Reconciliation Assumes a tax rate of (5) and 32 percent, for the low- and high-end, respectively. 16 The tables below present a reconciliation of net (loss) income attributable to Diplomat Pharmacy, Inc. to Adjusted EBITDA for the year ended December 31, 2018 Low High Net (loss) income attributable to Diplomat Pharmacy, Inc. (11,000) $ 500 $ Depreciation and amortization 98,000 97,000 Interest expense 42,000 40,000 Income tax expense EBITDA 129,540 $ 137,740 $ Contingent consideration and other merger and acquisition expense 7,000 $ 6,000 $ Share-based compensation expense 24,500 24,000 Employer payroll taxes - option repurchases and exercises Severance and related fees 2,900 2,400 Other items (440) (440) Adjusted EBITDA 164,000 $ 170,000 $ Reconciliation of 2018 GAAP to Adjusted EBITDA Guidance (dollars in thousands) (unaudited) Range