McKesson Corporation Reports Fiscal 2024 First-Quarter Results

First Quarter Highlights:

• Total revenues of $74.5 billion increased 11%.
• Earnings per diluted share from continuing operations of $7.02 increased $1.77.
• Adjusted Earnings per Diluted Share of $7.27 increased 25%.
• Adjusted Earnings per Diluted Share Excluding Certain Items increased 33%.
• Board of Directors approved a $6.0 billion increase to the share repurchase program, bringing the total remaining share repurchase authorization to $8.9 billion as of July 2023.
• Board of Directors increased the quarterly dividend for the seventh consecutive year to $0.62 per share.
• The US Oncology Network expanded its footprint with the addition of the Cancer Center of Kansas.

Fiscal 2024 Outlook:

• Increasing fiscal 2024 Adjusted Earnings per Diluted Share guidance range to $26.55 to $27.35, from the previous range of $26.10 to $26.90.
• Fiscal 2024 Adjusted Earnings per Diluted Share Excluding Certain Items guidance indicates 13% to 16% forecasted growth compared to prior year.
• The Company does not forecast GAAP earnings per diluted share from continuing operations or segment operating profit¹.

IRVING, Texas, August 2, 2023 - McKesson Corporation (NYSE:MCK) today reported results for the first quarter ended June 30, 2023.

Fiscal 2024 First Quarter Result Summary

“Our strong first quarter results reflect continued momentum across our business, led by the dedication and commitment of over 50,000 Team McKesson employees,” said Brian Tyler, chief executive officer. “Our performance in the quarter further demonstrates operating execution and continued focus on our strategy. We remain confident in our ability to deliver sustainable growth. Based on the strong first quarter and our outlook for the remainder of the year, we are raising our guidance range for fiscal 2024 Adjusted Earnings per Diluted Share to $26.55 to $27.35.”

First quarter revenues were $74.5 billion, an increase of 11% from a year ago, primarily driven by growth in the U.S. Pharmaceutical segment, resulting from increased prescription volumes, including higher volumes from retail national account customers and specialty and GLP-1 products, partially offset by lower revenues in the International segment as a result of the divestitures of McKesson's European businesses.

First quarter earnings per diluted share from continuing operations was $7.02 compared to $5.25 a year ago, an increase of $1.77.

First quarter Adjusted Earnings per Diluted Share was $7.27 compared to $5.83 a year ago, an increase of 25%, driven by a lower tax rate, lower share count, and growth in the U.S. Pharmaceutical and Prescription Technology Solutions segments. First quarter Adjusted Earnings per Diluted Share also included pre-tax losses of approximately $7 million associated with McKesson Ventures' equity investments, compared to pre-tax losses of approximately $22 million in the first quarter of fiscal 2023.

For the first three months of the fiscal year, McKesson returned $770 million of cash to shareholders, which included $696 million of common stock repurchases and $74 million of dividend payments. During the first three months of the fiscal year, McKesson used cash from operations of $1.1 billion, and invested $124 million in capital expenditures, resulting in negative Free Cash Flow of $1.2 billion.

Business Highlights

• McKesson maintains a disciplined approach to capital allocation, centered on delivering sustainable growth and long-term shareholder value. On July 21, 2023, the Board of Directors:
• Declared a 15% increase to its quarterly dividend from $0.54 per share to $0.62 per share.
• Approved the company to repurchase up to an additional $6.0 billion of its common shares to a total authorization of $8.9 billion as of July 2023, in a manner and timing deemed in the best interest of the company and its stockholders, considering factors such as other growth opportunities and prevailing business and market conditions.
• In July 2023, The US Oncology Network expanded its footprint with the addition of the Cancer Center of Kansas, strengthening its market leading position in community oncology practices and growing its total number of providers to over 2,400.
• McKesson released its latest Impact Report for fiscal years 2022 and 2023, showcasing its ongoing commitment to advancing health outcomes for all. The report describes McKesson’s continued efforts to track, measure, and communicate its progress in achieving its corporate purpose, with a focus on how the company is making an impact with its people, partners, community, and planet.

U.S. Pharmaceutical Segment

• Revenues were $67.2 billion, an increase of 18%, driven by increased prescription volumes, including higher volumes from retail national account customers and specialty and GLP-1 products, partially offset by branded to generic conversions.
• Segment Operating Profit was $827 million. Adjusted Segment Operating Profit was $771 million, an increase of 8%, driven by growth in the distribution of specialty products to providers and health systems and increased contributions from our generics program. Excluding the impact of COVID-19 vaccine distribution from fiscal 2023, the U.S. Pharmaceutical segment delivered Adjusted Segment Operating Profit growth of 14%.

Prescription Technology Solutions Segment

• Revenues were $1.2 billion, an increase of 17%, driven by growth in our third-party logistics and technology services businesses due to increased prescription volumes.
• Segment Operating Profit was $231 million. Adjusted Segment Operating Profit was $223 million, an increase of 35%, driven by increasing demand for access solutions, primarily related to prior authorization services due to increased prescription volumes.

Medical-Surgical Solutions Segment

• Revenues were $2.6 billion, an increase of 1%, driven by growth in the extended and primary care businesses, including growth in lab and equipment, and specialty pharmaceuticals, partially offset by lower sales of COVID-19 tests and lower contribution from kitting, storage, and distribution of ancillary supplies for the U.S. government’s COVID-19 vaccine program.
• Segment Operating Profit was $227 million. Adjusted Segment Operating Profit was $235 million, a decrease of 12%, driven by lower contribution from kitting, storage, and distribution of ancillary supplies for the U.S. government’s COVID-19 vaccine program. Excluding the impact of COVID-19 related items from fiscal 2023, the Medical-Surgical Solutions segment delivered Adjusted Segment Operating Profit growth of 7%, driven by growth in the extended and primary care businesses.

International Segment

• Revenues were $3.5 billion. On an FX-Adjusted basis, revenues were $3.7 billion, a decrease of 44%, driven by the divestitures of McKesson's European businesses.
• Segment Operating Profit was $57 million. On an FX-Adjusted basis, Adjusted Segment Operating Profit was $95 million, a decrease of 31%, driven by the divestitures of McKesson's European businesses.

Fiscal 2024 Outlook

McKesson does not provide forward-looking guidance on a GAAP basis as the Company is unable to provide a quantitative reconciliation of forward-looking Non-GAAP measures to the most directly comparable forward-looking GAAP measure, without unreasonable effort. McKesson cannot reliably forecast LIFO inventory-related adjustments, certain litigation loss and gain contingencies, restructuring, impairment and related charges, and other adjustments, which are difficult to predict and estimate. These items are generally uncertain and depend on various factors, many of which are beyond the company's control, and as such, any associated estimate and its impact on GAAP performance could vary materially.

McKesson is raising fiscal 2024 Adjusted Earnings per Diluted Share guidance to $26.55 to $27.35 from the previous range of $26.10 to $26.90 to reflect strong first quarter performance and outlook in the North American businesses.

Fiscal 2024 Adjusted Earnings per Diluted Share guidance includes ($0.04) related to year-to-date losses associated with McKesson Ventures' equity investments.

Fiscal 2024 Adjusted Earnings per Diluted Share Excluding Certain Items guidance indicates 13% to 16% forecasted growth compared to prior year.

Additional modeling considerations will be provided in the earnings call presentation.

Conference Call Details

McKesson has scheduled a conference call for today, Wednesday, August 2^nd at 4:30 PM ET to discuss the company’s financial results. The audio webcast of the conference call will be available live and archived on McKesson's Investor Relations website at investor.mckesson.com.

Upcoming Investor Events

McKesson management will be participating in the following investor conference:

• Morgan Stanley Healthcare Conference, September 12, 2023
• Baird Global Healthcare Conference, September 13, 2023

The audio webcast, and a complete listing of upcoming events for the investment community, including details and updates, will be available on McKesson’s Investor Relations website.

Non-GAAP Financial Measures

GAAP refers to the U.S. generally accepted accounting principles. This press release includes GAAP financial measures as well as Non-GAAP financial measures, including Adjusted Gross Profit, Adjusted Operating Expenses, Adjusted Interest Expense, Adjusted Income Tax Expense, Adjusted Earnings, Adjusted Earnings per Diluted Share, Adjusted Earnings per Diluted Share Excluding Certain Items, Adjusted Segment Operating Profit, Adjusted Segment Operating Profit Margin, Adjusted Corporate Expenses, Adjusted Operating Profit, FX-Adjusted results and Free Cash Flow which are financial measures not calculated in accordance with GAAP. Refer to the “Supplemental Non-GAAP Financial Information” section of the accompanying financial statement tables for the definitions and usefulness of the Company’s Non-GAAP financial measures and the attached schedules for reconciliations of the differences between the Non-GAAP financial measures and their most directly comparable GAAP financial measures.

Cautionary Statements

This earnings release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by their use of terminology such as “believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “projects,” “plans,” “estimates,” “targets,” or the negative of these words or other comparable terminology. The discussion of financial outlook, guidance, trends, strategy, plans, assumptions, commitments, intentions, and future dividends and share repurchases may also include forward-looking statements. Readers should not place undue reliance on forward-looking statements, such as financial performance forecasts, which speak only as of the date they are first made. Except to the extent required by law, we undertake no obligation to update or revise our forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated, or implied. Although it is not possible to predict or identify all such risks and uncertainties, we encourage investors to read the risk factors described in our most recent annual and periodic report filed with the Securities and Exchange Commission.

These risk factors include, but are not limited to: we experience costly and disruptive legal disputes and settlements, including regarding our role in distributing controlled substances such as opioids; we might experience losses not covered by insurance or indemnification; we are subject to frequently changing, extensive, complex, and challenging healthcare and other laws; we from time to time record significant charges from impairment to goodwill, intangibles, and other long-lived assets; we might not realize expected benefits from business process initiatives; we experience cybersecurity incidents that might significantly compromise our technology systems or might result in material data breaches; we may be unsuccessful in achieving our strategic growth objectives; we might be harmed by large customer purchase reductions, payment defaults or contract non-renewal; our contracts with government entities involve future funding and compliance risks; we might be harmed by changes in our relationships or contracts with suppliers; our use of third-party data is subject to limitations that could impede the growth of our data services business; we might be adversely impacted by healthcare reform such as changes in pricing and reimbursement models; we might be adversely impacted by competition and industry consolidation; we might be adversely impacted by changes or disruptions in product supply and have difficulties in sourcing or selling products due to a variety of causes; we might be adversely impacted as a result of our distribution of generic pharmaceuticals; we might be adversely impacted by changes in the economic environments in which we operate; changes affecting capital and credit markets might impede access to credit, increase borrowing costs, and disrupt banking services for us and our customers and suppliers and might impair the financial soundness of our customers and suppliers; we might be adversely impacted by changes in tax legislation or challenges to our tax positions; we might be adversely impacted by fluctuations in foreign currency exchange rates; we might be adversely impacted by events outside of our control, such as widespread public health issues, natural disasters, political events and other catastrophic events; and we may be adversely affected by global climate change or by legal, regulatory, or market responses to such change.

About McKesson Corporation

McKesson Corporation is a diversified healthcare services leader dedicated to advancing health outcomes for patients everywhere. Our teams partner with biopharma companies, care providers, pharmacies, manufacturers, governments, and others to deliver insights, products and services to help make quality care more accessible and affordable. Learn more about how McKesson is impacting virtually every aspect of healthcare at McKesson.com and read Our Stories.

Tables and full-text of earnings release also available for viewing and download in PDF format: McKesson Reports Fiscal 2024 First-Quarter Results (PDF, 266 KB)