McKesson Corporation Reports Fiscal 2023 Second-Quarter Results and Raises Full-Year Guidance

Second-Quarter Highlights:

• Total revenues of $70.2 billion increased 5%.
• Earnings per diluted share from continuing operations of $6.46 increased $4.75.
• Adjusted Earnings per Diluted Share of $6.06 decreased 1%.
• Adjusted Earnings per Diluted Share increased 11% when excluding certain items¹.

Fiscal 2023 Outlook:

• Increased fiscal 2023 Adjusted Earnings per Diluted Share guidance range to $24.45 to $24.95, from the previous range of $23.95 to $24.65.
• Fiscal 2023 Adjusted Earnings per Diluted Share guidance includes approximately $1.45 to $1.65, an increase from the previous range of $0.99 to $1.29, attributable to the following:
• $0.60 to $0.70 related to the U.S. government's COVID-19 vaccine distribution program;
• $1.00 to $1.10 related to the U.S. government's kitting, storage, and distribution of ancillary supplies program and COVID-19 tests;
• Approximately ($0.15) related to year-to-date net gains and losses associated with McKesson Ventures' equity investments.
• Fiscal 2023 Adjusted Earnings per Diluted Share guidance indicates 11% to 14% forecasted growth compared to prior year, excluding the impacts of the above items from both fiscal 2023 guidance and fiscal 2022 results.

IRVING, Texas, November 1, 2022—McKesson Corporation (NYSE:MCK) today reported results for the second-quarter ended September 30, 2022.

“Our financial results for the second quarter demonstrate how the continued development of our strategy, operating execution, and talented teams are driving solid growth. This performance enables further investments in both our oncology and biopharma businesses, which are foundations for our ability to deliver long term shareholder value," said Brian Tyler, chief executive officer. "McKesson continues to advance as a diversified healthcare services leader. Our expanding capabilities, combined with continued execution, give us the confidence in our outlook, and as a result, we are raising our guidance for fiscal 2023 Adjusted Earnings per Diluted Share to $24.45 to $24.95."

Second-quarter revenues were $70.2 billion, an increase of 5% from a year ago, primarily driven by growth in the U.S. Pharmaceutical segment, resulting from increased specialty product volumes, including retail national account customers, and market growth, partially offset by lower revenues in the International segment as a result of the progress on the planned divestiture of McKesson's European business.

Second-quarter earnings per diluted share from continuing operations was $6.46 compared to $1.71 a year ago, an increase of $4.75.

Second-quarter Adjusted Earnings per Diluted Share was $6.06 compared to $6.15 a year ago, a decrease of 1%, driven by prior year net gains from McKesson Ventures' equity investments and lower contribution from the U.S. government’s COVID-19 vaccine distribution, kitting, and storage programs and COVID-19 tests, partially offset by a lower share count. Second-quarter Adjusted Earnings per Diluted Share included pre-tax net losses of approximately $3 million associated with McKesson Ventures' equity investments, compared to pre-tax net gains of approximately $97 million in the second-quarter of fiscal 2022.

For the first six months of the fiscal year, McKesson returned $1.6 billion of cash to shareholders, which included $1.5 billion of common stock repurchases and $139 million of dividend payments. During the first six months of the fiscal year, McKesson generated cash from operations of $166 million, and invested $222 million in capital expenditures, resulting in negative Free Cash Flow of $56 million.

Business Highlights

• McKesson signed an agreement in principle to extend its pharmaceutical distribution partnership with CVS Health through June 2027.
• McKesson continues to expand its differentiated oncology and biopharma businesses, further demonstrating meaningful progress against its company priorities.
• On October 31, 2022, McKesson and HCA Healthcare completed its transaction and formed a joint venture combining McKesson's US Oncology Research and HCA Healthcare's Sarah Cannon Research Institute to advance cancer care and increase access to oncology clinical research. McKesson also acquired Genospace, a leading innovator in precision medicine and clinical trial matching.
• On November 1, 2022, McKesson closed the transaction of Rx Savings Solutions (RxSS), a prescription price transparency and benefit insight company that offers affordability and adherence solutions to health plans and employers.
• McKesson progressed in its planned exit of business operations within the European region and has completed divestitures in 11 of the 12 countries. After entering into an agreement in July 2021 to sell certain McKesson Europe businesses in France, Italy, Ireland, Portugal, Belgium, and Slovenia to the PHOENIX Group, McKesson closed the transaction on October 31, 2022.

U.S. Pharmaceutical Segment

• Second-quarter revenues were $60.1 billion, an increase of 12%, driven by increased volume of specialty products, including higher volumes from retail national account customers, and market growth, partially offset by branded to generic conversions.
• Second-quarter Segment Operating Profit was $896 million. Adjusted Segment Operating Profit was $756 million, an increase of 3%, driven by growth in distribution of specialty products to providers and health systems, partially offset by lower demand of COVID-19 vaccine distribution. Excluding the impact of COVID-19 vaccine distribution, the U.S. Pharmaceutical segment delivered Adjusted Segment Operating Profit growth of 5%.

Prescription Technology Solutions Segment

• Second-quarter revenues were $1.0 billion, an increase of 9%, driven by growth in prescription volumes in our third-party logistics business and higher technology service revenues.
• Second-quarter Segment Operating Profit was $120 million. Adjusted Segment Operating Profit was $141 million, a decrease of 2%, driven by higher operating expenses, resulting from increased headcount associated with annual support of customer programs.

Medical-Surgical Solutions Segment

• Second-quarter revenues were $2.8 billion, a decrease of 9%, driven by lower sales of COVID-19 tests, partially offset by growth in the primary care business.
• Second-quarter Segment Operating Profit was $299 million. Adjusted Segment Operating Profit was $307 million, a decrease of 4%, driven by lower sales of COVID-19 tests, partially offset by organic business performance. Excluding the impact of COVID-19 related items, the Medical-Surgical Solutions segment delivered Adjusted Segment Operating Profit growth of 7%.

International Segment

• Second-quarter revenues were $6.2 billion. On an FX-Adjusted basis, revenues were $6.9 billion, a decrease of 25%, driven by the divestitures of McKesson's UK and Austrian businesses.
• Second-quarter Segment Operating Loss was $37 million. On an FX-Adjusted basis, Adjusted Segment Operating Profit was $151 million, a decrease of 7%, driven by the divestitures of McKesson's UK and Austrian businesses.

Company Updates

• Kathleen Wilson-Thompson, a member of McKesson’s independent Directors, was recognized with the Distinguished Alumna Award by the DirectWomen Organization for her leadership and contributions to board service.
• Brian Tyler signed the Disability:IN’s “CEO Letter on Disability Inclusion,” reaffirming McKesson’s commitment to create an inclusive workplace for its employees.

Fiscal 2023 Outlook

McKesson raised fiscal 2023 Adjusted Earnings per Diluted Share guidance to $24.45 to $24.95 from the previous range of $23.95 to $24.65 to reflect operating business performance and increased contribution from the U.S. government’s COVID-19 vaccine distribution, kitting, and storage programs and COVID-19 tests.

Fiscal 2023 Adjusted Earnings per Diluted Share guidance includes approximately $1.45 to $1.65 of impacts attributable to the following:

Fiscal 2023 Adjusted Earnings per Diluted Share guidance indicates 11% to 14% forecasted growth compared to prior year, excluding the impacts of the above items from both fiscal 2023 guidance and fiscal 2022 results.

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

Conference Call Details

McKesson has scheduled a conference call for today, Tuesday, November 1^st 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:

• J.P. Morgan Healthcare Conference, January 9-12, 2023

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 Other Income, Adjusted Loss on Debt Extinguishment, Adjusted Income Tax Expense, Adjusted Earnings, Adjusted Earnings per Diluted Share, 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.

The Company does not provide forward-looking guidance on a GAAP basis as McKesson is unable to provide a quantitative reconciliation of this forward-looking Non-GAAP measure to the most directly comparable forward-looking GAAP measure, without unreasonable effort, because 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 inherently 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.

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” or the negative of these words or other comparable terminology. The discussion of financial outlook, trends, strategy, plans, assumptions, or intentions, and discussions about an agreement in principle, 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; we might be adversely impacted by changes in tax legislation or challenges to our tax positions; we from time to time record significant charges from impairment to goodwill, intangibles, inventory and other assets or investments; we experience cybersecurity incidents and might experience significant computer system compromises or data breaches; we might experience significant problems with information systems or networks; we may be unsuccessful in retail pharmacy profitability; 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; we might be adversely impacted by delays or other difficulties with divestitures; we might be adversely impacted by healthcare reform such as changes in pricing and reimbursement models; we might be adversely impacted by changes or disruptions in product supply and we have experienced and may experience difficulties in sourcing products and changes in pricing due to the effects of the COVID-19 pandemic and Russo-Ukrainian War on supply chains; we might be adversely impacted as a result of our distribution of generic pharmaceuticals; we might be adversely impacted by an economic slowdown or recession and by disruption in capital and credit markets that might impede our access to credit, increase our borrowing costs and impair the financial soundness of our customers and suppliers; we might be adversely impacted by monetary inflation or fluctuations in foreign currency exchange rates; we might be adversely impacted by events outside of our control, such as widespread public health issues (including the effects we have experienced from the COVID-19 pandemic), natural disasters, political events (such as the Russo-Ukrainian War) and other catastrophic events; we may be adversely affected by global climate change or by legal, regulatory or market responses to such change; the company might not achieve a definitive contract for an agreement in principle; and we face uncertainties and risks related to COVID-19 vaccination distribution and related ancillary supply kit programs.

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 2023 Second-Quarter Results (PDF, 328 KB)

¹ Certain items refer to the impacts attributable to the U.S. government's COVID-19 vaccine distribution of $0.41 in 1H FY23, $0.58 in 1H FY22, and $0.89 in FY22; kitting, storage, and distribution of ancillary supplies and COVID-19 tests of $0.58 in 1H FY23, $0.79 in 1H FY22, and $1.78 in FY22; and net gains and losses associated with McKesson Ventures' equity investments of approximately ($0.15) in 1H FY23, $0.49 in 1H FY22, and $0.47 in FY22
² Reflects continuing operations attributable to McKesson, net of tax
³ Represents a non-GAAP financial measure; refer to the reconciliations of non-GAAP financial measures included in accompanying schedules