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

Third-Quarter Highlights:

• Total revenues of $70.5 billion increased 3%.
• Earnings per diluted share from continuing operations of $7.65 increased $7.69.
• Adjusted Earnings per Diluted Share of $6.90 increased 12%.
• Adjusted Earnings per Diluted Share Excluding Certain Items increased 6%.

Fiscal 2023 Outlook:

• Increased fiscal 2023 Adjusted Earnings per Diluted Share guidance range to $25.75 to $26.15, from the previous range of $24.45 to $24.95.
• Fiscal 2023 Adjusted Earnings per Diluted Share guidance includes approximately $2.30 to $2.50, an increase from the previous range of $1.45 to $1.65, attributable to the following:
• $0.70 to $0.80 related to the U.S. government's COVID-19 vaccine distribution program;
• $1.10 to $1.20 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;
• $0.65 related to the termination of the tax receivable agreement with Change Healthcare.
• Fiscal 2023 Adjusted Earnings per Diluted Share Excluding Certain Items guidance indicates 13% to 16% forecasted growth compared to prior year.

IRVING, Texas, February 1, 2023—McKesson Corporation (NYSE:MCK) today reported results for the third-quarter ended December 31, 2022.

Fiscal 2023 Third-Quarter Result Summary

“McKesson delivered another solid quarter, driven by the dedication of our talented associates committed to advancing healthcare for all. Our performance was highlighted by execution across our scaled distribution businesses and differentiated capabilities in the oncology and biopharma services platforms," said Brian Tyler, chief executive officer. "This consistently solid performance, combined with our outlook, reinforces our ability to deliver on our financial targets, resulting in compelling value creation for all stakeholders. As a result of our execution and operational strength, we are raising our fiscal 2023 Adjusted Earnings per Diluted Share guidance to $25.75 to $26.15."

Third-quarter revenues were $70.5 billion, an increase of 3% 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, market growth, and strength across the oncology platform including increased patient visits, partially offset by lower revenues in the International segment as a result of the completed divestitures of McKesson’s European businesses.

Third-quarter earnings per diluted share from continuing operations was $7.65 compared to loss per diluted share from continuing operations of ($0.04) a year ago, an increase of $7.69, due to an after-tax charge of $829 million for the fair value remeasurement related to McKesson's agreement to sell its UK business in the third-quarter of fiscal 2022.

Third-quarter Adjusted Earnings per Diluted Share was $6.90 compared to $6.15 a year ago, an increase of 12%, driven by lower corporate expenses, including a pre-tax benefit of $126 million associated with the termination of the tax receivable agreement with Change Healthcare, lower share count, and growth across the North American businesses.

For the first nine months of the fiscal year, McKesson returned $3.7 billion of cash to shareholders, which included $3.5 billion of common stock repurchases and $216 million of dividend payments. During the first nine months of the fiscal year, McKesson generated cash from operations of $1.8 billion, and invested more than $300 million in capital expenditures, resulting in Free Cash Flow of $1.5 billion.

Business Highlights

• McKesson was recognized by Newsweek as one of America’s Greatest Workplaces for Diversity in 2023.
• The Science Based Targets initiative (SBTi) has approved McKesson's near-term science-based greenhouse gas (GHG) emissions reduction targets. The targets validated by SBTi are to:
• Reduce direct GHG emissions 50% by fiscal 2032 from a fiscal 2020 base year
• Ensure 70% of McKesson suppliers, by spend covering purchased goods and services, will have their own SBTi-approved GHG reduction targets by fiscal 2027
• McKesson continued 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 the formation of a joint venture combining McKesson’s US Oncology Research and HCA Healthcare’s Sarah Cannon Research Institute and on November 1, 2022, McKesson completed the acquisition of Rx Savings Solutions.
• The US Oncology Network expanded its footprint into local communities with the addition of two large multidisciplinary practices, Epic Care and Nexus Health.

U.S. Pharmaceutical Segment

• Third-quarter revenues were $61.9 billion, an increase of 13%, 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.
• Third-quarter Segment Operating Profit was $850 million. Adjusted Segment Operating Profit was $778 million, an increase of 6%, driven by growth in distribution of specialty products to providers and health systems. Excluding the impact of COVID-19 vaccine distribution, the U.S. Pharmaceutical segment delivered Adjusted Segment Operating Profit growth of 7%, driven by growth in distribution of specialty products to providers and health systems and improvements in pharmaceutical prescription volumes and oncology visits.

Prescription Technology Solutions Segment

• Third-quarter revenues were $1.1 billion, an increase of 9%, driven by growth in prescription volumes in our third-party logistics business and higher technology service revenues.
• Third-quarter Segment Operating Profit was $136 million. Adjusted Segment Operating Profit was $155 million, an increase of 7%, driven by growth in access, affordability, and adherence solutions. During the quarter, we continued to organically invest in this segment as we position our products and services for sustainable long-term growth.

Medical-Surgical Solutions Segment

• Third-quarter revenues were $3.0 billion, a decrease of 3%, driven 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, partially offset by growth in the primary care business.
• Third-quarter Segment Operating Profit was $328 million. Adjusted Segment Operating Profit was $336 million, an increase of 2%, driven by growth in the primary care business and organic business performance, 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. Excluding the impact of COVID-19 related items, the Medical-Surgical Solutions segment delivered Adjusted Segment Operating Profit growth of 25%, driven by growth in the primary care business, including illness season testing, and favorable sourcing activities.

International Segment

• Third-quarter revenues were $4.4 billion. On an FX-Adjusted basis, revenues were $4.9 billion, a decrease of 48%, driven by the divestitures of McKesson’s European businesses.
• Third-quarter Segment Operating Profit was $136 million. On an FX-Adjusted basis, Adjusted Segment Operating Profit was $158 million, a decrease of 29%, driven by the divestitures of McKesson’s European businesses.

Fiscal 2023 Outlook

McKesson raised fiscal 2023 Adjusted Earnings per Diluted Share guidance to $25.75 to $26.15 from the previous range of $24.45 to $24.95 to reflect solid operating business performance.

Fiscal 2023 Adjusted Earnings per Diluted Share guidance includes approximately $2.30 to $2.50 of impacts attributable to the following:

Fiscal 2023 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, February 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:

• BofA Securities 2023 Healthcare Conference, May 9-11, 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 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.

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,” “targets” or the negative of these words or other comparable terminology. The discussion of financial outlook, guidance, trends, strategy, plans, assumptions, or intentions, and our greenhouse gas emission targets 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 not achieve our GHG emissions reduction targets; SBTi may not validate a sufficient number of our suppliers’ GHG reduction targets; we may incur additional costs or operational impacts related to our GHG reduction initiatives; we may be adversely affected by global climate change or by legal, regulatory or market responses to such change; 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 Third-Quarter Results (PDF, 460 KB)