Full Press Release Details
McKESSON CORPORATION REPORTS FISCAL 2023 FOURTH-QUARTER
AND FULL-YEAR RESULTS AND RAISES LONG-TERM SEGMENT GROWTH TARGETS
Fourth-Quarter Highlights
Total revenues of $68.9 billion increased 4%.
Earnings per diluted share from continuing operations of $5.71 increased $3.23.
Adjusted Earnings per Diluted Share of $7.19 increased 23%.
Adjusted Earnings per Diluted Share Excluding Certain Items increased 30%.
Full-Year Highlights
Total revenues of $276.7 billion increased 5%.
Earnings per diluted share from continuing operations of $25.05 increased $17.79.
Adjusted Earnings per Diluted Share of $25.94 increased 9%.
Adjusted Earnings per Diluted Share Excluding Certain Items increased 15%.
Cash flow from operations of $5.2 billion and Free Cash Flow of $4.6 billion.
Fiscal 2024 Adjusted Earnings per Diluted Share guidance range of $26.10 to $26.90, indicates 1% to 4% forecasted growth compared to prior year.
Raising long-term Adjusted Segment Operating Profit growth targets and confirming strength of strategic growth prospects.
The Company does not forecast GAAP earnings per diluted share from continuing operations or segment operating profit1.
IRVING, Texas, May 8, 2023 - McKesson Corporation (NYSE MCK) today reported results for the fourth-quarter and fiscal year ended March 31, 2023.
Fiscal 2023 Fourth-Quarter and Full-Year Result Summary
| Fourth-Quarter | Full-Year | |||||||||||||||||||||
| ($ in millions, except per share amounts) | FY23 | FY22 | Change | FY23 | FY22 | Change | ||||||||||||||||
| Revenues | $ | 68,910 | $ | 66,102 | 4 | % | $ | 276,711 | $ | 263,966 | 5 | % | ||||||||||
| Income from Continuing Operations 2 | 787 | 370 | 113 | 3,563 | 1,119 | 218 | ||||||||||||||||
| Adjusted Earnings 2,3 | 992 | 870 | 14 | 3,689 | 3,652 | 1 | ||||||||||||||||
| Earnings per Diluted Share 2 | 5.71 | 2.48 | 130 | 25.05 | 7.26 | 245 | ||||||||||||||||
| Adjusted Earnings per Diluted Share 2,3 | 7.19 | 5.83 | 23 | 25.94 | 23.69 | 9 | ||||||||||||||||
| 1 See below under Fiscal 2024 Outlook for full explanation 2 Reflects continuing operations attributable to McKesson, net of tax 3 Adjusted results in this earnings release are non-GAAP financial measures refer to the accompanying definitions and reconciliation schedules |
"Our strong fourth quarter represented continued operating momentum and execution against our company priorities," said Brian Tyler, chief executive officer. "For the full year, McKesson reported performance across all business segments above our long-term targets. Our results reflect the commitment of our employees and their dedication to perform for customers, patients, communities, and shareholders. I want to thank the over 50,000 team members across McKesson for their dedication to delivering on our purpose to advance health outcomes for all."
"Looking ahead to fiscal 2024, we are well positioned to leverage the differentiated assets and capabilities across McKesson to execute on our strategies, drive sustainable growth and create value for all stakeholders," said Mr. Tyler. "We continue to invest for the long term, and our leadership positions, execution, and confidence in the future support our updated long-term segment growth targets."
Fourth-quarter revenues were $68.9 billion, an increase of 4% from a year ago, and full-year revenues were $276.7 billion, an increase of 5%, primarily driven by growth in the U.S. Pharmaceutical segment, partially offset by lower revenues in the International segment as a result of the completed divestitures of McKesson's European businesses.
Fourth-quarter earnings per diluted share from continuing operations was $5.71 compared to $2.48 a year ago, an increase of $3.23. Full-year earnings per diluted share from continuing operations was $25.05 compared to $7.26 a year ago, an increase of $17.79.
Fourth-quarter Adjusted Earnings per Diluted Share was $7.19 compared to $5.83 a year ago, an increase of 23%, driven by lower tax rate, lower share count, and growth in the U.S. Pharmaceutical and Prescription Technology Solutions segments. Full-year Adjusted Earnings per Diluted Share was $25.94 compared to $23.69 a year ago, an increase of 9%, driven by a lower share count and growth in the U.S. Pharmaceutical segment, partially offset by lower contributions in the International segment as a result of the completed divestitures of McKesson's European businesses.
For the full-year, McKesson returned $3.9 billion of cash to shareholders, which included $3.6 billion of common stock repurchases and $292 million of dividend payments. During the fiscal year, McKesson generated cash from operations of $5.2 billion, and invested $558 million in capital expenditures, resulting in Free Cash Flow of $4.6 billion.
McKesson continued to advance and expand its differentiated oncology and biopharma services platforms.
The US Oncology Network expanded its footprint into local communities with the addition of Regional Cancer Care Associates, strengthening its market leading position in community oncology practices and growing its total network of providers to over 2,300.
Prescription Technology Solutions helped patients access their medicine over 24 million times in the fourth quarter, the highest number of patients assisted in the segment's history.
McKesson received multiple awards and recognitions for its commitment to diversity and inclusion, as well as its dedication to sustainability.
Recognized by Forbes as one of America's Best Large Employers in 2023.
Recognized by Newsweek as one of America's Greatest Workplaces for Women in 2023.
Named a 2023 Industry Top-Rated ESG Company by Sustainalytics, an independent research, ratings, and analytics firm that reports on environmental, social, and governance performance to institutional investors and companies.
U.S. Pharmaceutical Segment
Revenues were $61.7 billion, an increase of 15%, 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.
Segment Operating Profit was $764 million. Adjusted Segment Operating Profit was $861 million, an increase of 10%, driven by growth in distribution of specialty products to providers and health systems and increased contributions from our generics programs. Excluding the impact of COVID-19 vaccine distribution, the U.S. Pharmaceutical segment delivered Adjusted Segment Operating Profit growth of 9%.
Revenues were $240.6 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.
Segment Operating Profit was $3.2 billion. Adjusted Segment Operating Profit was $3.1 billion, an increase of 6%, driven by growth in distribution of specialty products to providers and health systems, and increased contributions from our generics programs. Excluding the impact of COVID-19 vaccine distribution, the U.S. Pharmaceutical segment delivered Adjusted Segment Operating Profit growth of 8%.
Prescription Technology Solutions Segment
Revenues were $1.2 billion, an increase of 16%, driven by growth in prescription volumes in our third-party logistics business and higher technology service revenues.
Segment Operating Profit was $166 million. Adjusted Segment Operating Profit was $218 million, an increase of 35%, driven by growth in access, affordability, and adherence solutions.
Revenues were $4.4 billion, an increase of 14%, driven by growth in prescription volumes in our third-party logistics business and higher technology service revenues.
Segment Operating Profit was $566 million. Adjusted Segment Operating Profit was $679 million, an increase of 15%, driven by growth in access, affordability, and adherence solutions.
Medical-Surgical Solutions Segment
Revenues were $2.7 billion, a decrease of 6%, 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 and extended care businesses.
Segment Operating Profit was $234 million. Adjusted Segment Operating Profit was $248 million, a decrease of 17%, 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 and extended care businesses. Excluding the impact of COVID-19 related items, the Medical-Surgical Solutions segment delivered Adjusted Segment Operating Profit growth of 2%.
Revenues were $11.1 billion, a decrease of 4%, 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.
Segment Operating Profit was $1.1 billion. Adjusted Segment Operating Profit was $1.2 billion, a decrease of 4%, 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, including favorable sourcing activities and illness season testing. Excluding the impact of COVID-19 related items, the Medical-Surgical Solutions segment delivered Adjusted Segment Operating Profit growth of 13%.
International Segment
Revenues were $3.4 billion. On an FX-Adjusted basis, revenues were $3.6 billion, a decrease of 58%, driven by the divestitures of McKesson's European businesses.
Segment Operating Profit was $43 million. On an FX-Adjusted basis, Adjusted Segment Operating Profit was $88 million, a decrease of 40%, driven by the divestitures of McKesson's European businesses.
Revenues were $20.6 billion. On an FX-Adjusted basis, revenues were $22.5 billion, a decrease of 38%, driven by the divestitures of McKesson's European businesses.
Segment Operating Profit was $136 million. On an FX-Adjusted basis, Adjusted Segment Operating Profit was $549 million, a decrease of 22%, driven by the divestitures of McKesson's European businesses.
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, 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.
McKesson anticipates Fiscal 2024 Adjusted Earnings per Diluted Share of $26.10 to $26.90, which reflects expected growth at or above updated long-term segment targets, execution against strategic growth opportunities, and a disciplined approach to capital allocation, delivering sustainable long-term earnings growth.
Raising Long-Term Adjusted Segment Operating Profit Growth Targets
McKesson continues to strengthen its portfolio of differentiated assets and capabilities to advance healthcare for all. As COVID-19 related contracts with the U.S. government are scheduled to end in July 2023, and the contribution from Europe continues to run off as guided, McKesson remains committed to its company priorities
Focus on people and culture to achieve the company's mission of improving care in every setting - one product, one partner, one patient at a time.
Accelerate the expansion of McKesson's differentiated oncology and biopharma services platforms.
Drive sustainable core growth through the strong value proposition of McKesson's scaled and durable distribution business.
Evolve and grow the portfolio through the continued exit of Europe, as we explore strategic alternatives to exit its remaining operations in Norway.
As a result of strong execution against our strategic initiatives, operating momentum, and building on our differentiated assets and capabilities, McKesson is well positioned for strong growth in the years ahead and is raising long-term Adjusted Segment Operating Profit growth targets as follows
| Updated Long-Term Segment Growth Targets 1 | Previous Long-Term Segment Growth Targets 1 | |
| U.S. Pharmaceutical | 5% to 7% growth | 4% growth |
| Prescription Technology Solutions | 11% to 12% growth | 11% growth |
| Medical-Surgical Solutions | 10% to 12% growth | 10% growth |
| 1 Base year metrics of Adjusted Segment Operating Profit exclude the impacts attributable to the U.S. government's COVID-19 vaccine distribution in U.S. Pharmaceutical and impacts attributable to kitting, storage, and distribution of ancillary supplies and COVID-19 tests in Medical-Surgical Solutions |
Additional modeling considerations will be provided in the earnings call presentation.
Conference Call Details
McKesson has scheduled a conference call for today, Monday, May 8th 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 11, 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 Other Income, Adjusted Loss on Debt Extinguishment, 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.
The Company does not provide forward-looking guidance on a GAAP basis as McKesson 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, 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 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, including from inflation, an economic slowdown, or a recession 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.
Rachel Rodriguez (Investors)
Investors McKesson.com
David Matthews (Media)
MediaRelations McKesson.com
McKESSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP)
(in millions, except per share amounts)
| Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||
| Revenues | $ | 68,910 | $ | 66,102 | 4 | % | $ | 276,711 | $ | 263,966 | 5 | % | |||||||||
| Cost of sales | (65,844) | (62,784) | 5 | (264,353) | (250,836) | 5 | |||||||||||||||
| Gross profit | 3,066 | 3,318 | (8) | 12,358 | 13,130 | (6) | |||||||||||||||
| Selling, distribution, general, and administrative expenses | (1,964) | (2,531) | (22) | (7,776) | (10,537) | (26) | |||||||||||||||
| Claims and litigation charges, net | 3 | (81) | 104 | 8 | (274) | 103 | |||||||||||||||
| Restructuring, impairment, and related charges, net | (125) | (73) | 71 | (209) | (281) | (26) | |||||||||||||||
| Total operating expenses | (2,086) | (2,685) | (22) | (7,977) | (11,092) | (28) | |||||||||||||||
| Operating income | 980 | 633 | 55 | 4,381 | 2,038 | 115 | |||||||||||||||
| Other income, net | 31 | 57 | (46) | 497 | 259 | 92 | |||||||||||||||
| Loss on debt extinguishment | - | - | - | - | (191) | (100) | |||||||||||||||
| Interest expense | (79) | (43) | 84 | (248) | (178) | 39 | |||||||||||||||
| Income from continuing operations before income taxes | 932 | 647 | 44 | 4,630 | 1,928 | 140 | |||||||||||||||
| Income tax expense | (106) | (240) | (56) | (905) | (636) | 42 | |||||||||||||||
| Income from continuing operations | 826 | 407 | 103 | 3,725 | 1,292 | 188 | |||||||||||||||
| Loss from discontinued operations, net of tax | - | (2) | (100) | (3) | (5) | (40) | |||||||||||||||
| Net income | 826 | 405 | 104 | 3,722 | 1,287 | 189 | |||||||||||||||
| Net income attributable to noncontrolling interests | (39) | (37) | 5 | (162) | (173) | (6) | |||||||||||||||
| Net income attributable to McKesson Corporation | $ | 787 | $ | 368 | 114 | % | $ | 3,560 | $ | 1,114 | 220 | % | |||||||||
| Earnings (loss) per common share attributable to McKesson Corporation (a) | |||||||||||||||||||||
| Diluted | |||||||||||||||||||||
| Continuing operations | $ | 5.71 | $ | 2.48 | 130 | % | $ | 25.05 | $ | 7.26 | 245 | % | |||||||||
| Discontinued operations | - | (0.01) | (100) | (0.02) | (0.03) | (33) | |||||||||||||||
| Total | $ | 5.71 | $ | 2.47 | 131 | % | $ | 25.03 | $ | 7.23 | 246 | % | |||||||||
| Basic | |||||||||||||||||||||
| Continuing operations | $ | 5.75 | $ | 2.51 | 129 | % | $ | 25.25 | $ | 7.35 | 244 | % | |||||||||
| Discontinued operations | - | (0.01) | (100) | (0.02) | (0.03) | (33) | |||||||||||||||
| Total | $ | 5.75 | $ | 2.50 | 130 | % | $ | 25.23 | $ | 7.32 | 245 | % | |||||||||
| Dividends declared per common share | $ | 0.54 | $ | 0.47 | 15 | % | $ | 2.09 | $ | 1.83 | 14 | % | |||||||||
| Weighted-average common shares outstanding | |||||||||||||||||||||
| Diluted | 138.0 | 149.2 | (8) | % | 142.2 | 154.1 | (8) | % | |||||||||||||
| Basic | 136.9 | 147.2 | (7) | 141.1 | 152.3 | (7) |
(a)Certain computations may reflect rounding adjustments.
All percentage changes displayed above which are not meaningful are displayed as zero percent.
Refer to our applicable filings with the SEC for additional disclosures including our Quarterly Reports on Form 10-Q for fiscal 2023 and 2022 as well as our
Annual Reports on Form 10-K for fiscal 2023 and 2022.
McKESSON CORPORATION
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED RESULTS (NON-GAAP)
| Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||
| Income from continuing operations (GAAP) | $ | 826 | $ | 407 | 103 | % | $ | 3,725 | $ | 1,292 | 188 | % | |||||||||
| Net income attributable to noncontrolling interests (GAAP) | (39) | (37) | 5 | (162) | (173) | (6) | |||||||||||||||
| Income from continuing operations attributable to McKesson Corporation (GAAP) | 787 | 370 | 113 | 3,563 | 1,119 | 218 | |||||||||||||||
| Pre-tax adjustments | |||||||||||||||||||||
| Amortization of acquisition-related intangibles | 66 | 70 | (6) | 236 | 333 | (29) | |||||||||||||||
| Transaction-related expenses and adjustments (1) (2) (3) (4) (5) (6) | 35 | 234 | (85) | (123) | 1,577 | (108) | |||||||||||||||
| LIFO inventory-related adjustments | 32 | 56 | (43) | 1 | (23) | 104 | |||||||||||||||
| Gains from antitrust legal settlements | - | - | - | (129) | (46) | 180 | |||||||||||||||
| Restructuring, impairment, and related charges, net (7) | 125 | 73 | 71 | 209 | 281 | (26) | |||||||||||||||
| Claims and litigation charges, net (8) (9) | (3) | 81 | (104) | (8) | 274 | (103) | |||||||||||||||
| Other adjustments, net (10) (11) (12) | 1 | - | - | (70) | 347 | (120) | |||||||||||||||
| Income tax effect on pre-tax adjustments | (48) | (14) | 243 | 13 | (210) | 106 | |||||||||||||||
| Net income attributable to noncontrolling interests effect on pre-tax adjustments | (3) | - | - | (3) | - | - | |||||||||||||||
| Adjusted Earnings (Non-GAAP) | $ | 992 | $ | 870 | 14 | % | $ | 3,689 | $ | 3,652 | 1 | % |
All percentage changes displayed above which are not meaningful are displayed as zero percent.
Refer to the section entitled Financial Statement Notes of this release.
For more information relating to the Adjusted Earnings (Non-GAAP) definition, refer to the section entitled "Supplemental Non-GAAP Financial Information" of this release.
Schedule 2 (continued)
McKESSON CORPORATION
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED RESULTS (NON-GAAP)
(in millions, except per share amounts)