10-QPeriod: Q1 FY2023

MCKESSON CORP Quarterly Report for Q1 Ended Jun 30, 2022

Filed August 4, 2022For Securities:MCK

Summary

McKesson Corporation reported strong financial results for the first quarter of fiscal year 2023, ending June 30, 2022. Revenues saw a notable increase of 7% year-over-year, reaching $67.2 billion, driven primarily by market growth in the U.S. Pharmaceutical segment. Despite a flat gross profit, the company successfully reduced total operating expenses by 19%, leading to a significant 79% increase in income from continuing operations before income taxes. The company also demonstrated a strong commitment to returning capital to shareholders, repurchasing $1.0 billion in common stock and raising its quarterly dividend. Diluted earnings per share from continuing operations surged by 70% to $5.25, bolstered by reduced corporate expenses, growth in North American businesses, and a lower share count resulting from ongoing share repurchase programs. McKesson continues to navigate evolving market conditions, including the lingering impacts of COVID-19 and global economic factors, while maintaining a robust liquidity position.

Financial Highlights

52 data points
Beta

Revenue

$67.15B

4.5% Gross Margin

Net Income

$768.00M

1.1% Net Margin

EPS (Diluted)

$5.26

Total Assets

$62.30B

Cash & Equivalents

$2.23B

Free Cash Flow

-$1.01B

Financial Statements
Beta
Revenue$67.15B
Cost of Revenue$64.13B
Gross Profit$3.02B
SG&A Expenses$1.96B
Operating Expenses$1.99B
Operating Income$1.04B
Interest Expense$45.00M
Net Income$768.00M
EPS (Basic)$5.32
EPS (Diluted)$5.26
Shares Outstanding (Basic)144.20M
Shares Outstanding (Diluted)145.90M

Key Highlights

  • 1Revenues increased by 7% to $67.2 billion, primarily driven by growth in the U.S. Pharmaceutical segment.
  • 2Total operating expenses decreased by 19% due to lower selling, distribution, general, and administrative expenses, and reduced claims and litigation charges.
  • 3Income from continuing operations before income taxes significantly increased by 79% to $1.0 billion.
  • 4Diluted earnings per common share from continuing operations attributable to McKesson Corporation rose by 70% to $5.25.
  • 5The company returned $1.1 billion to shareholders through $1.0 billion in share repurchases and $71 million in dividends.
  • 6An increased authorization for share repurchases of $4.0 billion was approved in July 2022.
  • 7The company maintained compliance with debt covenants and expects sufficient liquidity to fund operations.

Frequently Asked Questions

The primary driver for the revenue increase was market growth in McKesson's U.S. Pharmaceutical segment, which benefited from increasing drug utilization, price increases, and the launch of new products. This was partially offset by lower revenues in the International segment due to divestitures and foreign currency fluctuations.

McKesson significantly reduced total operating expenses by 19%. This was achieved through lower selling, distribution, general, and administrative expenses, reduced claims and litigation charges related to opioid settlements, and lower restructuring, impairment, and related charges compared to the prior year. This expense management contributed to a substantial increase in income from continuing operations before income taxes.

McKesson returned $1.1 billion to shareholders in the first quarter through share repurchases ($1.0 billion) and dividends ($71 million). The company also announced an increase in its share repurchase authorization by $4.0 billion and raised its quarterly dividend from $0.47 to $0.54 per common share, indicating a continued focus on shareholder returns.

McKesson has reached a settlement with 46 states and their subdivisions, agreeing to pay up to approximately $7.4 billion over 18 years. Separate agreements in principle have been reached with Alabama, Oklahoma, and Washington, and with Native American tribes. The total estimated liability for opioid-related claims was $7.9 billion as of June 30, 2022, with $759 million classified as current.