10-QPeriod: Q3 FY2023

MCKESSON CORP Quarterly Report for Q3 Ended Dec 31, 2022

Filed February 2, 2023For Securities:MCK

Summary

McKesson Corporation's third quarter of fiscal year 2023 (ending December 30, 2022) showed robust revenue growth of 3% year-over-year, reaching $70.49 billion. This top-line performance was primarily driven by strong market growth in the U.S. Pharmaceutical segment, fueled by increased drug utilization, new product launches, and price adjustments. However, gross profit saw a 7% decrease due to a higher mix of lower-margin business, particularly from the divested International segment and unfavorable foreign currency impacts. The company made significant strategic moves, including the acquisition of Rx Savings Solutions for $600 million (plus contingent consideration) to bolster its Prescription Technology Solutions segment, and the formation of an oncology research business with HCA Healthcare. Simultaneously, McKesson continued its strategic divestitures by completing the sale of its European Union disposal group. These actions underscore McKesson's focus on optimizing its portfolio and strengthening its core businesses. Despite revenue growth, the company's net income attributable to McKesson Corporation experienced a substantial increase to $1.08 billion from a loss of $7 million in the prior year period, largely due to significant favorable adjustments related to prior year European divestiture charges and a lower share count from active share repurchase programs.

Financial Highlights

53 data points
Beta

Revenue

$70.49B

4.5% Gross Margin

Net Income

$1.08B

1.5% Net Margin

EPS (Diluted)

$7.66

Total Assets

$62.69B

Cash & Equivalents

$2.77B

Free Cash Flow

$1.56B

Financial Statements
Beta
Revenue$70.49B
Cost of Revenue$67.32B
Gross Profit$3.17B
SG&A Expenses$1.90B
Operating Expenses$1.93B
Operating Income$1.24B
Interest Expense$69.00M
Net Income$1.08B
EPS (Basic)$7.71
EPS (Diluted)$7.66
Shares Outstanding (Basic)139.90M
Shares Outstanding (Diluted)141.00M

Key Highlights

  • 1Revenue increased by 3% to $70.49 billion for the quarter, driven by the U.S. Pharmaceutical segment.
  • 2Gross profit decreased by 7% to $3.17 billion, impacted by divestitures and currency fluctuations.
  • 3Acquisition of Rx Savings Solutions for $600 million completed on November 1, 2022, to enhance Prescription Technology Solutions.
  • 4Completion of the sale of the European Union disposal group on October 31, 2022.
  • 5Net income attributable to McKesson Corporation surged to $1.08 billion from a $7 million loss in the prior year, significantly benefiting from prior period adjustments.
  • 6Diluted EPS from continuing operations was $7.65, a substantial improvement from a loss of $0.04 in the prior year.
  • 7The company returned $3.7 billion to shareholders through share repurchases and dividends in the nine-month period.

Frequently Asked Questions

The substantial increase in net income attributable to McKesson Corporation to $1.08 billion from a $7 million loss in the prior year's comparable quarter was primarily driven by a significant favorable year-over-year swing in charges related to the remeasurement of previously divested U.K. and E.U. disposal groups. Additionally, the company benefited from a lower weighted-average diluted share count resulting from ongoing share repurchase programs.

McKesson completed the acquisition of Rx Savings Solutions, strengthening its Prescription Technology Solutions segment, and formed an oncology research business. Concurrently, the divestiture of the European Union disposal group was finalized. These strategic actions contributed to revenue growth, particularly in the U.S. Pharmaceutical segment, while the reduction in the International segment's revenue reflects the completed divestitures. The divestitures also led to significant favorable adjustments in the current quarter's results compared to prior year charges associated with these groups.

McKesson remains committed to returning capital to shareholders. For the nine months ended December 31, 2022, the company returned $3.7 billion to shareholders through approximately $3.5 billion in common stock repurchases (via ASR programs and open market transactions) and $216 million in dividend payments. The company had $3.8 billion remaining on its share repurchase authorization as of December 31, 2022.

McKesson, along with two other national pharmaceutical distributors, settled with a significant majority of U.S. states and their subdivisions, agreeing to pay up to $19.5 billion over 18 years, with McKesson's portion being approximately $7.4 billion. The company has also reached separate agreements with specific states like Alabama, Washington, and Oklahoma, and with Native American tribes. As of December 31, 2022, the total estimated liability for opioid-related claims was $7.2 billion, with $598 million classified as current and the remainder as long-term. The company continues to defend against claims from private plaintiffs and governmental entities not part of the settlements.