Financial Data and Key Metrics Changes - The company reported record consolidated revenues of $97.8 billion, an increase of 23% over the prior year [5][30] - Adjusted operating profit increased by 9% to $1.4 billion, with three segments delivering double-digit growth [6][34] - The full-year guidance was raised to a range of $37.1 to $37.9 from a previous range of $36.9 to $37.7 [6][44] Business Line Data and Key Metrics Changes - In the U.S. Pharmaceutical segment, revenues were $90 billion, an increase of 25%, driven by increased prescription volumes and growth in oncology and specialty products [37] - The Prescription Technology Solutions segment saw revenues increase by 16% to $1.4 billion, with operating profit up 21% to $269 million [39] - Medical Surgical Solutions revenues were $2.7 billion, an increase of 2%, with operating profit rising 22% to $244 million [39] Market Data and Key Metrics Changes - Revenues in the international segment were $3.7 billion, an increase of 1%, with higher pharmaceutical distribution volumes in Canada [40] - The company anticipates revenue growth of 11% to 15% for fiscal 2026, with operating profit growth of 9% to 13% [44][52] Company Strategy and Development Direction - The company focuses on two strategic growth pillars: oncology and biopharma services, with recent acquisitions aimed at expanding capabilities in these areas [11][12] - The company is committed to enhancing its distribution network and investing in automation technologies to improve operational efficiency [20][32] - A strategic decision was made to separate the Medical Surgical segment into an independent company to enhance operational focus [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate a dynamic market and policy environment while delivering strong results [24][25] - The company remains engaged with policymakers to evaluate potential impacts on business and customers [25][101] - Management highlighted the importance of community settings for healthcare delivery and the need to keep them vibrant and healthy [100] Other Important Information - The company completed the acquisition of a controlling interest in Core Ventures and Prism Vision, which are expected to contribute significantly to growth [12][46] - The company announced a definitive agreement to sell its retail and distribution businesses in Norway, marking the exit from European operations [23][27] Q&A Session All Questions and Answers Question: Insights on RxTS performance and guidance - Management noted the consistency of operating performance in the RxTS segment, driven by utilization and program success, while acknowledging the challenges in predicting future upside [56][57] Question: Impact of Rite Aid's bankruptcy on operations - Management indicated that the impact of Rite Aid's second bankruptcy on operations and profit growth is immaterial and does not expect it to affect fiscal 2026 [61][62] Question: Changes in pharmaceutical market dynamics - Management stated that brand pricing and generic pricing are in line with expectations, and there are no unusual impacts from tariffs at this time [73][75] Question: Discussion on biosimilar adoption and its impact - Management highlighted that while biosimilars are a steady contributor to earnings, they do not expect material gains in the short term [81][84] Question: Trajectory of operating expenses and automation initiatives - Management discussed ongoing efforts in automation and efficiency improvements, which are expected to positively impact operating expenses over time [87][89]

[PART I—FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents McKesson Corporation's unaudited condensed consolidated financial statements for Q1 FY26 and Q1 FY25, including key financial statements and comprehensive notes [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in millions, except EPS) | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Change (%) | | :----- | :--------------------------------------------- | :--------------------------------------------- | :--------- | | Revenues | $97,827 | $79,283 | 23% | | Cost of sales | $(94,548) | $(76,131) | 24% | | Gross profit | $3,279 | $3,152 | 4% | | Operating income | $1,036 | $1,029 | 1% | | Income before income taxes | $1,051 | $1,084 | (3)% | | Net income | $831 | $960 | (13)% | | Net income attributable to McKesson Corporation | $784 | $915 | (14)% | | Diluted EPS | $6.25 | $7.00 | (11)% | | Basic EPS | $6.28 | $7.04 | (11)% | | Weighted-average common shares outstanding (Diluted) | 125.5 | 130.7 | (4)% | [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income (in millions) | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | | :----- | :--------------------------------------------- | :--------------------------------------------- | | Net income | $831 | $960 | | Other comprehensive income (loss), net of tax | $34 | $(32) | | Comprehensive income | $865 | $928 | | Comprehensive income attributable to McKesson Corporation | $818 | $883 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in millions) | Metric (in millions) | June 30, 2025 | March 31, 2025 | | :------------------- | :------------ | :------------- | | Total assets | $81,311 | $75,140 | | Cash and cash equivalents | $2,418 | $5,691 | | Receivables, net | $28,158 | $25,643 | | Inventories, net | $25,065 | $23,001 | | Goodwill | $11,365 | $10,022 | | Intangible assets, net | $4,272 | $1,464 | | Total current liabilities | $64,331 | $61,604 | | Drafts and accounts payable | $57,861 | $55,330 | | Long-term debt | $6,528 | $4,463 | | Redeemable noncontrolling interests | $725 | $— | | Total McKesson Corporation stockholders' deficit | $(1,967) | $(2,074) | [Condensed Consolidated Statements of Stockholders' Deficit](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Deficit) Condensed Consolidated Statements of Stockholders' Deficit (in millions) | Metric (in millions) | Balance, March 31, 2025 | Issuance of shares | Share-based compensation | Repurchase of common stock | Net income | Other comprehensive income | Cash dividends declared | Payments to noncontrolling interests | Other | Balance, June 30, 2025 | | :------------------- | :---------------------- | :----------------- | :----------------------- | :------------------------- | :--------- | :------------------------- | :---------------------- | :----------------------------------- | :---- | :--------------------- | | Common Stock (Shares) | 279 | 1 | — | — | — | — | — | — | — | 280 | | Common Stock (Amount) | $3 | $— | $— | $— | $— | $— | $— | $— | $— | $3 | | Additional Paid-in Capital | $8,373 | $22 | $55 | $— | $— | $— | $— | $— | $(1) | $8,449 | | Retained Earnings | $17,921 | — | — | — | $784 | — | $(89) | — | — | $18,616 | | Accumulated Other Comprehensive Loss | $(932) | — | — | — | — | $34 | — | — | — | $(898) | | Treasury Common Shares (Shares) | (154) | — | — | (1) | — | — | — | — | — | (155) | | Treasury Common Shares (Amount) | $(27,439) | $(106) | $— | $(592) | $— | $— | $— | $— | $— | $(28,137) | | Noncontrolling Interests | $380 | — | — | — | $47 | — | — | $(47) | $(1) | $379 | | Total Deficit | $(1,694) | $(84) | $55 | $(592) | $831 | $34 | $(89) | $(47) | $(2) | $(1,588) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in millions) | Activity (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | | :--------------------- | :------------------------------- | :------------------------------- | :----------- | | Net cash used in operating activities | $(918) | $(1,380) | $462 (decrease in cash used) | | Net cash used in investing activities | $(3,564) | $(87) | $(3,477) (increase in cash used) | | Net cash provided by (used in) financing activities | $1,176 | $(809) | $1,985 (shift to cash provided) | | Effect of exchange rate changes on cash, cash equivalents, and restricted cash | $33 | $(5) | $38 | | Net decrease in cash, cash equivalents, and restricted cash | $(3,273) | $(2,281) | $(992) (larger decrease) | | Cash and cash equivalents at end of period | $2,418 | $2,302 | $116 | [Note 1 - Significant Accounting Policies](index=8&type=section&id=Note%201%20-%20Significant%20Accounting%20Policies) - McKesson Corporation is a diversified healthcare services leader, reporting financial results in four segments: U.S. Pharmaceutical, Prescription Technology Solutions (RxTS), Medical-Surgical Solutions, and International[22](index=22&type=chunk) - The company adopted Accounting Standards Update (ASU) 2023-09, Income Taxes, in the first quarter of fiscal 2026, which will increase disclosures but had **no impact on consolidated financial statement results**[32](index=32&type=chunk) - ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures, is effective for fiscal years beginning after December 15, 2026, and the company is currently evaluating its impact on disclosures[33](index=33&type=chunk) [Note 2 - Business Acquisitions and Divestitures](index=9&type=section&id=Note%202%20-%20Business%20Acquisitions%20and%20Divestitures) - On April 1, 2025, McKesson acquired an **80% controlling interest in PRISM Vision Holdings, LLC for $874 million in cash**, with financial results included in the U.S. Pharmaceutical segment[35](index=35&type=chunk) - On June 2, 2025, McKesson acquired a **70% controlling interest in Community Oncology Revitalization Enterprise Ventures, LLC (Core Ventures) for $2.5 billion in cash**, with financial results included in the U.S. Pharmaceutical segment[40](index=40&type=chunk)[41](index=41&type=chunk) - The company completed the sale of its Rexall and Well.ca businesses in Canada (Canadian retail disposal group) on December 30, 2024, for **$9 million cash and a $120 million note**, divesting net assets of $741 million[45](index=45&type=chunk) - On August 4, 2025, the company entered into an agreement to sell its retail and distribution businesses in Norway, expecting to classify these assets and liabilities as held for sale[48](index=48&type=chunk) [Note 3 - Restructuring, Impairment, and Related Charges, Net](index=12&type=section&id=Note%203%20-%20Restructuring,%20Impairment,%20and%20Related%20Charges,%20Net) Restructuring, Impairment, and Related Charges, Net (in millions) | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | | Restructuring, impairment, and related charges, net | $47 | $10 | - During Q2 FY25, the company approved enterprise-wide initiatives to modernize technology and streamline the organization, anticipating total charges of **$650 million to $700 million by fiscal 2028**[51](index=51&type=chunk) - For the three months ended June 30, 2025, **$38 million in charges** were recorded related to these initiatives, primarily for facility exit, severance, and other employee-related costs[51](index=51&type=chunk) [Note 4 - Income Taxes](index=13&type=section&id=Note%204%20-%20Income%20Taxes) Income Tax Expense and Rate (in millions, except rates) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | | Income tax expense | $220 million | $124 million | | Reported income tax rate | 20.9% | 11.4% | - Fluctuations in income tax rates were primarily due to changes in the mix of earnings between various taxing jurisdictions and discrete items[58](index=58&type=chunk) - Q1 FY26 recognized a net discrete tax benefit of **$23 million**, primarily from share-based compensation, while Q1 FY25 recognized **$125 million in benefits** from a foreign affiliate tax status change, share-based compensation, and reduction in unrecognized tax benefits[59](index=59&type=chunk) [Note 5 - Redeemable Noncontrolling Interests and Noncontrolling Interests](index=13&type=section&id=Note%205%20-%20Redeemable%20Noncontrolling%20Interests%20and%20Noncontrolling%20Interests) - During Q1 FY26, the company recognized redeemable noncontrolling interests of **$25 million** related to the PRISM Vision acquisition and **$700 million** related to the Core Ventures acquisition[62](index=62&type=chunk) Redeemable Noncontrolling Interests and Noncontrolling Interests (in millions) | Metric (in millions) | June 30, 2025 | March 31, 2025 | | :------------------- | :------------ | :------------- | | Redeemable Noncontrolling Interests | $725 | $— | | Noncontrolling Interests | $379 | $380 | - Net income attributable to noncontrolling interests was **$47 million** for Q1 FY26 and **$45 million** for Q1 FY25[66](index=66&type=chunk) [Note 6 - Earnings Per Common Share](index=15&type=section&id=Note%206%20-%20Earnings%20Per%20Common%20Share) Earnings Per Common Share (in millions, except EPS and share counts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | | Net income attributable to McKesson Corporation | $784 million | $915 million | | Diluted EPS | $6.25 | $7.00 | | Basic EPS | $6.28 | $7.04 | | Weighted-average diluted common shares outstanding | 125.5 million | 130.7 million | | Weighted-average basic common shares outstanding | 124.9 million | 129.8 million | - The decrease in weighted-average diluted common shares outstanding was primarily due to the cumulative effect of share repurchases[217](index=217&type=chunk) [Note 7 - Goodwill and Intangible Assets, Net](index=16&type=section&id=Note%207%20-%20Goodwill%20and%20Intangible%20Assets,%20Net) Goodwill and Intangible Assets, Net (in millions) | Metric (in millions) | June 30, 2025 | March 31, 2025 | | :------------------- | :------------ | :------------- | | Goodwill | $11,365 | $10,022 | | Intangible assets, net | $4,272 | $1,464 | - Goodwill increased by **$1,277 million** in Q1 FY26, primarily due to acquisitions of PRISM Vision (**$432 million**) and Core Ventures (**$806 million**)[36](index=36&type=chunk)[41](index=41&type=chunk)[74](index=74&type=chunk) - Amortization expense of intangible assets was **$50 million** for Q1 FY26, down from $63 million in Q1 FY25[76](index=76&type=chunk) [Note 8 - Debt and Financing Activities](index=18&type=section&id=Note%208%20-%20Debt%20and%20Financing%20Activities) Debt and Financing Activities (in millions) | Metric (in millions) | June 30, 2025 | March 31, 2025 | | :------------------- | :------------ | :------------- | | Total debt | $7,777 | $5,654 | | Total long-term debt | $6,528 | $4,463 | - On May 30, 2025, the company completed a public debt offering of **$2.0 billion** (net proceeds) through 2030, 2032, and 2035 Notes, used to fund the Core Ventures acquisition[46](index=46&type=chunk)[83](index=83&type=chunk) - The company entered into a new **$1.0 billion 364-Day senior unsecured credit facility** in May 2025, maturing in May 2026, and extended its **$4.0 billion 5-Year facility** to November 2029[87](index=87&type=chunk)[89](index=89&type=chunk) [Note 9 - Hedging Activities](index=20&type=section&id=Note%209%20-%20Hedging%20Activities) - McKesson uses derivatives (cross-currency swaps, interest rate swaps, foreign currency forward contracts) to hedge interest rate and foreign currency exchange rate risks, not for speculative purposes[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) - The company expanded its net investment hedging program in fiscal 2025, with **C$6.5 billion in cross-currency swaps** outstanding at June 30, 2025[98](index=98&type=chunk) - Executed **$1.4 billion in forward-starting interest rate swap locks** in fiscal 2025 and Q1 FY26 to hedge upcoming financing activities, which were terminated upon a public debt offering[101](index=101&type=chunk) [Note 10 - Fair Value Measurements](index=22&type=section&id=Note%2010%20-%20Fair%20Value%20Measurements) - Cash and cash equivalents include **$242 million in money market funds** at June 30, 2025, which are reported at fair value using Level 1 inputs[105](index=105&type=chunk) - Fair values of derivatives (interest rate swaps, cross-currency swaps, foreign currency forward contracts) are determined using Level 2 inputs[106](index=106&type=chunk)[107](index=107&type=chunk) - Fair value assessments for acquisitions (PRISM Vision, Core Ventures) and goodwill impairment tests are considered Level 3 measurements due to significant unobservable inputs and company-specific information[111](index=111&type=chunk)[116](index=116&type=chunk) Long-term Debt Fair Value (in millions) | Metric (in millions) | June 30, 2025 | March 31, 2025 | | :------------------- | :------------ | :------------- | | Long-term debt, including current maturities (Carrying Value) | $7,777 | $5,654 | | Long-term debt, including current maturities (Fair Value) | $7,798 | $5,598 | [Note 11 - Commitments and Contingent Liabilities](index=25&type=section&id=Note%2011%20-%20Commitments%20and%20Contingent%20Liabilities) - The estimated accrued liability for opioid-related claims of U.S. governmental entities, Native American tribes, and certain non-governmental plaintiffs was **$6,377 million** at June 30, 2025[133](index=133&type=chunk) Litigation Liabilities (in millions) | Metric (in millions) | June 30, 2025 | March 31, 2025 | | :------------------- | :------------ | :------------- | | Current litigation liabilities | $776 | $776 | | Long-term litigation liabilities | $5,601 | $5,601 | | Total litigation liabilities | $6,377 | $6,377 | - The company has paid approximately **$2.0 billion** to Settling Governmental Entities as of June 30, 2025, with up to $5.9 billion more through 2038[123](index=123&type=chunk) - The City of Baltimore verdict against the company was remitted, reducing compensatory damages to **$37 million**[126](index=126&type=chunk) - Received **$28 million** from the State of New York to settle the Opioid Stewardship Act matter and **$8 million** from antitrust settlements in Q1 FY26[144](index=144&type=chunk)[145](index=145&type=chunk) [Note 12 - Stockholders' Deficit](index=29&type=section&id=Note%2012%20-%20Stockholders%27%20Deficit) - On July 29, 2025, the Board of Directors raised the quarterly dividend from **$0.71 to $0.82 per share** of common stock[147](index=147&type=chunk)[189](index=189&type=chunk)[261](index=261&type=chunk) - The company repurchased **0.8 million shares of common stock for $581 million** in Q1 FY26, with an average price of $709.84 per share[152](index=152&type=chunk)[189](index=189&type=chunk)[243](index=243&type=chunk)[249](index=249&type=chunk) - The total remaining authorization for common stock repurchases at June 30, 2025, was **$6.9 billion**[152](index=152&type=chunk)[189](index=189&type=chunk)[249](index=249&type=chunk) [Note 13 - Segments of Business](index=31&type=section&id=Note%2013%20-%20Segments%20of%20Business) - McKesson reports financial results in four segments: U.S. Pharmaceutical, Prescription Technology Solutions (RxTS), Medical-Surgical Solutions, and International[161](index=161&type=chunk)[179](index=179&type=chunk) Segment Revenues (in millions) | Segment | Q1 FY26 Revenues (in millions) | Q1 FY25 Revenues (in millions) | Change (%) | | :------ | :----------------------------- | :----------------------------- | :--------- | | U.S. Pharmaceutical | $89,954 | $71,715 | 25% | | RxTS | $1,434 | $1,241 | 16% | | Medical-Surgical Solutions | $2,701 | $2,636 | 2% | | International | $3,738 | $3,691 | 1% | | Total Revenues | $97,827 | $79,283 | 23% | Segment Operating Profit (in millions) | Segment | Q1 FY26 Operating Profit (in millions) | Q1 FY25 Operating Profit (in millions) | Change (%) | | :------ | :----------------------------------- | :----------------------------------- | :--------- | | U.S. Pharmaceutical | $727 | $781 | (7)% | | RxTS | $253 | $203 | 25% | | Medical-Surgical Solutions | $221 | $188 | 18% | | International | $92 | $90 | 2% | - The company announced its intention to separate the Medical-Surgical Solutions segment into an independent company during Q1 FY26[166](index=166&type=chunk)[189](index=189&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on McKesson's financial condition and results of operations for Q1 FY26, covering key highlights, trends, and liquidity [General](index=35&type=section&id=General) - This Financial Review assists in understanding significant changes and trends related to McKesson's operations and financial position[176](index=176&type=chunk) - The company's fiscal year begins on April 1 and ends on March 31[177](index=177&type=chunk) - The report contains forward-looking statements, subject to risks and uncertainties[177](index=177&type=chunk) [Overview of our Business](index=35&type=section&id=Overview%20of%20our%20Business) - McKesson is a diversified healthcare services leader focused on advancing health outcomes for patients[178](index=178&type=chunk) - The company reports financial results in four segments: U.S. Pharmaceutical, Prescription Technology Solutions (RxTS), Medical-Surgical Solutions, and International[179](index=179&type=chunk) - Recent acquisitions include PRISM Vision Holdings, LLC (**$874 million**) and Community Oncology Revitalization Enterprise Ventures, LLC (Core Ventures) (**$2.5 billion**), both integrated into the U.S. Pharmaceutical segment[182](index=182&type=chunk)[183](index=183&type=chunk) - McKesson announced its intention to separate the Medical-Surgical Solutions segment into an independent company[185](index=185&type=chunk) [Executive Summary](index=37&type=section&id=Executive%20Summary) Key Financial Highlights | Metric | Q1 FY26 vs. Prior Year Change | | :----- | :---------------------------- | | Revenues | +23% | | Gross profit | +4% | | Total operating expenses | +6% | | Other income, net | -51% | | Diluted EPS attributable to McKesson Corporation | $6.25 (from $7.00) | | Net income attributable to McKesson Corporation | $(14)% | - Completed acquisitions of PRISM Vision for **$874 million** and Core Ventures for **$2.5 billion**[189](index=189&type=chunk) - Recorded a **$189 million provision for bad debts** related to the bankruptcy of Rite Aid Corporation[189](index=189&type=chunk) - Returned **$671 million to shareholders** through $581 million in common stock repurchases and $90 million in dividend payments[189](index=189&type=chunk) [Trends and Uncertainties](index=37&type=section&id=Trends%20and%20Uncertainties) - Opioid-related litigation and claims continue to pose potential material adverse impacts on financial position, cash flows, or results of operations[187](index=187&type=chunk) - Rite Aid's second voluntary Chapter 11 petition led to an additional **$189 million provision for bad debts** in Q1 FY26 for remaining trade accounts receivable[192](index=192&type=chunk) - Previously, a **$725 million provision for bad debts** was recorded in fiscal 2024 related to Rite Aid, with a $206 million reversal in fiscal 2025[188](index=188&type=chunk) [Overview of Consolidated Results](index=38&type=section&id=Overview%20of%20Consolidated%20Results) Consolidated Financial Performance (in millions, except per share data) | Metric (in millions, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :---------------------------------------- | :------------------------------- | :------------------------------- | :--------- | | Revenues | $97,827 | $79,283 | 23% | | Gross profit | $3,279 | $3,152 | 4% | | Gross profit margin | 3.35% | 3.98% | (63) bp | | Total operating expenses | $(2,243) | $(2,123) | 6% | | Other income, net | $64 | $130 | (51)% | | Income before income taxes | $1,051 | $1,084 | (3)% | | Net income attributable to McKesson Corporation | $784 | $915 | (14)% | | Diluted earnings per common share | $6.25 | $7.00 | (11)% | - Revenues increased primarily due to market growth in the U.S. Pharmaceutical segment, including higher volumes from retail national account customers and growth in specialty pharmaceuticals[196](index=196&type=chunk) - Gross profit was impacted by a decrease in net cash proceeds from antitrust legal settlements (**$8 million in Q1 FY26 vs. $90 million in Q1 FY25**)[197](index=197&type=chunk)[198](index=198&type=chunk) - Total operating expenses included a **$189 million provision for bad debts** related to Rite Aid and increased restructuring charges (**$47 million in Q1 FY26 vs. $10 million in Q1 FY25**)[200](index=200&type=chunk)[205](index=205&type=chunk) [Overview of Segment Results](index=42&type=section&id=Overview%20of%20Segment%20Results) Segment Revenues (in millions) | Segment | Q1 FY26 Revenues (in millions) | Q1 FY25 Revenues (in millions) | Change (%) | | :------ | :----------------------------- | :----------------------------- | :--------- | | U.S. Pharmaceutical | $89,954 | $71,715 | 25% | | Prescription Technology Solutions | $1,434 | $1,241 | 16% | | Medical-Surgical Solutions | $2,701 | $2,636 | 2% | | International | $3,738 | $3,691 | 1% | Segment Operating Profit (in millions) | Segment | Q1 FY26 Operating Profit (in millions) | Q1 FY25 Operating Profit (in millions) | Change (%) | | :------ | :----------------------------------- | :----------------------------------- | :--------- | | U.S. Pharmaceutical | $727 | $781 | (7)% | | Prescription Technology Solutions | $253 | $203 | 25% | | Medical-Surgical Solutions | $221 | $188 | 18% | | International | $92 | $90 | 2% | - U.S. Pharmaceutical operating profit decreased primarily due to a **$189 million provision for bad debts** related to Rite Aid and lower antitrust legal settlements[229](index=229&type=chunk) - Prescription Technology Solutions operating profit increased due to increased volumes from third-party logistics and higher technology services revenues[221](index=221&type=chunk)[230](index=230&type=chunk) [New Accounting Pronouncements](index=44&type=section&id=New%20Accounting%20Pronouncements) - The company refers to Financial Note 1 for details on recently adopted and issued accounting pronouncements, including ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures)[234](index=234&type=chunk) [Financial Condition, Liquidity, and Capital Resources](index=45&type=section&id=Financial%20Condition,%20Liquidity,%20and%20Capital%20Resources) Cash Flow Activities (in millions) | Activity (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :--------------------- | :------------------------------- | :------------------------------- | :----- | | Net cash provided by (used in) operating activities | $(918) | $(1,380) | $462 | | Net cash used in investing activities | $(3,564) | $(87) | $(3,477) | | Net cash provided by (used in) financing activities | $1,176 | $(809) | $1,985 | | Net change in cash, cash equivalents, and restricted cash | $(3,273) | $(2,281) | $(992) | - Investing activities included **$3.4 billion of net cash payments for acquisitions**, primarily Core Ventures (**$2.5 billion**) and PRISM Vision (**$874 million**)[239](index=239&type=chunk) - Financing activities provided cash primarily due to **$2.0 billion in proceeds from public debt offerings**, used to fund the Core Ventures acquisition[244](index=244&type=chunk) Working Capital and Debt to Capital Ratio | Metric | June 30, 2025 | March 31, 2025 | | :----- | :------------ | :------------- | | Working capital | $(7,530) | $(6,206) | | Debt to capital ratio | 115.9% | 125.3% | [Cautionary Notice About Forward-Looking Statements](index=49&type=section&id=Cautionary%20Notice%20About%20Forward-Looking%20Statements) - This report contains forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially from projections[266](index=266&type=chunk) - Readers are cautioned not to place undue reliance on these statements, and the company undertakes no obligation to publicly release revisions, except as required by federal securities laws[266](index=266&type=chunk) [Available Information](index=49&type=section&id=Available%20Information) - McKesson routinely posts material information on its company website (www.mckesson.com) and social media channels (@McKesson on X) for investors[267](index=267&type=chunk) - Content on external websites or social media is not incorporated by reference into this report unless expressly noted[267](index=267&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes in McKesson's exposure to market risks, specifically those related to fluctuations in interest rates and foreign currency exchange rates, since the disclosures made in the Annual Report on Form 10-K for the fiscal year ended March 31, 2025 - No material change in exposure to risks associated with fluctuations in interest and foreign currency exchange rates compared to the Annual Report on Form 10-K for fiscal year ended March 31, 2025[268](index=268&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) McKesson's CEO and CFO confirmed the effectiveness of disclosure controls and procedures as of June 30, 2025, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[269](index=269&type=chunk) - No material changes in internal control over financial reporting were identified during the three months ended June 30, 2025[270](index=270&type=chunk) [PART II—OTHER INFORMATION](index=50&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference detailed information on McKesson's legal proceedings, commitments, and contingent liabilities from relevant financial notes - Information on legal proceedings is incorporated by reference from Financial Note 11 of this report and Financial Note 17 of the 2025 Annual Report[272](index=272&type=chunk) - Disclosure of environmental proceedings with a governmental agency is generally included if monetary sanctions are expected to exceed **$1 million**[272](index=272&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) This section indicates that there have been no material changes to the risk factors previously disclosed in Part I, Item 1A of McKesson's Annual Report on Form 10-K for the fiscal year ended March 31, 2025, beyond the factual updates provided within this Quarterly Report on Form 10-Q - No material changes to risk factors disclosed in the Annual Report on Form 10-K for fiscal year ended March 31, 2025, other than factual updates in this Quarterly Report[273](index=273&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details McKesson's Board-authorized common stock repurchase program, including methods, influencing factors, and a summary of Q1 FY26 activity - The Board of Directors has authorized the repurchase of common stock, which may occur through open market transactions, privately negotiated transactions, or accelerated share repurchase programs[274](index=274&type=chunk) Common Stock Repurchase Activity (in millions, except price per share) | Metric (in millions, except price per share) | Q1 FY26 | | :----------------------------------------- | :------ | | Total Number of Shares Purchased | 0.8 | | Average Price Paid Per Share | $709.84 | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs | $6,879 | | Excise taxes accrued for shares repurchased | $2 | [Item 3. Defaults Upon Senior Securities](index=51&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section explicitly states that McKesson Corporation has not experienced any defaults upon senior securities during the reported period - There were no defaults upon senior securities[278](index=278&type=chunk) [Item 4. Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that the disclosures related to mine safety are not applicable to McKesson Corporation's operations - Mine Safety Disclosures are not applicable to the company[279](index=279&type=chunk) [Item 5. Other Information](index=51&type=section&id=Item%205.%20Other%20Information) This section reports on a pre-arranged Rule 10b5-1 trading plan adopted by LeAnn Smith, Executive Vice President and Chief Human Resources Officer, on June 8, 2025, for the sale of up to 2,506 shares of the company's common stock - LeAnn Smith, EVP and Chief Human Resources Officer, adopted a Rule 10b5-1 trading arrangement on June 8, 2025[280](index=280&type=chunk) - The plan is for the sale of up to **2,506 shares of common stock**, with a duration until June 8, 2026[280](index=280&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists comprehensive exhibits filed with the SEC, including legal documents, corporate governance materials, and financial data in iXBRL format - Exhibits include Officer's Certificate, Management Incentive Plan, CEO/CFO Certifications, and financial statements formatted in Inline Extensible Business Reporting Language (iXBRL)[283](index=283&type=chunk) [Signatures](index=53&type=section&id=Signatures) This section formally concludes the Quarterly Report on Form 10-Q with signatures from McKesson's EVP and CFO, and SVP and Controller, dated August 6, 2025 - The report is signed by Britt J. Vitalone (Executive Vice President and Chief Financial Officer) and Napoleon B. Rutledge Jr. (Senior Vice President and Controller)[288](index=288&type=chunk) - The signing date is August 6, 2025[288](index=288&type=chunk)

Financial Data and Key Metrics Changes - The company reported record consolidated revenues of $97.8 billion, an increase of 23% over the prior year [4] - Adjusted operating profit increased by 9% to $1.4 billion, with three segments delivering double-digit growth [5][27] - Gross profit was $3.3 billion, a 7% increase, driven by specialty distribution and provider growth [28] - Earnings per diluted share increased by 5% to $8.26, with a 14% increase when excluding gains from McKesson Ventures investments [33] Business Line Data and Key Metrics Changes - In the U.S. Pharmaceutical segment, revenues increased by 25% to $90 billion, driven by increased prescription volumes and growth in oncology and specialty products [35] - Prescription Technology Solutions segment revenues increased by 16% to $1.4 billion, with operating profit up 21% to $269 million [37] - Medical Surgical Solutions revenues were $2.7 billion, a 2% increase, with operating profit rising 22% to $244 million [38] - International segment revenues were $3.7 billion, a 1% increase, with operating profit down 3% to $99 million due to divestitures [38] Market Data and Key Metrics Changes - The company anticipates revenue growth of 11% to 15% and operating profit growth of 9% to 13% for fiscal 2026 [41] - The U.S. Pharmaceutical segment is expected to see revenue increases of 12% to 16% [42] - The Prescription Technology Solutions segment anticipates revenue growth of 8% to 12% [45] - The Medical Surgical Solutions segment expects revenue and operating profit growth of 2% to 6% [46] Company Strategy and Development Direction - The company is focused on oncology and biopharma services as strategic growth pillars, with recent acquisitions enhancing its capabilities [10][11] - A definitive agreement to sell the retail and distribution businesses in Norway marks the final phase of divesting European operations [21][25] - The company is investing in automation and technology to improve operational efficiency and productivity across its distribution network [30][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to sustain growth and deliver shareholder value despite market challenges [22][23] - The company remains engaged with policymakers to evaluate potential impacts on its business and customers [22] - Management highlighted the importance of community pharmacies and their role in the healthcare landscape [16][17] Other Important Information - The company plans to host an Investor Day on September 23 to provide updates on strategic priorities and business outlook [24] - The Board of Directors approved a 15% increase in the quarterly dividend, reflecting confidence in the company's strength [49] Q&A Session Summary Question: Impact of Norway sale on guidance - Management confirmed that the guidance increase is primarily tied to the sale of Norway and does not reflect changes in segment guidance for Medical or Rx Technology Solutions [108] Question: Core Pharma performance and Rite Aid impact - Management indicated that the impact of Rite Aid's bankruptcy on operations is immaterial and does not affect fiscal 2026 operations [58][59] Question: Biosimilar adoption and its impact - Management noted that recent biosimilar launches are contributing steadily to earnings, particularly in the Part B oncology channel [78][80] Question: Changes in pharmaceutical market dynamics - Management stated that brand pricing and generic pricing are in line with expectations, with no unusual impacts observed [72][73] Question: Operating expenses and automation initiatives - Management highlighted ongoing improvements in operating expense leverage due to automation and efficiency initiatives [84]

Financial Performance - Revenues reached $97.8 billion, a 23% increase year-over-year[11] - Adjusted Earnings per Diluted Share increased by 5% to $8.26[11] - The company is raising its Fiscal 2026 Adjusted Earnings per Diluted Share outlook to a range of $37.10 to $37.90[11] Segment Results - U.S Pharmaceutical revenues increased by 25% to $89.954 billion, with adjusted segment operating profit up by 17% to $950 million[15] - Prescription Technology Solutions revenues grew by 16% to $1.434 billion, and adjusted segment operating profit increased by 21% to $269 million[16] - Medical-Surgical Solutions revenues increased by 2% to $2.701 billion, with adjusted segment operating profit up by 22% to $244 million[17] Capital Allocation - The Board of Directors approved a 15% increase in the quarterly dividend[11] - Approximately $2.5 billion is anticipated for share repurchases in Fiscal Year 2026[27]

Core Insights - High dividend yields are attractive, but total return, which includes both dividend yield and share price change, is a more relevant measure of stock performance [1] - Five stocks are highlighted for their strong total returns and significant dividend increases of 10% or more in 2025 [2] Company Summaries Comfort Systems USA (FIX) - Announced a 10% increase in its quarterly dividend to $0.50, payable on Aug. 25 [2] - Current dividend yield is 0.26%, with a payout ratio of 9.25% and a 13-year track record of dividend payments [2] - Despite a low yield, the stock has risen over 600% since early 2022, reflecting strong earnings momentum and investor confidence [4] Wingstop (WING) - Achieved a total return of nearly 28% in 2025, with an 11% increase in its quarterly dividend to $1.08 [6] - Current dividend yield is 0.32%, with a payout ratio of 18% and a 7-year track record of dividend payments [5] - The stock's quarterly payout has grown at a compound annual growth rate of over 16% in the past three years [7] McKesson (MCK) - Recently increased its quarterly dividend by 15% to $0.82, payable on Oct. 1 [9] - Current dividend yield is 0.40%, with a payout ratio of 10.99% and a 17-year track record of dividend payments [9] - The stock has provided a total return of around 23% in 2025, with consistent dividend increases enhancing long-term value [11] Encompass Health (EHC) - Announced a nearly 12% increase in its quarterly dividend to $0.19, payable on Oct. 15 [12] - Current dividend yield is 0.58%, with a payout ratio of 14.05% and a 2-year track record of dividend payments [12] - The company has achieved a total return of over 18% in 2025, indicating a focus on long-term capital returns [13] Welltower (WELL) - Increased its quarterly dividend by 10.4% to $0.74, payable on Aug. 21 [15] - Current dividend yield is 1.59%, with a payout ratio of 151.41% and a 2-year track record of dividend payments [14] - The stock has achieved a total return of over 33% in 2025, reflecting improving fundamentals and consistent dividend growth [16] Overall Market Trends - The five highlighted stocks are increasing their dividends, which is crucial as they have experienced significant share price appreciation [18] - Dividend increases help mitigate the decline in yield due to rising share prices, enhancing the overall return profile for investors [18]

[Fiscal 2026 First Quarter Results Overview](index=1&type=section&id=Fiscal%202026%20First%20Quarter%20Results%20Overview) McKesson Corporation reported a strong first quarter for fiscal year 2026, with record revenue of $97.8 billion, a 23% increase year-over-year, and raised its full-year Adjusted EPS guidance [First Quarter Highlights](index=1&type=section&id=First%20Quarter%20Highlights) McKesson Corporation reported a strong first quarter for fiscal year 2026, with record revenue of **$97.8 billion**, a **23% increase** year-over-year, and raised its full-year Adjusted EPS guidance First Quarter Financial Performance | Metric | FY26 Q1 ($ millions, except per share) | FY25 Q1 ($ millions, except per share) | Change (%) | | :------------------------------------- | :------------------------------------ | :------------------------------------ | :--------- | | Revenues | $97,827 | $79,283 | 23 | | Net income attributable to McKesson | $784 | $915 | (14) | | Adjusted Earnings | $1,037 | $1,029 | 1 | | Earnings per diluted common share | $6.25 | $7.00 | (11) | | Adjusted Earnings per Diluted Share | $8.26 | $7.88 | 5 | - Consolidated revenues increased **23% to $97.8 billion**[6](index=6&type=chunk) - Adjusted Earnings per Diluted Share increased **5% to $8.26**[6](index=6&type=chunk) - Completed acquisitions of controlling interests in PRISM Vision Holdings, LLC and Core Ventures[6](index=6&type=chunk) - Board of Directors approved a **15% increase** to the quarterly dividend, marking the ninth consecutive year of increases[6](index=6&type=chunk) - Raised Fiscal 2026 Adjusted Earnings per Diluted Share guidance range to **$37.10 to $37.90**, from $36.90 to $37.70[6](index=6&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Brian Tyler highlighted a standout quarter with enterprise-wide momentum and growth, attributing strong results to strategic execution and employee dedication, leading to increased full-year Adjusted EPS guidance - CEO Brian Tyler stated, "McKesson had a standout quarter with momentum and growth across the enterprise"[4](index=4&type=chunk) - Record revenue of **$97.8 billion**, representing **23% growth** compared to the previous year[4](index=4&type=chunk) - Closed acquisitions of PRISM Vision Holdings and Core Ventures, expanding capabilities in Oncology and Specialty solutions[4](index=4&type=chunk) - Raised fiscal 2026 Adjusted Earnings per Diluted Share guidance to a range of **$37.10 to $37.90**[4](index=4&type=chunk) [Detailed Financial Performance (Q1 FY26)](index=3&type=section&id=Detailed%20Financial%20Performance%20(Q1%20FY26)) First quarter revenues rose significantly, driven by U.S. Pharmaceutical growth, while GAAP EPS decreased due to a Rite Aid bad debt provision, offset by a 5% Adjusted EPS increase and negative Free Cash Flow from acquisitions - First quarter revenues were **$97.8 billion**, an increase of **23%** from a year ago, primarily driven by growth in the U.S. Pharmaceutical segment due to increased prescription volumes and growth in oncology and specialty products, including contributions from acquisitions[7](index=7&type=chunk) - First quarter earnings per diluted share was **$6.25**, a decrease of **$0.75**, due to a pre-tax increase to the provision for bad debts of **$189 million** within the U.S. Pharmaceutical segment related to the Rite Aid bankruptcy[8](index=8&type=chunk) - First quarter Adjusted Earnings per Diluted Share was **$8.26**, an increase of **5%**, driven by strong operational growth across the business, partially offset by a higher tax rate and pre-tax gains in the prior year[9](index=9&type=chunk) Cash Flow Summary | Cash Flow Item (Three Months Ended June 30, 2025) | Amount ($ millions) | | :------------------------------------------------ | :------------------ | | Cash returned to shareholders | $671 | | Common stock repurchases | $581 | | Dividend payments | $90 | | Cash used from operations | $918 | | Capital expenditures | $189 | | Free Cash Flow | $(1,100) | | Cash used towards acquisitions | $3,400 | [Business Highlights & Strategic Developments](index=3&type=section&id=Business%20Highlights%20%26%20Strategic%20Developments) McKesson completed two significant acquisitions, expanded its presence in ophthalmology and oncology, increased its quarterly dividend by 15%, and agreed to sell its Norwegian retail and distribution businesses [Corporate Strategic Developments](index=3&type=section&id=Corporate%20Strategic%20Developments) McKesson completed two significant acquisitions, expanded its presence in ophthalmology and oncology, increased its quarterly dividend by 15%, and agreed to sell its Norwegian retail and distribution businesses - Completed the acquisition of an **80% controlling interest** in PRISM Vision Holdings, LLC on April 1, 2025, a leading provider in general ophthalmology and retina management services[14](index=14&type=chunk) - Completed the acquisition of a **70% controlling interest** in Core Ventures on June 2, 2025, a business and administrative services organization established by Florida Cancer Specialists & Research Institute, LLC (FCS), growing its total number of providers to approximately **3,300**[14](index=14&type=chunk) - Board of Directors declared a **15% increase** to its quarterly dividend from **$0.71 per share to $0.82 per share**, marking the ninth consecutive year of increases[14](index=14&type=chunk) - Entered into a definitive agreement on August 4, 2025, to sell its retail and distribution businesses in Norway to NorgesGruppen, subject to customary closing conditions[14](index=14&type=chunk) [U.S. Pharmaceutical Segment Performance](index=3&type=section&id=U.S.%20Pharmaceutical%20Segment%20Performance) The U.S. Pharmaceutical segment reported a **25% revenue increase**, driven by higher prescription volumes and growth in oncology and specialty products, with Adjusted Segment Operating Profit up **17%** U.S. Pharmaceutical Segment Financials | Metric | FY26 Q1 ($ millions) | FY25 Q1 ($ millions) | Change (%) | | :-------------------------- | :------------------- | :------------------- | :--------- | | Revenues | $90,000 | $71,715 | 25 | | Segment Operating Profit | $727 | $781 | (7) | | Adjusted Segment Operating Profit | $950 | $815 | 17 | - Revenue growth was driven by increased prescription volumes from retail national account customers and growth in the distribution of oncology and specialty products, including contributions from acquisitions[14](index=14&type=chunk) - Adjusted Segment Operating Profit increase was driven by growth in core pharmaceutical distribution, including higher volumes from retail national account customers, and growth in the distribution of oncology and specialty products, including contributions from acquisitions[14](index=14&type=chunk) [Prescription Technology Solutions Segment Performance](index=3&type=section&id=Prescription%20Technology%20Solutions%20Segment%20Performance) The Prescription Technology Solutions segment saw a **16% revenue increase** from higher prescription volumes in logistics and technology services, with Adjusted Segment Operating Profit growing **21%** due to increased demand for access solutions Prescription Technology Solutions Segment Financials | Metric | FY26 Q1 ($ millions) | FY25 Q1 ($ millions) | Change (%) | | :-------------------------- | :------------------- | :------------------- | :--------- | | Revenues | $1,400 | $1,241 | 16 | | Segment Operating Profit | $253 | $203 | 25 | | Adjusted Segment Operating Profit | $269 | $223 | 21 | - Revenue increase was driven by increased prescription volumes in the third-party logistics and technology services businesses[14](index=14&type=chunk) - Adjusted Segment Operating Profit increase was driven by higher demand for access solutions[14](index=14&type=chunk) [Medical-Surgical Solutions Segment Performance](index=5&type=section&id=Medical-Surgical%20Solutions%20Segment%20Performance) The Medical-Surgical Solutions segment's revenues increased by **2%** due to higher specialty pharmaceutical volumes, while Adjusted Segment Operating Profit grew **22%** from cost optimization efficiencies Medical-Surgical Solutions Segment Financials | Metric | FY26 Q1 ($ millions) | FY25 Q1 ($ millions) | Change (%) | | :-------------------------- | :------------------- | :------------------- | :--------- | | Revenues | $2,700 | $2,636 | 2 | | Segment Operating Profit | $221 | $188 | 18 | | Adjusted Segment Operating Profit | $244 | $200 | 22 | - Revenue increase was driven by higher volumes of specialty pharmaceuticals[22](index=22&type=chunk) - Adjusted Segment Operating Profit increase was led by operational efficiencies from cost optimization initiatives[22](index=22&type=chunk) [International Segment Performance](index=5&type=section&id=International%20Segment%20Performance) The International segment's revenues rose **1%** from higher Canadian pharmaceutical distribution volumes, partially offset by divestitures, leading to a **3% decrease** in Adjusted Segment Operating Profit International Segment Financials | Metric | FY26 Q1 ($ millions) | FY25 Q1 ($ millions) | Change (%) | | :-------------------------- | :------------------- | :------------------- | :--------- | | Revenues | $3,700 | $3,691 | 1 | | Segment Operating Profit | $92 | $90 | 2 | | Adjusted Segment Operating Profit | $99 | $102 | (3) | - Revenue increase was driven by higher pharmaceutical distribution volumes in the Canadian business, partially offset by the divestiture of the Canada-based Rexall and Well.ca retail businesses[22](index=22&type=chunk) - Adjusted Segment Operating Profit decrease was a result of the fiscal 2025 divestiture of the Canada-based Rexall and Well.ca retail businesses, partially offset by higher pharmaceutical distribution volumes in the Canadian business[22](index=22&type=chunk) [Fiscal 2026 Outlook](index=5&type=section&id=Fiscal%202026%20Outlook) McKesson raised its fiscal 2026 Adjusted Earnings per Diluted Share guidance to **$37.10-$37.90**, including a **$0.20 accretion** from the anticipated sale of its Norwegian businesses [Fiscal 2026 Outlook](index=5&type=section&id=Fiscal%202026%20Outlook) McKesson raised its fiscal 2026 Adjusted Earnings per Diluted Share guidance to **$37.10-$37.90**, including a **$0.20 accretion** from the anticipated sale of its Norwegian businesses - McKesson is raising its fiscal 2026 Adjusted Earnings per Diluted Share guidance to **$37.10 to $37.90** from the previous range of $36.90 to $37.70[17](index=17&type=chunk) - The updated guidance range includes approximately **$0.20** of Adjusted Earnings per Diluted Share accretion as a result of the anticipated held-for-sale accounting related to the agreement to sell its retail and distribution businesses in Norway[17](index=17&type=chunk) - The company does not provide forward-looking guidance on a GAAP basis due to the difficulty in forecasting certain unpredictable adjustments[16](index=16&type=chunk) [Corporate Information](index=5&type=section&id=Corporate%20Information) This section provides details on McKesson's upcoming investor events, an overview of the company's mission, and important cautionary statements regarding forward-looking information [Conference Call & Investor Day](index=5&type=section&id=Conference%20Call%20%26%20Investor%20Day) McKesson scheduled a conference call for August 6, 2025, to discuss financial results and will host an Investor Day on September 23, 2025, featuring presentations from its leadership team - Conference call scheduled for August 6, 2025, at 4:30 PM ET to discuss financial results, with an audio webcast available on investor.mckesson.com[19](index=19&type=chunk) - McKesson will host its Investor Day on Tuesday, September 23, 2025, featuring presentations by the leadership team and a live Q&A session[20](index=20&type=chunk) [About McKesson Corporation](index=7&type=section&id=About%20McKesson%20Corporation) McKesson Corporation is a diversified healthcare services leader dedicated to improving patient health outcomes by partnering with various entities to deliver insights, products, and services - McKesson Corporation is a diversified healthcare services leader dedicated to advancing health outcomes for patients everywhere[25](index=25&type=chunk) - Teams partner with biopharma companies, care providers, pharmacies, manufacturers, governments, and others to deliver insights, products, and services[25](index=25&type=chunk) - Routinely uses its website, investors.mckesson.com, to post material information for investors[26](index=26&type=chunk) [Cautionary Statements](index=7&type=section&id=Cautionary%20Statements) This section contains forward-looking statements, advising readers that actual results may differ materially due to various risks and uncertainties, and encourages review of SEC filings - The earnings release contains forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from projections[23](index=23&type=chunk) - Readers should not place undue reliance on forward-looking statements, which speak only as of the date they are first made[23](index=23&type=chunk) - Key risk factors include costly legal disputes (e.g., opioids), cybersecurity incidents, inability to achieve strategic growth objectives, impacts from healthcare reform, and changes in economic environments[24](index=24&type=chunk) [Financial Statements (GAAP)](index=9&type=section&id=Financial%20Statements%20(GAAP)) This section presents McKesson's GAAP financial statements, including condensed consolidated statements of operations, balance sheets, and cash flows, providing a comprehensive view of the company's financial position and performance [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The GAAP Condensed Consolidated Statements of Operations show McKesson's financial performance for Q1 FY26, with significant revenue growth but a decrease in net income attributable to McKesson Corporation Condensed Consolidated Statements of Operations | Metric (Three Months Ended June 30) | 2025 ($ millions, except per share) | 2024 ($ millions, except per share) | Change (%) | | :---------------------------------- | :---------------------------------- | :---------------------------------- | :--------- | | Revenues | $97,827 | $79,283 | 23 | | Gross profit | $3,279 | $3,152 | 4 | | Operating income | $1,036 | $1,029 | 1 | | Income before income taxes | $1,051 | $1,084 | (3) | | Net income | $831 | $960 | (13) | | Net income attributable to McKesson | $784 | $915 | (14) | | Diluted EPS | $6.25 | $7.00 | (11) | | Dividends declared per common share | $0.71 | $0.62 | 15 | [Condensed Consolidated Balance Sheets](index=13&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The Condensed Consolidated Balance Sheets as of June 30, 2025, show increased total assets, driven by receivables, inventories, goodwill, and intangibles, with a corresponding rise in total liabilities, particularly debt Condensed Consolidated Balance Sheets | Balance Sheet Item | June 30, 2025 ($ millions) | March 31, 2025 ($ millions) | | :----------------- | :------------------------- | :-------------------------- | | Total current assets | $56,801 | $55,398 | | Total assets | $81,311 | $75,140 | | Total current liabilities | $64,331 | $61,604 | | Long-term debt | $6,528 | $4,463 | | Total liabilities, redeemable noncontrolling interests, and deficit | $81,311 | $75,140 | - Cash and cash equivalents decreased from **$5,691 million to $2,418 million**[40](index=40&type=chunk) - Goodwill increased from **$10,022 million to $11,365 million**, and intangible assets, net, increased from **$1,464 million to $4,272 million**, likely due to recent acquisitions[40](index=40&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=14&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The Condensed Consolidated Statements of Cash Flows reveal a significant net decrease in cash for Q1 FY26, primarily due to substantial cash used in operating and investing activities, especially for acquisitions Condensed Consolidated Statements of Cash Flows | Cash Flow Category (Three Months Ended June 30) | 2025 ($ millions) | 2024 ($ millions) | | :---------------------------------------------- | :---------------- | :---------------- | | Net cash used in operating activities | $(918) | $(1,380) | | Net cash used in investing activities | $(3,564) | $(87) | | Net cash provided by (used in) financing activities | $1,176 | $(809) | | Net decrease in cash, cash equivalents, and restricted cash | $(3,273) | $(2,281) | | Cash and cash equivalents at end of period | $2,418 | $2,302 | - Payments for acquisitions, net of cash, cash equivalents, and restricted cash acquired, amounted to **$3,359 million** in Q1 FY26, compared to zero in Q1 FY25[42](index=42&type=chunk) - Proceeds from issuances of long-term debt were **$1,990 million** in Q1 FY26[42](index=42&type=chunk) [Non-GAAP Financial Measures & Reconciliations](index=10&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) This section provides detailed reconciliations of GAAP to Non-GAAP financial measures, offering supplemental insights into McKesson's operating performance and the definitions of these adjusted metrics [Reconciliation of GAAP Operating Results to Adjusted Results (EPS)](index=10&type=section&id=Reconciliation%20of%20GAAP%20Operating%20Results%20to%20Adjusted%20Results%20(EPS)) This section reconciles GAAP Net Income and EPS to Adjusted Earnings and Adjusted EPS, detailing pre-tax and after-tax adjustments that significantly impact the adjusted financial figures Reconciliation of GAAP to Adjusted EPS | Metric (Three Months Ended June 30) | 2025 ($ millions, except per share) | 2024 ($ millions, except per share) | Change (%) | | :---------------------------------- | :---------------------------------- | :---------------------------------- | :--------- | | Net income attributable to McKesson (GAAP) | $784 | $915 | (14) | | Pre-tax adjustments: | | | | | Amortization of acquisition-related intangibles | $50 | $63 | (21) | | Transaction-related expenses and adjustments | $86 | $15 | 473 | | Other adjustments, net | $161 | $43 | 274 | | Adjusted Earnings (Non-GAAP) | $1,037 | $1,029 | 1 | | Earnings per diluted common share (GAAP) | $6.25 | $7.00 | (11) | | Adjusted Earnings per Diluted Share (Non-GAAP) | $8.26 | $7.88 | 5 | [Reconciliation of GAAP Operating Results to Adjusted Results (Income Statement Items)](index=11&type=section&id=Reconciliation%20of%20GAAP%20Operating%20Results%20to%20Adjusted%20Results%20(Income%20Statement%20Items)) This reconciliation details adjustments to GAAP income statement items like Gross Profit, Operating Expenses, and Income Tax Expense, providing a clearer view of core operational performance by excluding non-recurring items Reconciliation of GAAP to Adjusted Income Statement Items | Metric (Three Months Ended June 30) | 2025 ($ millions) | 2024 ($ millions) | Change (%) | | :---------------------------------- | :---------------- | :---------------- | :--------- | | Gross profit (GAAP) | $3,279 | $3,152 | 4 | | Adjusted Gross Profit (Non-GAAP) | $3,264 | $3,060 | 7 | | Total operating expenses (GAAP) | $(2,243) | $(2,123) | 6 | | Adjusted Operating Expenses (Non-GAAP) | $(1,904) | $(1,927) | (1) | | Other income, net (GAAP) | $64 | $130 | (51) | | Adjusted Other Income (Non-GAAP) | $64 | $172 | (63) | | Interest expense (GAAP) | $(49) | $(75) | (35) | | Adjusted Interest Expense (Non-GAAP) | $(44) | $(70) | (37) | | Income tax expense (GAAP) | $(220) | $(124) | 77 | | Adjusted Income Tax Expense (Non-GAAP) | $(295) | $(160) | 84 | [Reconciliation of GAAP Segment Operating Results to Adjusted Results](index=12&type=section&id=Reconciliation%20of%20GAAP%20Segment%20Operating%20Results%20to%20Adjusted%20Results) This section reconciles GAAP segment operating profit to Adjusted Segment Operating Profit for each business segment, highlighting the impact of adjustments on profitability and underlying operational performance Adjusted Segment Operating Profit | Segment Operating Profit (Three Months Ended June 30) | 2025 GAAP ($ millions) | 2025 Adjusted ($ millions) | 2024 GAAP ($ millions) | 2024 Adjusted ($ millions) | 2025 vs 2024 Adjusted Change (%) | | :---------------------------------------------------- | :--------------------- | :------------------------- | :--------------------- | :------------------------- | :------------------------------- | | U.S. Pharmaceutical | $727 | $950 | $781 | $815 | 17 | | Prescription Technology Solutions | $253 | $269 | $203 | $223 | 21 | | Medical-Surgical Solutions | $221 | $244 | $188 | $200 | 22 | | International | $92 | $99 | $90 | $102 | (3) | | Subtotal | $1,293 | $1,562 | $1,262 | $1,340 | 17 | | Corporate expenses, net | $(193) | $(138) | $(103) | $(35) | 294 | | Income before interest expense and income taxes | $1,100 | $1,424 | $1,159 | $1,305 | 9 | Adjusted Segment Operating Profit as % of Revenues | Segment Operating Profit as % of Revenues (Three Months Ended June 30) | 2025 GAAP (%) | 2025 Adjusted (%) | 2024 GAAP (%) | 2024 Adjusted (%) | 2025 vs 2024 Adjusted Change (bp) | | :--------------------------------------------------------------------- | :------------ | :---------------- | :------------ | :---------------- | :-------------------------------- | | U.S. Pharmaceutical | 0.81 | 1.06 | 1.09 | 1.14 | (8) | | Prescription Technology Solutions | 17.64 | 18.76 | 16.36 | 17.97 | 79 | | Medical-Surgical Solutions | 8.18 | 9.03 | 7.13 | 7.59 | 144 | | International | 2.46 | 2.65 | 2.44 | 2.76 | (11) | [Reconciliation of GAAP Cash Flow to Free Cash Flow](index=15&type=section&id=Reconciliation%20of%20GAAP%20Cash%20Flow%20to%20Free%20Cash%20Flow) This section reconciles GAAP net cash used in operating activities to Free Cash Flow, showing negative Free Cash Flow for Q1 FY26 primarily due to significant cash used in operations and capital expenditures Reconciliation of GAAP Cash Flow to Free Cash Flow | Cash Flow Category (Three Months Ended June 30) | 2025 ($ millions) | 2024 ($ millions) | Change (%) | | :---------------------------------------------- | :---------------- | :---------------- | :--------- | | Net cash used in operating activities (GAAP) | $(918) | $(1,380) | (33) | | Payments for property, plant, and equipment | $(111) | $(106) | 5 | | Capitalized software expenditures | $(78) | $(61) | 28 | | Free Cash Flow (Non-GAAP) | $(1,107) | $(1,547) | (28) | [Financial Statement Notes](index=16&type=section&id=Financial%20Statement%20Notes) The financial statement notes explain specific adjustments, including restructuring charges, claims and litigation, and other items like the bad debt provision related to the Rite Aid bankruptcy - Restructuring, impairment, and related charges for Q1 FY26 included **$47 million** pre-tax, primarily within Medical-Surgical Solutions and Corporate Expenses[47](index=47&type=chunk) - Claims and litigation charges for Q1 FY25 included **$114 million** pre-tax related to estimated liability for opioid-related claims[47](index=47&type=chunk) - Other adjustments for Q1 FY26 included a pre-tax provision for bad debts of **$189 million** within U.S. Pharmaceutical related to the Rite Aid bankruptcy, which is excluded from adjusted results as it's not reflective of normal business operations[47](index=47&type=chunk) [Supplemental Non-GAAP Financial Information Definitions](index=17&type=section&id=Supplemental%20Non-GAAP%20Financial%20Information%20Definitions) This section defines various Non-GAAP financial measures used by McKesson, providing additional insights into operating performance and facilitating comparisons, while noting they are not GAAP substitutes - Non-GAAP measures are provided to offer useful supplemental information regarding operating performance and assist with comparisons of financial results[60](index=60&type=chunk) - Management internally uses both GAAP and Non-GAAP financial measures for financial planning, resource allocation, capital deployment, performance assessment, and incentive compensation[61](index=61&type=chunk) - Non-GAAP adjusted results should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP[61](index=61&type=chunk) [Adjusted Gross Profit (Non-GAAP)](index=17&type=section&id=Adjusted%20Gross%20Profit%20(Non-GAAP)) Adjusted Gross Profit is defined as GAAP gross profit, excluding specific transaction-related expenses, LIFO adjustments, antitrust settlement gains, and other adjustments - Defined as GAAP gross profit, excluding transaction-related expenses and adjustments, LIFO inventory-related adjustments, gains from antitrust legal settlements, and other adjustments[49](index=49&type=chunk) [Adjusted Operating Expenses (Non-GAAP)](index=17&type=section&id=Adjusted%20Operating%20Expenses%20(Non-GAAP)) Adjusted Operating Expenses are defined as GAAP total operating expenses, excluding amortization of acquisition-related intangibles, transaction expenses, restructuring, and litigation charges - Defined as GAAP total operating expenses, excluding amortization of acquisition-related intangibles, transaction-related expenses and adjustments, restructuring, impairment, and related charges, claims and litigation charges, and other adjustments[49](index=49&type=chunk) [Adjusted Other Income (Non-GAAP)](index=17&type=section&id=Adjusted%20Other%20Income%20(Non-GAAP)) Adjusted Other Income is defined as GAAP other income, net, excluding amortization of acquisition-related intangibles, transaction-related expenses, and other specific adjustments - Defined as GAAP other income (expense), net, excluding amortization of acquisition-related intangibles, transaction-related expenses and adjustments, and other adjustments[49](index=49&type=chunk) [Adjusted Interest Expense (Non-GAAP)](index=17&type=section&id=Adjusted%20Interest%20Expense%20(Non-GAAP)) Adjusted Interest Expense is defined as GAAP interest expense, excluding transaction-related adjustments specifically for net interest expense from cross-currency swaps - Defined as GAAP interest expense, excluding transaction-related expenses and adjustments related to net interest expense incurred from cross-currency swaps[49](index=49&type=chunk) [Adjusted Income Tax Expense (Non-GAAP)](index=17&type=section&id=Adjusted%20Income%20Tax%20Expense%20(Non-GAAP)) Adjusted Income Tax Expense is defined as GAAP income tax benefit (expense), excluding the tax effects of various adjustments like amortization of intangibles and transaction-related expenses - Defined as GAAP income tax benefit (expense), excluding the income tax effects of various adjustments such as amortization of acquisition-related intangibles, transaction-related expenses, LIFO adjustments, and claims and litigation charges[49](index=49&type=chunk) [Adjusted Earnings (Non-GAAP)](index=17&type=section&id=Adjusted%20Earnings%20(Non-GAAP)) Adjusted Earnings are defined as GAAP income attributable to McKesson, excluding various non-recurring or non-operational items and their related income tax effects - Defined as GAAP income attributable to McKesson, excluding amortization of acquisition-related intangibles, transaction-related expenses and adjustments, LIFO inventory-related adjustments, gains from antitrust legal settlements, restructuring, impairment, and related charges, claims and litigation charges, other adjustments, as well as the related income tax effects for each of these items[49](index=49&type=chunk) [Adjusted Earnings per Diluted Share (Non-GAAP)](index=17&type=section&id=Adjusted%20Earnings%20per%20Diluted%20Share%20(Non-GAAP)) Adjusted Earnings per Diluted Share is defined as GAAP earnings per diluted common share, excluding per share impacts of various adjustments, divided by diluted weighted-average shares outstanding - Defined as GAAP earnings per diluted common share attributable to McKesson, excluding per share impacts of various adjustments such as amortization of acquisition-related intangibles, transaction-related expenses, LIFO adjustments, and claims and litigation charges, divided by diluted weighted-average shares outstanding[49](index=49&type=chunk) [Adjusted Segment Operating Profit (Non-GAAP) and Adjusted Segment Operating Profit Margin (Non-GAAP)](index=17&type=section&id=Adjusted%20Segment%20Operating%20Profit%20(Non-GAAP)%20and%20Adjusted%20Segment%20Operating%20Profit%20Margin%20(Non-GAAP)) Adjusted Segment Operating Profit is GAAP segment operating profit excluding specific adjustments, while the margin is this adjusted profit divided by GAAP segment revenues - Adjusted Segment Operating Profit is defined as GAAP segment operating profit, excluding amortization of acquisition-related intangibles, transaction-related expenses and adjustments, LIFO inventory-related adjustments, gains from antitrust legal settlements, restructuring, impairment, and related charges, and other adjustments[49](index=49&type=chunk) - Adjusted Segment Operating Profit Margin is defined as Adjusted Segment Operating Profit (Non-GAAP) divided by GAAP segment revenues[49](index=49&type=chunk) [Adjusted Corporate Expenses (Non-GAAP)](index=17&type=section&id=Adjusted%20Corporate%20Expenses%20(Non-GAAP)) Adjusted Corporate Expenses are defined as GAAP corporate expenses, net, excluding transaction-related expenses, restructuring, impairment, and claims and litigation charges - Defined as GAAP corporate expenses, net, excluding transaction-related expenses and adjustments, restructuring, impairment, and related charges, claims and litigation charges, and other adjustments[49](index=49&type=chunk) [Adjusted Operating Profit (Non-GAAP)](index=18&type=section&id=Adjusted%20Operating%20Profit%20(Non-GAAP)) Adjusted Operating Profit is defined as GAAP income before interest and taxes, excluding amortization of intangibles, transaction expenses, LIFO adjustments, and other specific charges - Defined as GAAP income before interest expense and income taxes, excluding amortization of acquisition-related intangibles, transaction-related expenses and adjustments, LIFO inventory-related adjustments, gains from antitrust legal settlements, restructuring, impairment, and related charges, claims and litigation charges, and other adjustments[51](index=51&type=chunk) [Free Cash Flow (Non-GAAP)](index=18&type=section&id=Free%20Cash%20Flow%20(Non-GAAP)) Free Cash Flow is defined as net cash provided by (used in) operating activities less payments for property, plant, and equipment and capitalized software expenditures - Defined as net cash provided by (used in) operating activities less payments for property, plant, and equipment and capitalized software expenditures[58](index=58&type=chunk)

Core Viewpoint - McKesson Corporation is set to report its first-quarter fiscal 2026 results, with expectations of revenue growth driven by the adoption of GLP-1 weight loss drugs and demand for specialty pharmaceuticals [1][2]. Revenue Growth - Revenue growth has been significantly influenced by the rapid adoption of GLP-1 weight loss drugs and sustained demand for branded pharmaceuticals [2]. - The rising demand for specialty pharmaceuticals has also played a crucial role in revenue expansion [2]. Segment Performance - The U.S. Pharmaceutical segment is expected to continue its steady growth, driven by strong demand for specialty pharmaceuticals, particularly oncology treatments [5]. - The Prescription Technology Solutions segment is projected to see revenues of $1.31 billion, reflecting a 5.7% year-over-year improvement, supported by strong demand for technology services [12]. - The Medical Surgical Solutions segment is estimated to generate $2.74 billion, indicating a 3.9% year-over-year increase, aided by a rebound in primary care visits [14]. Earnings Estimates - The Zacks Consensus Estimate for earnings is $8.23 per share, representing a 4.4% year-over-year improvement, while revenue estimates are pegged at $96.1 billion, indicating a 21.2% year-over-year surge [4]. Challenges - The sale of European operations and divestments in Canada may negatively impact sales [8]. - Lower distribution volumes of COVID-19 vaccines and changes in formularies could weigh on segmental performance [9][10]. - Margin pressures from low-margin GLP-1 sales and increased costs may limit earnings upside [10].

Market Overview - Recent market pullback due to new tariffs and a slowdown in job growth has shaken investor confidence, with July nonfarm payrolls rising by only 73,000, significantly below expectations [1] - June's job numbers were revised downward, indicating a weaker labor market than previously thought [1] - Renewed trade tensions have fueled expectations of a Federal Reserve rate cut and increased risk aversion, leading to sharp declines in major indices [1] Importance of Financial Health - Investors should not rely solely on stock price movements; understanding a company's fundamentals is crucial for informed decision-making in an unpredictable market [2] - Sales and earnings metrics can be misleading; the interest coverage ratio is a key indicator of a company's ability to meet financial obligations [3][4] Interest Coverage Ratio - The interest coverage ratio measures how effectively a company can pay interest on its debt, calculated as Earnings before Interest & Taxes (EBIT) divided by Interest Expense [5] - A higher interest coverage ratio indicates a greater ability to meet financial commitments, while a ratio below 1 suggests potential default risks [6][7] - Companies with strong interest coverage ratios include The Walt Disney Company, BJ's Wholesale Club, Ralph Lauren, and McKesson Corporation, all of which demonstrate solid debt-servicing capabilities [9][11] Investment Strategy - A favorable investment strategy includes selecting stocks with an interest coverage ratio above the industry average, a Zacks Rank of 1 or 2, and a VGM Score of A or B [8][10] - The selected companies have shown strong earnings surprises and are projected to grow sales and earnings in the coming year [9][11] Company Performance Highlights - **Walt Disney Company**: Zacks Rank 2, VGM Score B, with a trailing four-quarter earnings surprise of 16.4% and projected sales and EPS growth of 4% and 16.3% respectively [12] - **BJ's Wholesale Club**: Zacks Rank 2, VGM Score B, trailing four-quarter earnings surprise of 17.7%, with projected sales and EPS growth of 5.5% and 6.2% respectively [13] - **Ralph Lauren**: Zacks Rank 2, VGM Score B, trailing four-quarter earnings surprise of 9%, with projected sales and EPS growth of 3.8% and 11.8% respectively [14] - **McKesson Corporation**: Zacks Rank 2, VGM Score A, trailing four-quarter earnings surprise of 3.9%, with projected sales and EPS growth of 13.1% and 12.7% respectively [15]

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying the right ones can be challenging due to associated risks and volatility [1] Group 1: Company Overview - McKesson (MCK) is highlighted as a recommended growth stock with a favorable Growth Score and a top Zacks Rank [2] - The company has a historical EPS growth rate of 16%, with projected EPS growth of 12.7% this year, significantly higher than the industry average of 6.9% [5] Group 2: Financial Metrics - McKesson's asset utilization ratio (sales-to-total-assets ratio) is 4.95, indicating that the company generates $4.95 in sales for every dollar in assets, compared to the industry average of 0.72 [6] - The company's sales are expected to grow by 13.1% this year, outpacing the industry average growth of 4.5% [7] Group 3: Earnings Estimates - There has been a positive trend in earnings estimate revisions for McKesson, with the current-year earnings estimates increasing by 0.1% over the past month [8] - McKesson has achieved a Zacks Rank of 2 (Buy) and a Growth Score of A, indicating strong potential for growth investors [10]

Investors with an interest in Medical stocks should continue to track McKesson and Cencora. These stocks will be looking to continue their solid performance. The Medical group has plenty of great stocks, but investors should always be looking for companies that are outperforming their peers. Has McKesson (MCK) been one of those stocks this year? By taking a look at the stock's year-to-date performance in comparison to its Medical peers, we might be able to answer that question. Another Medical stock, which ...