McKesson(MCK) - 2026 Q1 - Quarterly Results

Fiscal 2026 First Quarter Results Overview 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 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] - Adjusted Earnings per Diluted Share increased 5% to $8.26[6] - Completed acquisitions of controlling interests in PRISM Vision Holdings, LLC and Core Ventures[6] - Board of Directors approved a 15% increase to the quarterly dividend, marking the ninth consecutive year of increases[6] - Raised Fiscal 2026 Adjusted Earnings per Diluted Share guidance range to $37.10 to $37.90, from $36.90 to $37.70[6] CEO Commentary 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] - Record revenue of $97.8 billion, representing 23% growth compared to the previous year[4] - Closed acquisitions of PRISM Vision Holdings and Core Ventures, expanding capabilities in Oncology and Specialty solutions[4] - Raised fiscal 2026 Adjusted Earnings per Diluted Share guidance to a range of $37.10 to $37.90[4] Detailed Financial Performance (Q1 FY26) 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] - 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] - First quarter Adjusted Earnings per Diluted Share was $8.26, an increase of 5%, driven by strong operational growth across the business, partially offset by a higher tax rate and pre-tax gains in the prior year[9] Cash Flow Summary | Cash Flow Item (Three Months Ended June 30, 2025) | Amount ($ 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 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 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] - 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] - Board of Directors declared a 15% increase to its quarterly dividend from $0.71 per share to $0.82 per share, marking the ninth consecutive year of increases[14] - Entered into a definitive agreement on August 4, 2025, to sell its retail and distribution businesses in Norway to NorgesGruppen, subject to customary closing conditions[14] U.S. Pharmaceutical Segment Performance The U.S. Pharmaceutical segment reported a 25% revenue increase, driven by higher prescription volumes and growth in oncology and specialty products, with Adjusted Segment Operating Profit up 17% U.S. Pharmaceutical Segment Financials | Metric | FY26 Q1 ($ millions) | FY25 Q1 ($ millions) | Change (%) | | :-------------------------- | :------------------- | :------------------- | :--------- | | Revenues | $90,000 | $71,715 | 25 | | Segment Operating Profit | $727 | $781 | (7) | | Adjusted Segment Operating Profit | $950 | $815 | 17 | - Revenue growth was driven by increased prescription volumes from retail national account customers and growth in the distribution of oncology and specialty products, including contributions from acquisitions[14] - Adjusted Segment Operating Profit increase was driven by growth in core pharmaceutical distribution, including higher volumes from retail national account customers, and growth in the distribution of oncology and specialty products, including contributions from acquisitions[14] Prescription Technology Solutions Segment Performance The Prescription Technology Solutions segment saw a 16% revenue increase from higher prescription volumes in logistics and technology services, with Adjusted Segment Operating Profit growing 21% due to increased demand for access solutions Prescription Technology Solutions Segment Financials | Metric | FY26 Q1 ($ millions) | FY25 Q1 ($ millions) | Change (%) | | :-------------------------- | :------------------- | :------------------- | :--------- | | Revenues | $1,400 | $1,241 | 16 | | Segment Operating Profit | $253 | $203 | 25 | | Adjusted Segment Operating Profit | $269 | $223 | 21 | - Revenue increase was driven by increased prescription volumes in the third-party logistics and technology services businesses[14] - Adjusted Segment Operating Profit increase was driven by higher demand for access solutions[14] Medical-Surgical Solutions Segment Performance The Medical-Surgical Solutions segment's revenues increased by 2% due to higher specialty pharmaceutical volumes, while Adjusted Segment Operating Profit grew 22% from cost optimization efficiencies Medical-Surgical Solutions Segment Financials | Metric | FY26 Q1 ($ millions) | FY25 Q1 ($ millions) | Change (%) | | :-------------------------- | :------------------- | :------------------- | :--------- | | Revenues | $2,700 | $2,636 | 2 | | Segment Operating Profit | $221 | $188 | 18 | | Adjusted Segment Operating Profit | $244 | $200 | 22 | - Revenue increase was driven by higher volumes of specialty pharmaceuticals[22] - Adjusted Segment Operating Profit increase was led by operational efficiencies from cost optimization initiatives[22] International Segment Performance The International segment's revenues rose 1% from higher Canadian pharmaceutical distribution volumes, partially offset by divestitures, leading to a 3% decrease in Adjusted Segment Operating Profit International Segment Financials | Metric | FY26 Q1 ($ 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] - 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] Fiscal 2026 Outlook 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 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] - 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] - The company does not provide forward-looking guidance on a GAAP basis due to the difficulty in forecasting certain unpredictable adjustments[16] Corporate Information 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 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] - McKesson will host its Investor Day on Tuesday, September 23, 2025, featuring presentations by the leadership team and a live Q&A session[20] About McKesson Corporation 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] - Teams partner with biopharma companies, care providers, pharmacies, manufacturers, governments, and others to deliver insights, products, and services[25] - Routinely uses its website, investors.mckesson.com, to post material information for investors[26] Cautionary Statements 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] - Readers should not place undue reliance on forward-looking statements, which speak only as of the date they are first made[23] - 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] Financial Statements (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 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 | $0.62 | 15 | Condensed Consolidated Balance Sheets The Condensed Consolidated Balance Sheets as of June 30, 2025, show increased total assets, driven by receivables, inventories, goodwill, and intangibles, with a corresponding rise in total liabilities, particularly debt Condensed Consolidated Balance Sheets | Balance Sheet Item | June 30, 2025 ($ 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] - Goodwill increased from $10,022 million to $11,365 million, and intangible assets, net, increased from $1,464 million to $4,272 million, likely due to recent acquisitions[40] Condensed Consolidated Statements of Cash Flows The Condensed Consolidated Statements of Cash Flows reveal a significant net decrease in cash for Q1 FY26, primarily due to substantial cash used in operating and investing activities, especially for acquisitions Condensed Consolidated Statements of Cash Flows | Cash Flow Category (Three Months Ended June 30) | 2025 ($ 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] - Proceeds from issuances of long-term debt were $1,990 million in Q1 FY26[42] Non-GAAP Financial Measures & Reconciliations This section provides detailed reconciliations of GAAP to Non-GAAP financial measures, offering supplemental insights into McKesson's operating performance and the definitions of these adjusted metrics Reconciliation of GAAP Operating Results to Adjusted Results (EPS) This section reconciles GAAP Net Income and EPS to Adjusted Earnings and Adjusted EPS, detailing pre-tax and after-tax adjustments that significantly impact the adjusted financial figures Reconciliation of GAAP to Adjusted EPS | Metric (Three Months Ended June 30) | 2025 ($ 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 | $7.88 | 5 | Reconciliation of GAAP Operating Results to Adjusted Results (Income Statement Items) This reconciliation details adjustments to GAAP income statement items like Gross Profit, Operating Expenses, and Income Tax Expense, providing a clearer view of core operational performance by excluding non-recurring items Reconciliation of GAAP to Adjusted Income Statement Items | Metric (Three Months Ended June 30) | 2025 ($ 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) | $(160) | 84 | Reconciliation of GAAP Segment Operating Results to Adjusted Results This section reconciles GAAP segment operating profit to Adjusted Segment Operating Profit for each business segment, highlighting the impact of adjustments on profitability and underlying operational performance Adjusted Segment Operating Profit | Segment Operating Profit (Three Months Ended June 30) | 2025 GAAP ($ 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 | $1,305 | 9 | Adjusted Segment Operating Profit as % of Revenues | Segment Operating Profit as % of Revenues (Three Months Ended June 30) | 2025 GAAP (%) | 2025 Adjusted (%) | 2024 GAAP (%) | 2024 Adjusted (%) | 2025 vs 2024 Adjusted Change (bp) | | :--------------------------------------------------------------------- | :------------ | :---------------- | :------------ | :---------------- | :-------------------------------- | | U.S. Pharmaceutical | 0.81 | 1.06 | 1.09 | 1.14 | (8) | | Prescription Technology Solutions | 17.64 | 18.76 | 16.36 | 17.97 | 79 | | Medical-Surgical Solutions | 8.18 | 9.03 | 7.13 | 7.59 | 144 | | International | 2.46 | 2.65 | 2.44 | 2.76 | (11) | Reconciliation of GAAP Cash Flow to Free Cash Flow This section reconciles GAAP net cash used in operating activities to Free Cash Flow, showing negative Free Cash Flow for Q1 FY26 primarily due to significant cash used in operations and capital expenditures Reconciliation of GAAP Cash Flow to Free Cash Flow | Cash Flow Category (Three Months Ended June 30) | 2025 ($ 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 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] - Claims and litigation charges for Q1 FY25 included $114 million pre-tax related to estimated liability for opioid-related claims[47] - 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] Supplemental Non-GAAP Financial Information Definitions 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] - Management internally uses both GAAP and Non-GAAP financial measures for financial planning, resource allocation, capital deployment, performance assessment, and incentive compensation[61] - 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] Adjusted Gross Profit (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] Adjusted Operating Expenses (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] Adjusted Other Income (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] Adjusted Interest Expense (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] Adjusted Income Tax Expense (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] Adjusted Earnings (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] Adjusted Earnings per Diluted Share (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] Adjusted Segment Operating Profit (Non-GAAP) and Adjusted Segment Operating Profit Margin (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] - Adjusted Segment Operating Profit Margin is defined as Adjusted Segment Operating Profit (Non-GAAP) divided by GAAP segment revenues[49] Adjusted Corporate Expenses (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] Adjusted Operating Profit (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] Free Cash Flow (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]