McKesson(US:MCK)2023-11-01 23:57Financial Data and Key Metrics Changes - Revenues increased by 10% to $77.2 billion in Q2 2024, with adjusted earnings per diluted share at $6.23, reflecting a 14% increase from the prior year when excluding certain items [5][21] - Gross profit was $3 billion, a decrease of 1%, but increased by 8% when excluding the impact of European business operations and completed divestitures [21] - Operating profit increased by 1% to $1.2 billion, with a 12% increase when excluding COVID-19 related items and losses from McKesson Ventures [22][23] Business Line Data and Key Metrics Changes - The U.S. Pharmaceutical segment saw revenues of $69.8 billion, a 16% year-over-year increase, driven by higher prescription volumes, particularly from GLP-1 medications [25] - Prescription Technology Solutions revenues increased by 12% to $1.1 billion, with operating profit rising by 48% to $209 million, reflecting strong demand for access solutions [27] - Medical-Surgical Solutions revenues were flat at $2.8 billion, with operating profit decreasing by 17% due to lower sales of COVID-19 tests and ancillary supplies [28] Market Data and Key Metrics Changes - The Medical-Surgical segment observed a decline in primary care foot traffic and lower instances of respiratory illness, impacting overall market performance [10][11] - International segment revenues decreased by 44% year-over-year to $3.5 billion, primarily due to divestitures of European businesses [29] Company Strategy and Development Direction - The company is focused on expanding its oncology and biopharma platforms, having added four new practices and hundreds of providers to the U.S. Oncology network [11][12] - Investments in technology and data analytics are prioritized to enhance operational efficiency and customer service [38] - The company aims to leverage its differentiated services and solutions to improve care across various settings, positioning itself for continued growth [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to drive growth and strategic advancement in fiscal 2024 and beyond, despite challenges in certain segments [17][41] - The anticipated impact of Rite Aid's bankruptcy is not expected to materially affect fiscal 2024 adjusted earnings per diluted share [6][19] - Management noted that the primary care market is moderating, but they remain confident in their position and capabilities to serve customers [64] Other Important Information - The company recorded a pretax GAAP provision for bad debts of $210 million related to Rite Aid's bankruptcy, with an additional provision of $511 million anticipated in Q3 2024 [18][19] - Free cash flow for the quarter was $825 million, with a total of $4.3 billion for the trailing 12 months [31] Q&A Session Summary Question: Focus on RxTS and revenue upside - Management noted stable utilization trends and growth in GLP-1 medications driving revenue, with variability factors including prescription utilization and drug launches [45][46] Question: Margin changes in Prescription Technology Solutions - Management explained that the business should be viewed on an annual basis, with different revenue and margin profiles for various programs impacting second-half expectations [49][50] Question: Rite Aid reserves and collections approach - Management confirmed ongoing distribution services to Rite Aid and outlined the interim agreement with shorter credit terms [55][56] Question: Sustainability of operating expenses - Management emphasized operational efficiency and ongoing investments in capabilities, expecting continued operating margin leverage [58][60] Question: Medical-Surgical segment primary care volumes - Management acknowledged lower primary care volumes due to a less severe illness season and noted that healthcare service consumption needs remain unchanged [63][64] Question: Pharma segment growth drivers - Management highlighted the broad portfolio and efficiency in service delivery as key growth drivers, with oncology investments contributing positively [67] Question: M&A pipeline and focus - Management stated that M&A activities are aligned with growth strategies and financial discipline, with ongoing interest in expanding capabilities [77][78]