McKesson Corporation · NYSE:MCK
McKesson — Q3 FY2019 Earnings Presentation
30 slides from McKesson's earnings presentation, Jan 31, 2019
Slide 1: Q3 Fiscal 2019 Financial Performance
McKesson Corporation Q3 Fiscal 2019 Financial Performance Financial Results and Company Highlights January 31, 2019
Slide 2: Forward-Looking Statements
Forward-Looking Statements Some of the information in this presentation is not historical in nature and may constitute forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the
Slide 3: Opening Remarks
Opening Remarks John Hammergren Chairman and Chief Executive Officer
Slide 4: Q3 Fiscal 2019 Governance Updates
Q3 Fiscal 2019 Governance Updates • John Hammergren Chairman/CEO retirement effective March 31, 2019 – Advisory capacity thereafter – Retain Chairman role at Change Healthcare • Brian Tyler, current President and Chief Operating Officer, to transition to Chief Executive Officer role, effective April
Slide 5: Business Update
Business Update Brian Tyler President and Chief Operating Officer
Slide 6: Q3 Fiscal 2019 Highlights
Q3 Fiscal 2019 Highlights Solid Quarterly Results; Narrowed Full-Year Guidance Company Updates Business Summary • John Hammergren to retire as Chairman and CEO • Revenue growth of 5% effective 3/31/19 • Brian Tyler to become CEO effective 4/1/19 • Adjusted EPS of $3.40, flat to prior year • Ed Muell
Slide 7: Financial Overview
Financial Overview Britt Vitalone Executive Vice President and Chief Financial Officer
Slide 8: Q3 and YTD Fiscal 2019 GAAP to Adjusted EPS Reconciliation
Q3 and YTD Fiscal 2019 GAAP to Adjusted Earnings Per Diluted Share Reconciliation Q3 YTD GAAP Earnings Per Diluted Share $ 2.41 $ 4.17 Adjustments Amortization of acquisition-related intangibles 0.76 2.24 Acquisition-related expenses and adjustments 0.20 0.69 LIFO inventory-related adjustments (0.08
Slide 9: Q3 Fiscal 2019 Other Items
Q3 Fiscal 2019 Other Items • Customer charge: $60M, or approximately $0.23 per diluted share, associated with a customer bankruptcy. • Opioids: Reversed $17M, or approximately $0.06 per diluted share, in charges related to New York Opioid Stewardship Act, which was more than offset by higher than ex
Slide 10: Condensed Consolidated Statement of Earnings
Condensed Consolidated Statement of Earnings Q3 and YTD Fiscal 2019 Adjusted Results* Q3 YoY YTD Q3 YoY ($ in millions, except per share amounts) FY 2019 Change FY 2019 Change Revenues $56,208 5% $161,890 3% Gross Profit $2,845 5% $8,351 3% Operating Expense ($2,007) 8% ($5,854) 6% Income from Opera
Slide 11: Segment Results: U.S. Pharmaceutical and Specialty Solutions
Segment Results: U.S. Pharmaceutical and Specialty Solutions Q3 and YTD Fiscal 2019 Adjusted Results* Q3 YoY YTD Q3 YoY ($ in millions) FY 2019 Change FY 2019 Change U.S. Pharmaceutical and Specialty Solutions Revenues $44,279 6% $126,866 3% Operating Profit $593 (2)% $1,768 (2)% Operating Margin 1.
Slide 12: Segment Results: European Pharmaceutical Solutions
Segment Results: European Pharmaceutical Solutions Q3 and YTD Fiscal 2019 Adjusted Results* Q3 YoY YTD Q3 YoY ($ in millions) FY 2019 Change FY 2019 Change European Pharmaceutical Solutions Revenues $6,911 (1)% $20,485 2% Operating Profit $69 (19)% $196 (24)% Operating Margin 1.00% (22)bps 0.96% (32
Slide 13: Segment Results: Medical-Surgical Solutions
Segment Results: Medical-Surgical Solutions Q3 and YTD Fiscal 2019 Adjusted Results* Q3 YoY YTD Q3 YoY ($ in millions) FY 2019 Change FY 2019 Change Medical-Surgical Solutions Revenues $2,012 19% $5,663 16% Operating Profit $170 21% $433 8% Operating Margin 8.45% 12bps 7.65% (58)bps *See Tables in t
Slide 14: Results: Other & Corporate
Results: Other & Corporate Q3 and YTD Fiscal 2019 Adjusted Results* Q3 YoY YTD Q3 YoY ($ in millions) FY 2019 Change FY 2019 Change Other Revenues $3,006 1% $8,876 - Operating Profit $224 5% $737 8% Operating Margin NM NM NM NM Corporate Operating Loss ($138) 29% ($376) 21% *See Tables in the Append
Slide 15: Cash
Cash YTD Cash Balance Walk* Cash Dynamics ($ in millions) o Operating Cash Flow reflects working capital Balance at March 31, 2018 $ 2,672 timing and seasonal investments Operating Cash Flow 141 o YTD share buybacks of $1.4 billion Capital Expenditures (405) o Remaining share repurchase authorizatio
Slide 16: FY19 Outlook
FY19 Outlook On the following slides, McKesson presents an overview of its Fiscal 2019 Outlook assumptions. These assumptions consist of certain non-GAAP measures. McKesson does not provide forward-looking guidance on a GAAP basis as the company is unable to provide a quantitative reconciliation of
Slide 17: Fiscal 2019 Adjusted Earnings Outlook
Fiscal 2019 Adjusted Earnings Outlook Fiscal 2019 Fiscal 2018 Outlook Actual Revenues Up low-single digit $208.4 billion Income from Continuing Operations before Down low-single $3.9 billion Interest Expense and Income Taxes digit Diluted Earnings per Share $13.45 to $13.65 $12.62 Free Cash Flow ~$3
Slide 18: Fiscal 2019 Segment Adjusted Earnings Outlook
Fiscal 2019 Segment Adjusted Earnings Outlook Year-over-Year Percent Growth Revenues Operating Profit Down low- to U.S. Pharmaceutical and Specialty Solutions Up low- to mid-single digit mid-single digit Decline year over year; European Pharmaceutical Solutions Flat 2HFY19 similar to 1HFY19 High end
Slide 19: Fiscal 2019 Adjusted Earnings Assumptions
Fiscal 2019 Adjusted Earnings Assumptions ($ and shares in millions) FY19 Outlook Corporate Expenses Increase high-single digit Income From Equity Method Investment Decline year over year; 2HFY19 similar to 1HFY19 in Change Healthcare Interest Expense Decline year over year Effective Tax Rate 17% -
Slide 20: Appendix
MCKESSON Appendix
Slide 21: Reconciliation of GAAP Amounts to Free Cash Flow
Reconciliation of GAAP Amounts to Free Cash Flow ($M) Q3YTD FY 19 Q3YTD FY 18 YoY Change Major GAAP cash flow categories: Operating cash flow $ 141 $ 1,321 $ (1,180) Investing cash flow $ (1,151) $ (1,952) $ 801 Financing cash flow $ 317 $ (1,147) $ 1,464 Free cash flow (non-GAAP measure): Operating
Slide 22: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Q3 Fiscal 2019 Schedule 2A McKESSON CORPORATION RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) (unaudited) (in millions, except per share amounts) Quarter Ended December 31, 2018 Vs. Prior Quarter Amortization Acquisition- LIFO Gains from Res
Slide 23: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Schedule 2A Q3 Fiscal 2018 Quarter Ended December 31, 2017 (continued) Amortization Acquisition- LIFO Restructuring of Acquisition- Related Inventory- Gains from and Asset Other Adjusted As Reported Related Expenses and Related Antitrust Legal Impairment Adjustments,
Slide 24: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation YTD Fiscal 2019 McKESSON CORPORATION Schedule 2B RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) (unaudited) (in millions, except per share amounts) Change Nine Months Ended December 31, 2018 Vs. Prior Period Amortization Acquisition- LIFO Gai
Slide 25: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation YTD Fiscal 2018 Schedule 2B (continued) Nine Months Ended December 31, 2017 Amortization Acquisition- Restructuring of Acquisition- Related LIFO Inventory- Gains from and Asset Other Adjusted As Reported Related Expenses and Related Antitrust Legal Impairment Adjustme
Slide 26: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Q3 Fiscal 2019 and Q3 Fiscal 2018 26
Slide 27: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation YTD Fiscal 2019 and YTD Fiscal 2018 27
Slide 28: Financial Statement Footnotes
Financial Statement Footnotes McKESSON CORPORATION FINANCIAL STATEMENT NOTES (1) The third quarters of fiscal 2019 and 2018 include pre-tax credits of $21 million and $2 million, and the first nine months of fiscal 2019 and 2018 include pre-tax credits of $64 million and $5 million related to our la
Slide 29: Supplemental Non-GAAP Financial Information
Supplemental Non-GAAP Financial Information 1 of 2 SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION In an effort to provide investors with additional information regarding the Company's financial results as determined by generally accepted accounting principles ("GAAP"), McKesson Corporation (the "Compan
Slide 30: Supplemental Non-GAAP Financial Information
Supplemental Non-GAAP Financial Information 2 of 2 SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION (continued) Other adjustments - The Company evaluates the nature and significance of transactions qualitatively and quantitatively on an individual basis and may include them in the determination of our Ad