McKesson Corporation · NYSE:MCK
McKesson — Q3 FY2020 Earnings Presentation
26 slides from McKesson's earnings presentation, Feb 4, 2020
Slide 1: McKesson Corporation Q3 Fiscal 2020 Financial Results
McKesson Corporation Q3 Fiscal 2020 Financial Results February 4, 2020
Slide 2: Cautionary Statements
Cautionary Statements Except for historical information referred to in our presentation, matters discussed may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that involve risks and uncert
Slide 3: Company Updates
Company Updates Q3 Adjusted Earnings Exceeded Expectations; Reaffirmed Full-Year Guidance Company Updates Business Summary • On February 4, 2020, a McKesson wholly-owned • Revenue growth of 5%1 subsidiary filed a registration statement with the Securities and Exchange Commission relating to a • Adju
Slide 4: Condensed Consolidated Statement of Earnings
Condensed Consolidated Statement of Earnings Q3 and YTD Fiscal 2020 Results Adjusted Results Q3 YoY YTD Q3 YoY ($ in millions, except per share amounts) FY 20 Change FY 20 Change Revenues $ 59,172 5 % $ 172,516 7 % Gross Profit $ 2,945 4 % $ 8,546 2 % Total Operating Expenses $ (2,077) 3 % $ (6,054)
Slide 5: U.S. Pharmaceutical and Specialty Solutions
U.S. Pharmaceutical and Specialty Solutions Q3 and YTD Fiscal 2020 Results Adjusted Results Q3 YoY YTD Q3 YoY ($ in millions) FY 20 Change FY 20 Change U.S. Pharmaceutical and Specialty Solutions Revenues $ 46,923 6 % $ 137,067 8 % Operating Profit $ 658 11 % $ 1,899 7 % Operating Margin 1.40% 6 bp
Slide 6: European Pharmaceutical Solutions
European Pharmaceutical Solutions Q3 and YTD Fiscal 2020 Results Adjusted Results Q3 YoY YTD Q3 YoY ($ in millions) FY 20 Change FY 20 Change European Pharmaceutical Solutions Revenues $ 6,931 — % $ 20,239 (1) % Operating Profit $ 80 16 % $ 156 (20) % Operating Margin 1.15% 15 bp 0.77% (19) bp • Q3
Slide 7: Medical-Surgical Solutions
Medical-Surgical Solutions Q3 and YTD Fiscal 2020 Results Adjusted Results Q3 YoY YTD Q3 YoY ($ in millions) FY 20 Change FY 20 Change Medical-Surgical Solutions Revenues $ 2,141 6 % $ 6,100 8 % Operating Profit $ 184 8 % $ 509 18 % Operating Margin 8.59% 14 bp 8.34% 69 bp • Q3 revenue increase prim
Slide 8: Other & Corporate
Other & Corporate Q3 and YTD Fiscal 2020 Results Adjusted Results Q3 YoY YTD Q3 YoY ($ in millions) FY 20 Change FY 20 Change Other1 Revenues $ 3,177 6 % $ 9,110 3 % Operating Profit $ 214 (4) % $ 711 (4) % Operating Margin NM NM NM NM Corporate Operating Loss $ (178) 29 % $ (461) 23 % • Q3 operatin
Slide 9: Opioid-Related Costs
Opioid-Related Costs Results Q3 Q3 YTD Q3 Full Year ($ in millions) FY 20 FY 19 FY 20 FY 19 Opioid-Related Costs Litigation Reserves Adjustment $ — $ — $ 82 $ 37 Legal Fees and Other $ 36 $ 20 $ 108 $ 114 Total Expense $ 36 $ 20 $ 190 $ 151 Litigation Reserves Adjustment • McKesson recorded a pre-ta
Slide 10: Cash
Cash ($ in millions) YTD Cash Balance Walk* Cash Dynamics Balance at March 31, 2019 $ 2,981 • Free cash flow of $(618) million Operating Cash Flow (280) Capital Expenditures (338) • Returned $2.2 billion of cash to Free Cash Flow (618) shareholders year-to-date Acquisitions (97) Other Investing Cash
Slide 11: Fiscal 2020 Outlook
Fiscal 2020 Outlook On the following slides, McKesson presents an overview of its fiscal 2020 Outlook assumptions. These assumptions consist of certain non-GAAP measures. As outlined in the company’s February 4, 2020 press release, McKesson does not provide forward-looking guidance on a GAAP basis a
Slide 12: Fiscal 2020 Adjusted Earnings Outlook
Fiscal 2020 Adjusted Earnings Outlook Fiscal 2020 Outlook Fiscal 2019 Actual Revenues Mid to high-single digit percent growth $214.3 billion Income from continuing Low-single digit percent increase operations before interest $3.8 billion (Previously flat to low-single digit expense and income taxes
Slide 13: Fiscal 2020 Adjusted Earnings Outlook
Fiscal 2020 Adjusted Earnings Outlook Year-over-Year Percent Change European U.S. Pharmaceutical and Pharmaceutical Medical-Surgical Solutions Other Specialty Solutions Solutions FY20 Flat to low-single High-single digit Low-single digit 7% - 9% digit decline growth growth Revenue Low-double digit F
Slide 14: Fiscal 2020 Adjusted Earnings Assumptions
Fiscal 2020 Adjusted Earnings Assumptions ($ and shares in millions) FY20 Outlook $660 - $700 Corporate Expenses (Previously $695 - $745) Adjusted Equity Earnings from Investment in $250 – $270 Change Healthcare Interest Expense $245 – $265 Effective Tax Rate 18 – 19% Net Income Attributable to Nonc
Slide 15: Appendix
Appendix
Slide 16: Reconciliation of GAAP Amounts to Free Cash Flow
Reconciliation of GAAP Amounts to Free Cash Flow Q3 FY20 Q3 FY19 ($ in millions) YTD YTD YoY Change Major GAAP cash flow categories: Operating cash flow $ (280) $ 141 $ (421) Investing cash flow $ (409) $ (1,151) $ 742 Financing cash flow $ (254) $ 317 $ (571) Free cash flow (non-GAAP measure): Oper
Slide 17: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Q3 Fiscal 2020 McKESSON CORPORATION Schedule 2A RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) (unaudited) (in millions, except per share amounts) Three Months Ended December 31, 2019 Change Vs. Prior Quarter Amortization Transaction- LIFO Ga
Slide 18: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Q3 Fiscal 2019 Schedule 2A (Continued) Three Months Ended December 31, 2018 Amortization Transaction- LIFO Gains from Restructuring, of Acquisition- Related Inventory- Antitrust Impairment and Other Adjusted As Reported Related Expenses and Related Legal Related Adjus
Slide 19: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation YTD Fiscal 2020 McKESSON CORPORATION Schedule 2B RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) (unaudited) (in millions, except per share amounts) Nine Months Ended December 31, 2019 Change Vs. Prior Period Amortization Transaction- LIFO Gai
Slide 20: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation YTD Fiscal 2019 Schedule 2B Nine Months Ended December 31, 2018 (Continued) Amortization Transaction- LIFO Gains from Restructuring, of Acquisition- Related Inventory- Antitrust Impairment and Other Adjusted As Reported Related Expenses and Related Legal Related Adjus
Slide 21: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Q3 Fiscal 2020 and Q3 Fiscal 2019 McKESSON CORPORATION Schedule 3A RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) (unaudited) (in millions, except per share amounts) Three Months Ended December 31, 2019 Three Months Ended December 31,
Slide 22: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation YTD Fiscal 2020 and YTD Fiscal 2019 McKESSON CORPORATION Schedule 3B RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) (unaudited) (in millions, except per share amounts) Nine Months Ended December 31, 2019 Nine Months Ended December 31,
Slide 23: Financial Statement Notes
Financial Statement Notes 1 of 2 McKESSON CORPORATION FINANCIAL STATEMENT NOTES (1) Operating expenses for the nine months ended December 31, 2018 include a gain from an escrow settlement of $97 million (pre-tax and after-tax) representing certain indemnity and other claims related to our third quar
Slide 24: Financial Statement Notes
Financial Statement Notes 2 of 2 FINANCIAL STATEMENT NOTES (continued) (8) Equity earnings and charges from investment in Change Healthcare Joint Venture for the nine months ended December 31, 2019 includes a pre-tax charge of $1,157 million ($864 million after-tax) representing an other-than-tempor
Slide 25: Supplemental Non-GAAP Financial Information
Supplemental Non-GAAP Financial Information McKESSON CORPORATION 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 Cor
Slide 26: Supplemental Non-GAAP Financial Information
Supplemental Non-GAAP Financial Information 2 of 2 SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION (continued) Income taxes on Adjusted Earnings are calculated in accordance with Accounting Standards Codification ("ASC") 740, “Income Taxes,” which is the same accounting principle used by the Company whe