McKesson Corporation · NYSE:MCK
McKesson — Q2 FY2019 Earnings Presentation
31 slides from McKesson's earnings presentation, Oct 25, 2018
Slide 1: Q2 Fiscal 2019 Financial Performance
McKesson Corporation Q2 Fiscal 2019 Financial Performance Financial Results and Company Highlights October 25, 2018
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 Brian Tyler President and Chief Operating Officer
Slide 4: Q2 Fiscal 2019 Highlights
Q2 Fiscal 2019 Highlights Quarter Ahead Of Expectations; Raised Lower End of Full-Year Guidance Company Updates Business Summary • Our Board of Directors welcomed Dominic • Revenue growth of 2%1 Caruso as a new independent director • Adjusted EPS of $3.60, reflecting lower tax rate and contractual l
Slide 5: Financial Overview
Financial Overview Britt Vitalone Executive Vice President and Chief Financial Officer
Slide 6: Q2 Fiscal 2019 GAAP to Adjusted EPS Reconciliation
Q2 Fiscal 2019 GAAP to Adjusted Earnings Per Diluted Share Reconciliation GAAP Earnings Per Diluted Share $ 2.51 Adjustments Amortization of acquisition-related intangibles 0.75 Acquisition-related expenses and adjustments 0.27 LIFO inventory-related adjustments (0.08) Restructuring and asset impair
Slide 7: YTD Fiscal 2019 GAAP to Adjusted EPS Reconciliation
YTD Fiscal 2019 GAAP to Adjusted Earnings Per Diluted Share Reconciliation GAAP Earnings Per Diluted Share $ 1.79 Adjustments Amortization of acquisition-related intangibles 1.49 Acquisition-related expenses and adjustments 0.49 LIFO inventory-related adjustments (0.16) Gains from antitrust legal se
Slide 8: Q2 Fiscal 2019 Other Items
Q2 Fiscal 2019 Other Items • Contractual Obligation: McKesson waived its right to certain distributions from Change Healthcare in exchange for release from a contractual obligation due to other Change Healthcare shareholders. As a result, McKesson recognized a reduction to adjusted operating expense
Slide 9: Condensed Consolidated Statement of Earnings, Q2
Condensed Consolidated Statement of Earnings Q2 Fiscal 2019 Adjusted Results* Q2 YoY Constant YoY ($ in millions, except per share amounts) FY 2019 Change Currency Change Revenues $53,075 2% $53,256 2% Gross Profit $2,782 (1)% $2,810 - Operating Expense ($1,875) - ($1,893) 1% Income from Operations
Slide 10: Condensed Consolidated Statement of Earnings, YTD
Condensed Consolidated Statement of Earnings YTD Fiscal 2019 Adjusted Results* YTD Q2 YoY Constant YoY ($ in millions, except per share amounts) FY 2019 Change Currency Change Revenues $105,682 2% $105,265 2% Gross Profit $5,506 2% $5,467 1% Operating Expense ($3,847) 4% ($3,810) 3% Income from Oper
Slide 11: Segment Results: U.S. Pharmaceutical and Specialty Solutions
Segment Results: U.S. Pharmaceutical and Specialty Solutions Q2 and YTD Fiscal 2019 Adjusted Results* Q2 YoY Constant YoY ($ in millions) FY 2019 Change Currency Change U.S. Pharmaceutical and Specialty Solutions Revenues $41,610 2% Operating Profit $635 (5)% Operating Margin 1.53% (12)bps Adjusted
Slide 12: Segment Results: European Pharmaceutical Solutions
Segment Results: European Pharmaceutical Solutions Q2 and YTD Fiscal 2019 Adjusted Results* Q2 YoY Constant YoY ($ in millions) FY 2019 Change Currency Change European Pharmaceutical Solutions Revenues $6,639 (2)% $6,707 (1)% Operating Profit $53 (40)% $54 (39)% Operating Margin 0.80% (51)bps 0.81%
Slide 13: Segment Results: Medical-Surgical Solutions
Segment Results: Medical-Surgical Solutions Q2 and YTD Fiscal 2019 Adjusted Results* Q2 YoY Constant YoY ($ in millions) FY 2019 Change Currency Change Medical-Surgical Solutions Revenues $1,948 17% Operating Profit $138 1% Operating Margin 7.08% (111)bps Adjusted Results* YTD Q2 YoY Constant YoY ($
Slide 14: Results: Other & Corporate, Q2
Results: Other & Corporate Q2 Fiscal 2019 Adjusted Results* Q2 YoY Constant YoY ($ in millions) FY 2019 Change Currency Change Other Revenues $2,878 (5)% $2,991 (1)% Operating Profit $300 24% $310 29% Operating Margin NM NM NM NM Corporate Operating Loss ($143) 54% ($144) 55% *See Tables in the Appe
Slide 15: Results: Other & Corporate, YTD
Results: Other & Corporate YTD Fiscal 2019 Adjusted Results* YTD Q2 YoY Constant YoY ($ in millions) FY 2019 Change Currency Change Other Revenues $5,870 - $5,872 - Operating Profit $513 9% $514 9% Operating Margin NM NM NM NM Corporate Operating Loss ($238) 16% ($238) 16% *See Tables in the Appendi
Slide 16: Cash
Cash YTD Cash Balance Walk* Cash Dynamics ($ in millions) o Working capital: Balance at March 31, 2018 $ 2,672 o Days sales outstanding decreased 1 day YoY to Other Operating Cash Flows 1,224 26 days Working Capital, Net** (906) o Days sales in inventory decreased 1 day YoY to Cash Used In Operation
Slide 17: 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 18: Fiscal 2019 Adjusted Earnings Outlook
Fiscal 2019 Adjusted Earnings Outlook Fiscal 2019 Fiscal 2018 Outlook Actual Up mid-single digit Revenues $208.4 billion percent growth Decline low- to mid- Income from Continuing Operations before single digits percent $3.9 billion Interest Expense and Income Taxes growth Diluted Earnings per Share
Slide 19: Fiscal 2019 Segment Adjusted Earnings Outlook
Fiscal 2019 Segment Adjusted Earnings Outlook Year-over-Year Percent Growth Revenues Operating Profit Low end of range of flat to U.S. Pharmaceutical and Specialty Solutions Up low- to mid-single digit down mid-single digit Decline year over year; European Pharmaceutical Solutions Flat to up mid-sin
Slide 20: Fiscal 2019 Adjusted Earnings Assumptions
Fiscal 2019 Adjusted Earnings Assumptions ($ and shares in millions) FY19 Outlook Corporate Expenses Increase year over year 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% - 19%
Slide 21: Appendix
MCKESSON Appendix
Slide 22: Reconciliation of GAAP Amounts to Free Cash Flow
Reconciliation of GAAP Amounts to Free Cash Flow ($M) Q2 YTD FY19 Q2 YTD FY18 YoY Change Major GAAP cash flow categories: Operating cash flow $ 318 $ 1,339 $ (1,021) Investing cash flow $ (983) $ (1,865) $ 882 Financing cash flow $ 198 $ (1,272) $ 1,470 Free cash flow (non-GAAP measure): Operating c
Slide 23: GAAP to Non-GAAP Reconciliation, Q2 Fiscal 2019
GAAP to Non-GAAP Reconciliation Q2 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 September 30, 2018 Vs. Prior Quarter Amortization Acquisition- Restructuring of A
Slide 24: GAAP to Non-GAAP Reconciliation, Q2 Fiscal 2018
GAAP to Non-GAAP Reconciliation Q2 Fiscal 2018 Schedule 2A (continued) Quarter Ended September 30, 2017 Amortization of Acquisition- Acquisition-Related LIFO Inventory- Gains from Restructuring and Adjusted As Reported Related Expenses and Related Antitrust Legal Asset Impairment Other Earnings (GAA
Slide 25: GAAP to Non-GAAP Reconciliation, YTD Fiscal 2019
GAAP to Non-GAAP Reconciliation YTD Fiscal 2019 Schedule 2B McKESSON CORPORATION RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) (unaudited) (in millions, except per share amounts) Change Six Months Ended September 30, 2018 Vs. Prior Period Amortization Acquisition- Restruct
Slide 26: GAAP to Non-GAAP Reconciliation, YTD Fiscal 2018
GAAP to Non-GAAP Reconciliation YTD Fiscal 2018 Schedule 2B (continued) Six Months Ended September 30, 2017 Amortization of Acquisition- Acquisition-Related LIFO Inventory- Gains from Restructuring and Adjusted As Reported Related Expenses and Related Antitrust Legal Asset Impairment Other Earnings
Slide 27: GAAP to Non-GAAP Segment Reconciliation, Q2
GAAP to Non-GAAP Reconciliation Q2 Fiscal 2019 and Q2 Fiscal 2018 Schedule 3A McKESSON CORPORATION RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) (unaudited) (in millions) Quarter Ended September 30, 2018 Quarter Ended September 30, 2017 GAAP Non-GAAP Change Adjuste
Slide 28: GAAP to Non-GAAP Segment Reconciliation, YTD
GAAP to Non-GAAP Reconciliation YTD Fiscal 2019 and YTD Fiscal 2018 Schedule 3B McKESSON CORPORATION RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) (unaudited) (in millions) Six Months Ended September 30, 2018 Six Months Ended September 30, 2017 GAAP Non-GAAP Change
Slide 29: Financial Statement Footnotes
Financial Statement Footnotes McKESSON CORPORATION FINANCIAL STATEMENT FOOTNOTES The following explanations are provided for the financial results as reported under U.S. GAAP. 1) The second quarters of fiscal 2019 and 2018 include pre-tax credits of $22 million and $29 million, and the first half of
Slide 30: 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 31: Supplemental Non-GAAP Financial Information (continued)
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