McKesson : Q4 2025 McKesson Corporation Earnings Transcript

Published: 2025-05-09 10:01:11 ET MCK

Published on 05/09/2025 at 10:01

08-May-2025

McKesson Corp. (MCK)

Q4 2025 Earnings Call

Jeni Dominguez

Vice President Investor Relations, McKesson Corp.

Brian Scott Tyler

Chief Executive Officer & Director, McKesson Corp.

Britt J. Vitalone

Chief Financial Officer & Executive Vice President, McKesson Corp.

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Kevin Caliendo

Analyst, UBS Securities LLC

Lisa C. Gill

Analyst, JPMorgan Securities LLC

Allen Lutz

Analyst, BofA Securities, Inc.

Eric Percher

Analyst, Nephron Research LLC

Stephen Baxter

Analyst, Wells Fargo Securities LLC

Daniel Grosslight

Analyst, Citigroup Global Markets, Inc.

Eric White Coldwell

Analyst, Robert W. Baird & Co., Inc.

Elizabeth Anderson

Analyst, Evercore ISI

Charles Rhyee

Analyst, TD Cowen

At this time, I'd like to turn the call over to Jeni Dominguez, VP of Investor Relations. Please go ahead.

Jeni Dominguez

Vice President Investor Relations, McKesson Corp.

Good afternoon, and welcome everyone, to McKesson's fourth quarter fiscal 2025 earnings call. Today, I'm joined by Brian Tyler, our Chief Executive Officer; and Brett Vitalone, our Chief Financial Officer. Brian will lead off followed by Britt. And then we'll move into a question-and-answer session.

Today's discussion will include forward-looking statements such as forecasts about McKesson's operations and future results. Please refer to the cautionary statements in today's earnings release and presentation slides available on our website at investor.mckesson.com and to the Risk Factors section of our most recent annual and periodic SEC filings for more information concerning risk factors that could cause our actual results to differ from those in our forward-looking statements.

Information about non-GAAP financial measures that we will discuss during this webcast, including a reconciliation of those measures to GAAP results, can be found in today's earnings release and presentation slides. Presentation slides also include a summary of our results for the quarter and guidance assumptions.

With that, let me turn it over to Brian.

Brian Scott Tyler

Chief Executive Officer & Director, McKesson Corp.

Thank you, Jeni. Good afternoon, everyone. Thanks for joining our call. Today, we reported fiscal fourth quarter results, marking a strong finish to fiscal 2025. Thanks to the collective efforts of our 45,000 employees, team McKesson delivered on a really tremendous year. We continued significant momentum in advancing our strategy as reflected in the fiscal fourth quarter and full year financial results.

Full year consolidated revenues grew 16% from the prior year, reaching a record level of $359 billion. Adjusted earnings per diluted share was $33.05, exceeding our expectations. We delivered year-over-year EPS growth of 20%, which is above long-term growth targets of 12% to 14% EPS growth. We also generated strong cash flow and returned $3.5 billion of cash to shareholders. Underpinning the strong financial performance is our successful execution of our company priorities. I want to take a few minutes and highlight some examples of the incredible work team McKesson has achieved this year.

First, we made strategic acquisitions that will accelerate our strategy in oncology and other specialties, including the completed acquisition of a controlling interest in PRISM Vision and the pending acquisition of a controlling interest in Community Oncology Revitalization Enterprise Ventures, or Core Ventures. These additions mark an important step as we continue our efforts to empower community-based providers and improve care experiences for patients. I'll share more about these acquisitions in just a moment.

Secondly, we strengthened our core distribution capabilities through targeted investments in technology and infrastructure. Our team continues to deliver on operational excellence and quality customer service. Our differentiated customer value proposition is reflected in the successful onboarding of several new customers, including a new strategic partner during fiscal 2025.

The last thing I'll mention is initiatives that we launched that will accelerate and modernize the enterprise. Throughout the company, our teams are identifying and capturing opportunities, including the use of technology, automation and AI that will allow us to strengthen the business platform, improve operational efficiencies, and enhance our financial profile, all while better serving our customers.

This exceptional execution and growth are a testament to the hard work of our employees, and I'm grateful for their dedication, their passion, and their unwavering focus to advance our mission. The continuous advancement and successful execution of our strategy, along with our strong performance in fiscal 2025, has ensured a foundation for success as we look forward.

Today, we initiated our fiscal 2026 guidance, reflecting our confidence to extend the momentum, further enhance our differentiated capabilities, execute on our strategy, and ultimately advance health outcomes for all. I want to focus my comments today on the strategies that have been, and we believe will continue to be the center of our company's focus. And then I'm going to turn it over to Britt for more of the financial details, including the fiscal 2026 outlook itself.

As always, let me start with our focus on people and culture, which underpins all of our success. We operate in an ever-evolving healthcare landscape where change, quite frankly, happens fast. It's important to me that we empower our employees with the right tools and the resources to drive innovation and improve efficiency. We provide training and skill development designed for employees at all levels of the organization, individual contributors, frontline managers, people leaders. We cover a range of skills, from managing and leading teams to performance development to technology and AI. Developing our talent creates an environment where our teams can better serve our customers, our customers' patients and each other. We will continue this investment in our people as we invest to grow our future.

Moving on to our two strategic growth pillars: oncology and biopharma services. We continue to advance our differentiated capabilities in our oncology platform. In the past year, the US Oncology Network welcomed two new practices, Illinois Cancer Center (sic) [Illinois CancerCare] (00:05:35) and Tennessee Cancer Specialists growing the total provider count to over 2,700 across 645 sites in 31 states. Through these community-based oncology sites, more than 1.4 million patients receive high-quality care close to home every year.

This past year, we announced an agreement to acquire a controlling interest in Core Ventures, a business and administrative services organization established by a Florida Cancer Specialists & Research Institute. I'm pleased to share that we have cleared regulatory approval and expect to complete the acquisition on June 2, 2025, subject to customary closing conditions. After completion, Florida Cancer Specialists, along with its 530 providers, will become a member of the US Oncology Network.

One of the rising challenges of the cancer care experience is managing the sustainability of healthcare costs. In the past decade, we've invested in and we've supported the community-based oncology providers. We believe the community-based setting is an important channel that provides high quality and lower cost options to patients, including those in underserved communities. We have been a proponent of policies and reforms that will improve access to treatment in local communities and increase financial sustainability for patients.

A good example of this is our participation in value-based care programs. The practices within the US Oncology Network are leading the way in finding opportunities to reduce the treatment costs and enhance quality in oncology. 70% of the physicians in the US Oncology Network participate in the Enhancing Oncology Model. At the network level, we support practices with the necessary resources and transformational strategies to excel in this initiative. In the recently reported first Performance Period, over 90% of the participating practices reduced costs versus benchmark, driving meaningful savings to patients and advancing the cancer care experience.

Beyond opportunities in oncology, we're also building capabilities in other specialties where we see the opportunity for us to create differentiated platforms, as we have done in oncology over the past decades. In April, we closed the acquisition of a controlling interest in PRISM Vision, a provider of general ophthalmology and retina management services. This is a quite logical expansion for us when we think about community-based care. We'll be able to build on the recent capabilities we've developed around the GPO and other value-added services in the ophthalmology and retina space. Our team is working diligently on integrating the business, and we look forward to this new growth opportunity for McKesson and supporting more practices to provide world class eye care.

Moving on to our biopharma services platform, the Prescription Technology Solutions segment delivered a strong year with double-digit growth in adjusted operating profit. Business growth was supported by continued strong demand for our access and affordability solutions, new business wins, and a growing network of digital connections to providers and pharmacies. In the past year alone, we helped patients save more than $10 billion on brand and specialty medications. We helped to prevent an estimated 12 million prescriptions from being

abandoned due to affordability challenges, and we helped patients access their medicine more than 100 million times.

Fiscal fourth quarter is typically the busiest time of year as we support patients with their annual verifications. This year, we delivered a particularly strong season, supporting a record number of 3 million patients in their journey to access the medicines they need. Our team achieved high levels of efficiency by leveraging technology to optimize processes and streamline the operation.

As an example, in this past season, we were able to leverage our CoverMyMeds virtual assistant to automate more than 20% of chats within the Patient Support center, while importantly maintaining customer satisfaction scores equivalent to those of live agent interactions. As I reflect on our progress in enhancing our oncology and biopharma platforms, it's hard not to be proud of what team McKesson has achieved. These two strategic growth pillars continue to represent attractive market opportunities, and we will continue to drive our mission forward with innovation, speed and focus.

Now, let me move on to our next strategic priority centered around disciplined portfolio management. We have a portfolio of differentiated assets. And as part of our continuous practice to evaluate the businesses for strategic alignment, which enables us in turn have more focus and investment in our growth pillars and allows us to efficiently deploy capital. In the past, this has led to several actions like the spinoff of Change Healthcare, the divestiture of our European businesses, and most recently, the divestiture of the Canadian retail business. These actions have unlocked value for the business and created significant value for our shareholders.

Today, we are announcing our intent to separate the Medical-Surgical segment into an independent company. Over these past years, we have built a really great medical business focused on what we think are the most attractive markets in the alternate sites of care. We have a dedicated and experienced team that works closely with customers to provide the best quality of service. Since we started reporting this segment in fiscal 2019, the business has delivered consistent and solid growth.

We continue to enhance our strategic focus, separation transaction is an important step to focus capital deployment on opportunities that align with the long-term enterprise strategies and further invest in strategic growth areas like oncology and biopharma services. We believe this action will unlock significant value for the medical business and for McKesson. It will result in two well-capitalized at-scale world class companies that are well-positioned to pursue their respective strategies and growth priorities. We expect the Medical-Surgical business will continue to deliver exceptional value to its customers and patients as a differentiated Medical-Surgical supply and solutions company. We have started the process to explore the right transaction. We anticipate providing you with additional information, including timeline and structure, when appropriate. Britt will also share more details with you on the assumptions in the fiscal 2026 guidance.

Moving on to our core distribution businesses. The US Pharmaceutical segment delivered strong performance with double-digit growth in revenue and adjusted operating profit. Our team demonstrated exceptional execution to support the significant growth of the business. We saw broad based strength across the segment and stable market fundamentals, including solid pharmaceutical utilization trends. Our scaled capabilities in specialty distribution and our deep channel expertise continue to position us well to support this fast-growing category of pharmaceuticals.

The strength of our business is also a reflection of the strength of our customers. They are at the center of everything we do, and we're pleased to serve them as a pharmaceutical distributor and long-term strategic partner

Disclaimer

McKesson Corporation published this content on May 08, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 09, 2025 at 14:00 UTC.