McKesson(MCK) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue grew 18% to $95.3 billion and adjusted operating profit grew 16% to$ 1.5 billion [8][36] - Adjusted earnings per diluted share guidance increased to a range of $32.55 to$ 32.95, representing 19% to 20% year-over-year growth [9][52] - Gross profit was $3.3 billion, an increase of 7%, with operating expenses rising 2% to$ 1.9 billion [37][38] Business Line Data and Key Metrics Changes - U.S. Pharmaceutical segment revenues increased 19% to $87.1 billion, driven by higher volumes from retail national account customers and specialty product distribution [41] - Prescription Technology Solutions segment revenues increased 14% to$ 1.4 billion, with operating profit rising 22% to $235 million [43] - Medical Surgical Solutions revenues decreased 3% to$ 2.9 billion due to lower demand for illness season products [45] Market Data and Key Metrics Changes - The number of flu-like illness cases was lower than the average of the last five non-COVID years, impacting demand for seasonal vaccines and related products [18][45] - International segment revenues increased 6% to $3.9 billion, with operating profit rising 18% driven by higher pharmaceutical distribution volumes in Canada [48] Company Strategy and Development Direction - The company announced the acquisition of a controlling interest in PRISM Vision to enhance its specialty services platform [7][55] - Focus on strengthening distribution capabilities in North America and expanding oncology and biopharma services platforms [20][30] - Continued investment in automation and technology to modernize distribution networks and improve operational efficiencies [31][72] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of prescription volumes and growth in specialty areas, particularly oncology [82] - The company anticipates ongoing challenges from public policy and market dynamics but remains focused on long-term growth [70][148] - Cost optimization initiatives are expected to deliver$ 100 million in savings in the second half of fiscal 2025 [47][60] Other Important Information - The company completed the divestiture of the Rexall and Well.ca businesses to focus on strategic areas [31][61] - Cash and cash equivalents at the end of the quarter were $1.1 billion, with negative free cash flow of$ 2.6 billion due to timing [50][65] Q&A Session Summary Question: Utilization levels and macro trends impact - Management noted stable prescription volume in the pharma segment, with strong growth in specialty and oncology areas [81] Question: Fiscal 2026 guidance and acquisitions - Management affirmed long-term EPS growth rate of 12% to 14%, with acquisitions subject to regulatory review [87][90] Question: Operating expense growth variability - Management highlighted efforts to drive operating leverage and efficiency while investing in key growth areas [96][97] Question: Medical segment market share and strategy - Management emphasized focus on customer base growth rather than market share, with a shift towards more sophisticated medical products [105][106] Question: PRISM distribution and business impact - Management confirmed they are not the current distributor for PRISM but will pick up that business post-acquisition [108] Question: Cost savings recognition and fiscal 2026 headwinds - Management indicated ongoing cost optimization efforts and potential public policy impacts as headwinds for fiscal 2026 [148]