McKesson Corporation

McKesson's Fourth Quarter Fiscal 2023 Earnings Conference Call. Please be advised that today's conference is being recorded. At this time, I would like to turn the call over to Nicole Kramer, Manager of Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon and welcome everyone to McKesson's Fourth Quarter Fiscal 2023 Earnings Call. Today I'm joined by Brian Tyler, our Chief Executive Officer, and Britt Vidalone, our Chief Financial Officer. Brian will lead off with followed by Britt, and then we will move to 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 periodic SEC filings for additional information concerning risk factors that could cause our actual results to materially 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. The presentation slides also include a summary of our results for the quarter and guidance assumptions. With that, let me turn it over to Brian.

Thank you, Nicole, and good afternoon, everyone. I appreciate you joining us for our call today. Earlier today, we announced fourth quarter results, closing out a very successful fiscal 2023. We delivered full year revenues of $277 billion and adjusted earnings per diluted share of $25.94. When excluding certain items, adjusted earnings per diluted share grew 15% from the prior year, driven by momentum across all business segments. In fiscal 2023, Team McKesson made significant progress executing our company priorities and advancing our position as a diversified healthcare services company. We grew our biopharma and oncology platforms through a balance of strategic partnerships, acquisitions, and internal investments. We delivered growth in the core distribution businesses, and we divested the majority of the operations in Europe furthering our goal to streamline and optimize the portfolio. As we close out fiscal 2023 and look ahead, we're confident in our ability to carry the business momentum forward, and we're excited to update and increase our long-term adjusted segment operating profit growth targets. This is a testament to our strategic focus, consistent execution, and confidence in the outlook of the business. Building off our differentiated assets and capabilities, we're well positioned to deliver strong, sustainable growth in the years ahead. Britt will later walk you through more of the financial details, including fiscal 2024 outlook and the updated long-term growth segment targets. I wanted to start my remarks today, though, with the foundation of all of our strategies, which is our focus on people and culture. Our talent is critical to everything that we do at McKesson. We strive to be the best place to work in healthcare, and we're building a culture that not only unites the team, but empowers them to innovate and succeed. One of the important commitments we have to our employees is to create a workspace where everyone can be comfortable to work at their very best. In the past quarter at McKesson, we celebrated Black History Month in February and Women's History Month in March with many great, great employee-led events. I had the opportunity to participate in many of these, and I'm energized by the dedication and passion our employees have demonstrated towards promoting awareness and listening and supporting each other as Team McKesson. We have a strong employee value proposition, and our progress in creating the best place to work is being recognized externally. Recently, we were pleased to be named by Forbes as one of America's best large employers, earning the third highest ranking in healthcare. We were also named by Newsweek as one of America's greatest places for work for women, among many, many more recognitions. I'm very proud of the accomplishments, the togetherness, and the alignment of our team. Our second company priority is to drive sustainable core growth. In U.S. pharmaceutical, the core pharmaceutical distribution business continues to support the growth momentum of the segment. In fiscal 2023, the segment revenue increased 13%, and adjusted operating profit, excluding COVID-19-related contributions, increased 8%, representing the highest profit growth rate since we formed this segment. We renewed our longstanding relationship with CVS and delivered strong value propositions to support customers across all channels, partnering with them to help solve their most immediate business needs. Our ability to consistently deliver high quality services is supported by our deep expertise in pharmaceutical distribution and scaled network of assets. We continue to invest in the infrastructure to improve efficiency and modernize the network in support of our growth and in pursuit of efficiencies. In October 2022, we opened a new state-of-the-art pharmaceutical distribution center in Ohio. This is one of our most technologically advanced facilities. It leverages automation to increase efficiency, increase productivity, and enhance the employee experience. Leveraging our scaled distribution network and logistics expertise, we have supported the U.S. government in its initiatives of distributing COVID-19 vaccines and the kitting and storage of ancillary kits. Both government contracts are scheduled to expire in July of 2023. Looking back at the past two years, Team McKesson has demonstrated incredible agility dedication, and commitment in standing up the operation and in distributing millions of lifesaving vaccines across the country. We've gained invaluable experience, deepened our relationship with government partners, and proven our value, capabilities, and expertise. The next priority I want to talk about is our priority to expand the oncology and biopharma platforms. Through years of focused investment and execution, we have built differentiated assets and capabilities oncology and in biopharma services and we've strengthened our market positions in these high growth and high margin areas I'll start with the oncology platform one of the pillars of our oncology platform is the distribution capability we are the leading distributor in the community oncology market with a scaled reach to providers in the community setting biologics our specialty pharmacy is supports more than 3,500 specialty practices with cancer and other rare disease medications. Through our GPO services, OnMark and Unity, we serve thousands of oncology physicians and deliver significant savings on oncology drug purchases for practices both within the U.S. Oncology Network and other community-based practices. Fiscal 2023 has been a year of significant growth for our practice management business. The U.S. Oncology Network welcomed three new practices, Epic Care, Nexus Health, and most recently, the Regional Cancer Care Associates as effective as of April 1st, 2023. With these additions, the number of providers grew by more than 450 to a total exceeding over 2,300. This represents the fastest growth period since we acquired the U.S. Oncology Network in 2010. These new practices expand the reach of the network into new geographies and enhance its commitment to providing high-quality care close to home. In addition to the expansion and footprint, we continue to empower the growth of individual oncology practices to ensure that they are the forefront of cancer care. Physicians in the network stand out as thought leaders in the industry with participation in leading publications and leadership roles within the industry. The network also plays a leading role in the transformation to value-based care, including its participation in the oncology care model. In October 2022, US Oncology Research formed a joint venture with HCA's Sarah Cannon Research Institute, creating a fully integrated oncology research organization. We expect this transaction to accelerate our oncology strategy expand clinical research, and increase access to clinical trials for community oncology providers, and more importantly, for patients. We're pleased with the performance across the oncology platform, and we believe our differentiated set of assets allows us to be a key partner of choice across both providers and biopharma companies. In addition to the momentum in the oncology platform, we're also making significant progress in growing our assets and capabilities in the biopharma platform. We continue to enhance the ways patients get their medications by improving access, affordability, and adherence to prescription medications. In this past year, we managed programs that helped patients save more than $8 billion on branded and specialty medications. and prevented approximately 9.9 million prescriptions from being abandoned due to affordability challenges. This helped patients get access to medicine more than 78 million times. In November of 2022, we completed the acquisition of RxSaving Solutions, a prescription price transparency and benefit insight company. The acquisition expands our affordability and adherence capabilities and sets the foundation for the expansion of outcomes management and evidence-based biopharma and payer services. For the prescription technology solution segment, our fiscal fourth quarter is usually the busiest quarter of the year, driven by customer annual verification activities. Our employees had a particularly busy season this past quarter, assisting the highest volume of patients in the history of the segment. We continue to see strong market demand for the products and services we provide, which supports the growth outlook of this segment. While we're committed to grow the biopharma platform, we're also continually looking for opportunities to optimize the portfolio of products and services we offer. We have a disciplined review process to ensure that our resources are aligned with the areas of most strategic priority. In this past quarter, we made the decision to reprioritize investments of products within the prescription technology solution segment that we believe have reached the end of their life cycle and are no longer essential to the growth strategy. These actions will allow us to improve operational efficiency and, more importantly, to better focus investments in other strategic areas and to maximize our resources for growth opportunities. These types of decisions are always difficult, and it had a direct impact on some of our employees. I am deeply grateful for the contributions of all our prescription technology solution employees have made that have led to the significant growth in this segment the past several years. As part of this initiative, we're also streamlining the real estate assets, supporting more flexibility for our employees. We remain confident about our differentiated capabilities, the market opportunity, and our ability to achieve the long-term growth target of this segment. Another important portfolio action we are executing is the divestiture of our European businesses. We have now successfully divested businesses in 11 of the 12 countries with Norway being the only country for which we are still exploring alternatives. As we make significant progress in expanding the strategic growth areas, we are doing so in a way that allows us to deliver for all our stakeholders. We're committed to drive sustainability and to execute on initiatives that are aligned to our business strategy, support our growth, and contribute to measurable and enduring positive impacts and health outcomes for our stakeholders and communities. We look forward to publishing our impact report in June to share our progress on these important initiatives. Earlier this year, our near-term science-based greenhouse gas emissions reduction targets were approved by the Science-Based Targets Initiative. Focused on energy, transportation, and real estate, our teams are taking meaningful actions to achieve these targets and improve the business. Recently, we were included in Sustainalytics 2023 industry top rated ESG companies list, recognizing our comprehensive commitment and achievements in environmental, social, and governance related issues. So let me pull everything together. McKesson reported a strong fourth quarter and full year results. Looking back to fiscal 2023, we made significant progress in advancing our company priorities. We executed on our strategy with focus and dedication. We invested in our businesses and our people for future growth. And as a diversified healthcare services company, we enacted positive changes to our customers, partners, and their patients. I'm incredibly proud of what we have achieved as a team. And I'm confident in our ability to continue the momentum and deliver sustainable growth as reflected in our updated long-term segment growth targets. With that, Britt, I'll hand it over to you for additional comments.