McKesson Corporation

Welcome to McKesson's Second Quarter Fiscal 2024 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 Rachel Rodriguez, VP of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome everyone to McKesson's Second Quarter Fiscal 2024 Earnings Call. Today, I'm joined by Brian Tyler, our Chief Executive Officer, and Britt Vitilone, our Chief Financial Officer. Brian will lead off, 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 factor section of our most recent annual and periodic SEC fire links 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 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 updated guidance. With that, let me turn it over to Brian.

Thank you, Rachel, and good afternoon, everybody. We appreciate you joining us on our call today. We're very pleased to report another solid quarter in fiscal 2024 with adjusted results above expectations, demonstrating our ability to consistently execute against company priorities and create sustained value for our shareholders. In the second quarter, revenues increased 10% to $77.2 billion. Adjusted earnings per diluted share was $6.23. When excluding certain items, adjusted earnings per diluted share increased 14% from the prior year. Our performance through the first half of the fiscal year, combined with the continued momentum in advancing our company's strategies, gives us the confidence to raise our guidance for fiscal 2024 adjusted earnings per diluted share. Our previous guidance range of $26.55 to $27.35 has been updated to a range of $26.80 to $27.40. Team McKesson continues to deliver on our mission of improving care in every setting. As a diversified health care services company, we're making important progress in strengthening our portfolio of differentiated assets and bringing more value to our customers and their patients. Before I turn my attention to our company priorities and the second quarter results, I want to briefly discuss Rite Aid's recent bankruptcy proceedings. We have been supplying Rite Aid with the majority of their pharmaceutical products for more than 20 years. As they navigate through their reorganization process, we're working closely with them to provide continued delivery of products. We're closely monitoring developments, but as Britt will describe in his remarks, we anticipate that Rite Aid's bankruptcy filing will not materially impact fiscal 2024 adjusted earnings per diluted share. Now, let me move on to our company priorities, and I want to start by recognizing our people, including the diverse, dedicated, and talented team we've built here at McKesson. Investing in people and culture is foundational to our strategy, and we offer many engagement programs and initiatives to empower our employees and allow them to express new ideas, to contribute their unique perspectives, and to care for each other. We firmly believe that we achieve our full potential when our culture is diverse, inclusive, and focused on best talent. Our efforts fostering a culture of belonging are well recognized. Recently, we were honored to be named by Forbes as one of America's best employers for women. And for the eighth consecutive year, we were named as one of the best places to work for disability inclusion, earning a top ranking score of 100. We appreciate all the hard work and dedication from Team McKesson. and we recognize the importance of helping, respecting, and caring for each other. On October 27th, we celebrated our annual wellness day called Your Day, Your Way. This is the third year that we've celebrated this tradition and shown appreciation for our employees by providing them with an additional day off work to prioritize their personal health and well-being. Let's take a minute to review the performance of the distribution business and the progress we've made driving sustainable core growth. In the second quarter, we saw strong performance in the US pharmaceutical segment. Over the past 10 quarters, the segment has consistently delivered double-digit revenue increases, demonstrating our ability to serve and grow with our customers. In the second quarter, we continued to observe solid prescription volume trends, particularly in the category of GLP-1 medications, which contributed to revenue growth in the quarter. And over the past three years, We were honored to support the US government as the centralized distributor of COVID-19 vaccines. Our team demonstrated incredible agility and dedication in standing up a fit-for-purpose operation to distribute the vaccines across the country. This past September, we started transitioning the COVID-19 vaccine distribution to commercial channels. We're working closely with the manufacturers to bring vaccines to patients in an efficient and timely manner. As one of the largest distributors of flu vaccines in the country, we have scaled channel reach and deep expertise in working with vaccine products. And I'm pleased to say that through October 20th, we have distributed nearly 8 million COVID-19 vaccines through our commercial channels. In the medical surgical segment, we continue to support our customers' evolving needs with a diversified portfolio of products and broad experience in medical surgical and related supplies. As a reminder, While we serve many alternate site providers, the biggest channel within the segment is primary care, including physician offices. We closely track market data, and during the second quarter, we observed general market moderations in primary care foot traffic. We also saw a year-over-year decline in instances of respiratory illness and flu, which contributed to lower illness testing and patient visits in the primary care business. These dynamics impacted the segment results in the second quarter, and our full year fiscal 2024 outlook. However, we remain confident in the fundamentals of the business and the strength of our scaled assets within the medical surgical segment. Moving on to the next company priority of expanding our oncology and biopharma platforms. Since the beginning of this calendar year, we've added four new practices and welcome hundreds of new providers to the US Oncology Network. The team is working hard to ensure that the new practices are leveraging the resources of the network including best practices, coordinated resources, technology, and infrastructure. As an important element of the integration, all of the new practices will be operating on the same electronic health record or EHR system we call INOMED. Designed in close collaboration with oncologists, INOMED serves as an important link between the U.S. Oncology Network and ONTATA, our data and insights business. Powered by the innovative technology from ONTATA, Inomed creates powerful insights and provides comprehensive point-of-care treatment decision support to providers. More than 2,600 providers across the country use Inomed as their EHR, and we are pleased to see Inomed being honored as a top-ranked medical oncology EHR in the 2023 Best in Class Report. In addition to technology solutions like Inomed, ONTATA continues to advance its mission of transforming the fight against cancer. Recently, the U.S. Food and Drug Administration awarded ONTATA a contract to advance the use of real-world data in the U.S. community oncology setting, which is a good opportunity to identify insights that will inform care and clinical research. Moving on to the Biopharma Services Platform. Through strategic acquisitions and investments, we've built a set of highly differentiated assets within the prescription technology solution segment. The combination of these assets creates a powerful and scaled network that includes multiple touch points throughout the patient treatment journey. We're connected to approximately 900,000 providers, enabling solutions that help remove barriers to access prescription medications. We're also connected to over 50,000 pharmacies, helping patients afford their prescriptions through solutions like cash copay and digital coupons right at the pharmacy counter. In the second quarter, we were pleased with the strong performance in the segment with double-digit growth in both revenue and adjusted operating profit, driven by growth in access solutions, including increased volumes in prior authorizations for GLP-1 medications. The year-over-year comparison was also partially impacted by lower prior year results, which, as we called out in Q2 of our fiscal 2023, included higher operating expenses resulting from the timing of increased headcount to support customer annual verification activities. One of the areas where we saw significant growth in the past two quarters is our access solutions, including prior authorizations for brands like GLP-1 medications. For selected prescription drugs, patients are required to obtain approval from their health plan, which sometimes can be very manual and cumbersome. What we offer is an automated technology solution that is embedded within the provider's workflow. Our technology solution introduces efficiency to the process. More than 40% of our prior authorizations are approved instantly, and approximately 65% are approved within one hour. We continue to add new features and functionalities to improve the user experience. The latest feature introduced allows providers to share prior authorization outcomes directly with their patients when a health plan makes a determination. Through improvements like this, we help remove barriers and provide greater patient visibility to the prior authorization process. Solutions like prior authorizations are great examples of the success of our business strategy. It's also a reflection of our efforts to improve medication access and ultimately advance health outcomes for all. As an impact-driven organization, we're deeply committed to advancing our strategy and contributing to positive changes in the communities where we live and work. This past quarter, we celebrated our Community Impact Days, which is McKesson's largest annual company-wide employee volunteer event. Thousands of McKesson employees participated in various community impact projects that aligned with this year's theme, cancer awareness, prevention, and support. This year marked the 25th anniversary of the event, and we will continue honoring this tradition and will work to find more ways to enhance the health of those who live in our communities. So, let me pull everything together. McKesson delivered a solid second quarter. Thanks to the contribution and dedication of over 50,000 McKesson employees, we continue to execute against our company priorities with focus and excellence. Leveraging our differentiated services and solutions, we're well positioned to continue to improve care in every setting. Looking ahead, we're confident in our ability to drive continued growth and strategic advancement in fiscal 2024 and beyond. And with that, I'll turn it over to Britt for additional comments.