Q4 2024 McKesson Corp Earnings Call

Please standby.

Operator: Welcome to McKesson's 4th 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.

Welcome to Mckesson's fourth quarter fiscal 2024 earnings conference call. Please be advised that today's conference is being recorded.

Operator: Tom I would like to turn the call over to Rachel Webb VP of Investor Relations. Please go ahead.

Rachel Rodriguez: Thank you, operator. Good afternoon, and welcome everyone to McKesson's fourth quarter Fiscal 2024 earnings call. Today, I'm joined by Brian Tyler, our Chief Executive Officer, and Britt Vitalone, our Chief Financial Officer. Brian will lead off, followed by Britt, and then we will move to a question and answer session.

Rachel Rodriguez: Thank you operator, good afternoon, and welcome everyone to Mckesson's fourth quarter fiscal 2024 earnings call today, I'm joined by Brian Tyler, Our Chief Executive Officer, and Britt, but alone our Chief Financial Officer.

Rachel Rodriguez: Brian will lead off followed by Britt and then we will move to a question and answer session.

Rachel Rodriguez: 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 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. Presentation slides also include a summary of our results for the quarter and guidance. With that, I will turn it over to Brian. Thank you, Rachel.

Rachel Rodriguez: Today's discussion will include forward looking statements such as forecasts about mckesson's operations and future results.

Rachel Rodriguez: Please refer to the cautionary statements in today's earnings release and presentation slides available on our website at Investor Mckesson Dotcom.

Rachel Rodriguez: And to the risk factors section of our most recent annual and 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.

Rachel Rodriguez: 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.

Rachel Rodriguez: 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 Rachel and good afternoon, everyone. Thanks for joining our call. This afternoon.

Brian S. Tyler: Thank you, Rachel, and good afternoon, everyone. Thanks for joining our call this afternoon. Today, we reported our fiscal fourth-quarter results, marking the close to a strong fiscal 2024. I wanna thank the 51,000 McKesson employees for their terrific efforts over the course of this year. As together, we drove the business and achieved significant progress in advancing our mission and our strategy. In fiscal 2024, consolidated revenue grew 12% to $309 billion, and adjusted earnings per diluted share increased by 6% to $27.44, both exceeding the expectations we set out at the beginning of the fiscal year.

Brian S. Tyler: We reported our fiscal fourth quarter results Martin that close to a strong fiscal 2024 I want to thank the 51000 Mckesson employees for their terrific efforts over the course of this year as together, we drove the business and achieved significant progress in advancing our mission and our strategies.

Brian S. Tyler: Fiscal 2024 consolidated revenue grew 12% to $309 billion and adjusted.

Brian S. Tyler: Earnings per diluted share increased by 6% to $27 44.

Brian S. Tyler: Both exceeding the expectations, we set out at the beginning of the fiscal year.

Brian S. Tyler: We're pleased with the growth across the enterprise, supported by our differentiated portfolio of assets, our innovative solutions, and our deep commitment to quality and operational excellence. We're particularly excited about the opportunities within our strategic growth pillars of oncology and biopharma services. During the year, we saw record expansion in the U.S. oncology network and strong market demand for our access, affordability, and adherence solutions. I'm going to start my remarks today with a review of our company priorities, and then I'm going to hand it over to Britt, who will take us through more details on our financial performance and our outlook for fiscal 2025.

Brian S. Tyler: We're pleased with the growth across the enterprise.

Britt: Courted by our differentiated portfolio of assets, our innovative solutions and our deep commitment to quality and operational excellence, we're particularly excited about the opportunities within our strategic growth pillars of oncology and Biopharma services during.

Britt: During the year, we saw record expansion in the U S oncology network and strong market demand for our access affordability and adherence solutions.

Britt: I'm going to start my remarks today with the.

Britt: A review of our company priorities, and then I'm going to hand, it over to Brett who will take us through more details on our financial performance and our outlook for fiscal 2025.

Brian S. Tyler: What you will take away from both of us today is our confidence in the strength of the underlying businesses, and our commitment to continue carrying out the strategy and the momentum into the next year. The first company priority I want to touch on is our focus on people and culture. Over the past few years, we've made continued progress in transforming McKesson into a diversified healthcare services company. That requires us to embrace new ideas and lead at the forefront of innovation.

Britt: You will take away from both of US today is our confidence in the strength of the underlying businesses our commitment to continue carrying out the strategy and the momentum into the next year.

Brian S. Tyler: The first company priority I want to touch on is our focus on people and culture over the past few years. We've made continued progress in transforming and mckesson into a diversified healthcare services company that requires us to embrace new ideas and lead at the forefront of innovation.

Brian S. Tyler: We're honored to be recognized as one of America's most innovative companies by Fortune, and we will continue to strengthen our innovative culture, which is essential to our growth strategy overall. Recently, we were also named one of America's greatest workplaces for women by Newsweek and a top women employer by DiversityComm Media.

Brian S. Tyler: We're honored to be recognized as one of America's most innovative companies by Fortune will continue to strengthen our innovative culture, which is essential to our growth strategy overall.

Brian S. Tyler: Recently, we were also named as one of America's greatest workplaces for women by Newsweek and a top women employer by diversity Comm media I am pleased to see our companywide efforts continue to be recognized externally I'm also really quite impressed by the commitment and leadership exhibited by so many mckesson employees.

Brian S. Tyler: I am pleased to see our company-wide efforts continue to be recognized externally. I'm also really quite impressed by the commitment and leadership exhibited by so many McKesson employees and the initiatives they take on to support each other and to create an open and collaborative culture. Moving on to our two strategic pillars of oncology and biopharma services, these are both pivotal assets that unlock tremendous value and bring significant benefits to our customers and stakeholders.

Brian S. Tyler: And the initiatives they take on to support each other and to create an open and collaborative culture.

Brian S. Tyler: Moving on to our key strategic pillars of oncology and Biopharma services. These are both pivotal assets that unlocked tremendous value and bring significant benefits to our customers and stakeholders.

Brian S. Tyler: Over the years, we've been building out our portfolio of assets around oncology, spanning from the distribution of related therapies to practice management to oncology data insights and other value-added services. We're very pleased with the meaningful expansion in our oncology assets as reflected in the growth of the U.S. Oncology Network. We welcome four practices to the network this fiscal year, including Regional Cancer Care Associates, Cancer Center of Kansas, Nashville Oncology Associates, and SCRI Oncology Partners.

Brian S. Tyler: Over the years, we've been building out our portfolio of assets around oncology spanning from the distribution of related therapies. The practice management to oncology data insights and other value added services.

Brian S. Tyler: We're very pleased with the meaningful expansion in our oncology assets as reflected in the growth of the U S. Oncology network, we welcome for practices to the network and the fiscal year, including regional cancer care Associates Cancer Center of Kansas, Nashville, Oncology Associates, and SPRI oncology partners.

Brian S. Tyler: The addition of these new practices expands our geographic footprint and allows us to provide our services to a broader set of providers and, importantly, to the patients they serve. As of April, our network has grown to approximately 2,600 providers at 600 sites of care across 31 states.

Brian S. Tyler: The addition of these new practices expands our geographic footprint and allows us to provide our services to a broader set of providers and importantly to the patients they serve.

Brian S. Tyler: As of April the network has grown to approximately 2600 providers at 600 sites of care across 31 States. We grew the provider network through a combination of newly affiliated practices and the recruitment of new providers to existing practices, we saw organic growth in providers at more than 75%.

Brian S. Tyler: We grew the provider network through a combination of newly affiliated practices and the recruitment of new providers to existing practices. We saw organic growth in providers at more than 75% of the practices. With this extensive reach within the community oncology setting, the U.S. Oncology Network now treats over 1.4 million patients each year. In addition to practice management, we also provide clinical trial services to these community-based practices. In 2022, we expanded our clinical trial capabilities through the formation of a joint venture that now operates under the name of Sarah Cannon Research Institute, or sometimes referred to as SCRI. In the past year, practices in the U.S. Oncology Network participated in over 200 clinical trials through SCRI, enrolling more than 3,100 patients in treatment studies across various diseases.

Brian S. Tyler: Of the practices.

Brian S. Tyler: With this extensive reach within the community oncology setting the U S oncology network now treats over one 4 million patients each year.

Brian S. Tyler: In addition to practice management, we also provide clinical trial services to these community based practices in 2022, we expanded our clinical trial capabilities through the formation of a joint venture that now operates under the name of <unk>, Sarah Cannon Research Institute.

Brian S. Tyler: Sometimes referred to as at Cri.

Brian S. Tyler: In the past year practices in the U S. Oncology network participated in over 200 clinical trials through Cri enrolling more than 3100 patients in treatment studies across various disease states.

Brian S. Tyler: And in February, SCRI announced a collaboration with AstraZeneca to enhance the delivery of oncology clinical trials. Working together, the two parties will implement modern solutions to accelerate clinical trial delivery timelines, reduce site burden, and enhance trial enrollment within our scaled provider network. In addition to oncology, our other differentiated growth priority is our biopharma services platform. Our portfolio of connected solutions provides unique value propositions to biopharma companies and helps them improve medication access, affordability, and adherence. In Fiscal 2024, we saw strong growth in the prescription technology segment, delivering 23% growth in adjusted operating profits.

Brian S. Tyler: And in February SPRI announced a collaboration with Astrazeneca to enhance the delivery of oncology clinical trials working together. The two parties will implement modern solutions to accelerate clinical trial delivery timelines reduce site burden and enhance trial enrollment within our scaled provider network.

Brian S. Tyler: In addition to oncology or other differentiated growth priority is our Biopharma services platform. Our portfolio of connected solutions provides unique value propositions to biopharma companies and help them improve medication access affordability and adherence.

Brian S. Tyler: In fiscal 2024, we saw strong growth in the prescription technology segment, delivering 23% growth in <unk>.

Brian S. Tyler: Adjusted operating profit.

Brian S. Tyler: More importantly, in the past year, our differentiated solutions helped patients save more than $8.8 billion on brand and specialty medication. We helped to prevent approximately 10.7 million prescriptions from being abandoned due to affordability challenges, and we helped patients access their medicine more than 94 million times. The Biopharma Services Platform was built through years of strategic investment. It includes targeted acquisitions that accelerated our growth strategy and internal investments that drove innovation and enhanced capability. One of the first assets we required was Relay Health, and it's foundational to the network and services we offer today.

Brian S. Tyler: More importantly in the past year, our differentiated solutions help patient saved more than $8 $8 billion on brand and specialty medications, we help to prevent approximately $10 7 million prescriptions from being abandoned due to affordability challenges and we help patients access their medicine more than 90.

Brian S. Tyler: 4 million tons.

Brian S. Tyler: The Biopharma services platform was built through years of strategic investments that includes targeted acquisitions that accelerated our growth strategy and internal investments that drove innovation and enhanced capabilities. One of the first assets, we required with relay health and it's foundational it's foundational to the network and service.

Brian S. Tyler: We offered today for those who aren't familiar with this business. It helps adjudicate prescription claims and enable the efficient delivery of prescription drugs.

Brian S. Tyler: For those who aren't familiar with this business, it helps adjudicate prescription claims and enable the efficient delivery of prescription drugs. It is now connected to over 50,000 pharmacies and processes billions of transactions annually. The connectivity to the pharmacies provides us insights into the patient's journey, and it helps us develop additional solutions, such as programs like co-pay assistance programs and digital coupons.

Brian S. Tyler: Now connected to over 50000, pharmacies and processes billions of transactions annually.

Brian S. Tyler: Activity to the pharmacies provides us insights into the patient's journey and it helps us develop additional solutions programs like co pay assist programs and digital coupons.

Brian S. Tyler: We want to provide our customers not just a claims switch solution but a robust platform that connects key stakeholders, delivers access and affordability solutions, and ultimately improves the patient's experience and outcome. Let's move on now to our next priority of driving sustainable core growth. We have scaled and durable assets in both pharmaceutical and medical-surgical distribution, and we continue to deliver sustainable growth in these core businesses. In fiscal 2024, U.S. Pharmaceuticals delivered solid results with 16% increases in revenue and a 7% increase in adjusted operating profit, which I'll remind you is at the high end of our long-term target for this segment.

Brian S. Tyler: To provide our customers not just the claims switch solution, but a robust platform that connects key stakeholders delivers access and affordability solutions and ultimately improves the patient experience and outcomes.

Brian S. Tyler: Let's move on now to our next priority of driving sustainable core growth.

Brian S. Tyler: We have scaled and durable assets in both pharmaceutical and medical surgical distribution and we continue to deliver sustainable growth in these core businesses in fiscal 2024 U S. Pharmaceutical delivered solid results with 16% increases in revenue and a 7% increase in adjusted operating profit.

Brian S. Tyler: Which I'll remind you is at the high end of our long term target for this segment.

Brian S. Tyler: To support business growth and the evolving needs of our customers, we continue to invest in our infrastructure, ensuring that the distribution assets are technologically equipped to maximize capacity and efficiency. And while we're still in the early stages of investing in the capabilities of artificial intelligence, we've already developed tools and algorithms that apply AI in the supply chain.

Brian S. Tyler: To support the business growth and the evolving needs of our customers. We continue to invest in our infrastructure ensuring that the distribution assets are technologically equipped to maximize capacity and efficiency.

Brian S. Tyler: While we are still in the early stages of investing in capabilities of artificial intelligence, we've already developed tools and algorithms that apply AI and the supply chain. This is enabling us to move products more quickly and nimbly throughout our distribution centers generating cost savings and continuing to improve our service levels.

Brian S. Tyler: This is enabling us to move products more quickly and nimbly throughout our distribution centers, generating cost savings and continuing to improve our service level. We'll continue to make these targeted and strategic investments that support the sustainable growth of our business. Our core distribution business is also complemented by a growing portfolio of services and solutions around specialty and oncology, which adds to our differentiated market position and supports our unique value proposition to our customers.

Brian S. Tyler: We will continue to make these targeted and strategic investments that support the sustainable growth of our business.

Brian S. Tyler: Our core distribution business is also complemented by a growing portfolio of services and solutions around specialty in oncology with which adds to our differentiated market position and supports our unique value proposition to our customers and today. We're excited to talk about our strategic relationship with Optum, we started servicing of.

Brian S. Tyler: And today we're excited to talk about our strategic relationship with, We started servicing a portion of Optum's business last year, and we're pleased to get the opportunity to expand the scope of our services starting July of 2024. We believe this relationship is a strong testament to our differentiated capabilities and services across pharmaceutical distribution, sourcing, and oncology. We look forward to the opportunity to serve and grow with all of our customers, including now Optum.

Brian S. Tyler: Portion of Optima business last year, and we're pleased to get the opportunity to expand the scope of our services starting July 2024.

Brian S. Tyler: We believe this relationship is a strong testament to our differentiated differentiated capabilities and services across pharmaceutical distribution sourcing and oncology, we look forward to the opportunity to serve and grow with all of our customers, including now optum.

Brian S. Tyler: As we assess investment opportunities and allocate resources across the enterprise, we strive to ensure that our decisions align with our strategic priorities and with our mission of improving healthcare in every setting. We want to become not only a diversified healthcare services company but also a company that enables positive change in our communities and drives impact. In April, we launched a new initiative aimed at advancing health equity for at-risk populations in underserved communities.

Brian S. Tyler: As we assess investment opportunities and we allocate resources across the enterprise, we strive to ensure that our decisions align with our strategic priorities.

Brian S. Tyler: And with our mission of improving health care in every setting we want to become not only a diversified health care services company, but also a company that enables positive changes in our communities and drive impact.

Brian S. Tyler: In April we launched a new initiative aimed at advancing health equity for at risk populations and underserved communities.

Brian S. Tyler: We have a long history of working with pharmacies and providers in the community setting. Now we want to leverage our business resources and expertise to support their growth and enable better access to health care in many of these communities. With this project, we look to identify and address pharmacy deserts where residents face significant challenges in accessing essential pharmacy services. We chose Avondale, Ohio, as our pilot activation site.

Brian S. Tyler: We have a long history of working with pharmacies and providers in the community community setting now we want to leverage our business resources and expertise to support their growth and enabled better access to health care in many of these communities with this project, we look to identify and address pharmacy desert, where residents faced significant challenges.

Brian S. Tyler: And accessing essential pharmacy services.

Brian S. Tyler: We chose Avondale, Ohio at our pilot activation site, we helped facilitate an expedited path to an independent pharmacy ownership in the local community.

Brian S. Tyler: We helped facilitate an expedited path to independent pharmacy ownership in the local community, and we opened the pharmacy this past December. I had the opportunity to be there personally and experience the joy of those who live in that community, appreciating something that most of us take for granted, a pharmacy near our house. We look forward to making a lasting difference in more communities like Avondale in the future. We also support and fund many charitable works through the McKesson Foundation.

Brian S. Tyler: And we open the pharmacy this past December.

Brian S. Tyler: I had the opportunity to be there personally and experienced the joy of those who live in that community appreciating something that most of us take for granted our pharmacy near our house.

Brian S. Tyler: We look forward to making a lasting difference and more communities like Avondale and the future.

Brian S. Tyler: We also support and fund many charitable works through the Mckesson Foundation. This past year marked an important milestone for the foundation as it celebrated its <unk> anniversary.

Brian S. Tyler: This past year marked an important milestone for the foundation as it celebrated its 80th anniversary. During the last year alone, it funded nearly 50 organizations through its grant-making program and disbursed approximately $9 million, one-third of which supported direct patient care and assistance.

Brian S. Tyler: In the last year alone. It funded nearly 50 organizations through its Grantmaking program and disbursed approximately $9 million, one third of which supported direct patient care and assistance. We're also pleased to see continued increase in employee participation in these impactful initiatives in fiscal 2020 for Mckesson employees put in over one.

Brian S. Tyler: We're also pleased to see a continued increase in employee participation in these impactful initiatives. In fiscal 2024, McKesson employees put in over 44,000 volunteer hours with charities across the U.S. and Canada. I'm truly proud of what we have achieved as a team to support the communities and to live our purpose of advancing health outcomes for all.

Brian S. Tyler: 44000 volunteer hours with charities across the U S and Canada I'm truly proud of what we've achieved as a team to support the communities and to live our purpose and advancing health outcomes for all.

Brian S. Tyler: So let me pull that altogether.

Brian S. Tyler: McKesson delivered performance above our initial expectations in fiscal 2024, underpinned by continued momentum across the business. We finish the year with a growing portfolio of oncology and biopharma services solutions, an expanded core distribution business, and a stronger culture that unites us all. As we look ahead to fiscal 2025, we're excited about the opportunities to grow our differentiated assets and capabilities. We remain deeply committed to our strategies and priorities, and we're confident in our ability to drive sustainable business growth and generate attractive shareholder returns. Team McKesson is more focused and more agile as we enter this new fiscal year. Strength and compassion. With that, Britt, I'll hand it over to you.

Brian S. Tyler: Catherine delivered performance above our initial expectations in fiscal 2024 underpinned by continued momentum across the businesses with.

Britt: We finished the year with a growing portfolio of oncology and Biopharma services solutions, and an expanded core distribution business and a stronger culture that unites us all.

Britt: As we look ahead to our fiscal 2025, we're excited about the opportunities to grow our differentiated assets and capabilities. We remain deeply committed to our strategies and priorities and we're confident in our ability to drive sustainable business growth and generate attractive shareholder return team Mckesson is more focused and more.

Brian S. Tyler: More agile as we enter this new fiscal year with strength and confidence with that Britt I'll hand, it over to you.

Britt Vitalone: All right. Thank you, Brian, and good afternoon, everyone. Fiscal 2024 marks another year of strong execution and financial performance. We entered fiscal 2025 with the momentum to deliver growth and create value for our customers, partners, and shareholders. Today, I'll discuss our fourth quarter and full year fiscal 2024 results, then I'll provide an overview of our fiscal 2025 outlook. My comments today will refer to our adjusted results unless I state otherwise.

Britt: Thank you, Brian and good afternoon, everyone.

Britt Vitalone: Fiscal 2024 marks another year of strong execution and financial performance.

Britt Vitalone: We entered fiscal 2025 with a momentum to deliver growth and create value for our customers partners and shareholders today.

Britt Vitalone: Today, I'll discuss our fourth quarter and full year fiscal 2024 results.

Britt Vitalone: Then I will provide an overview of our fiscal 2025 outlook.

Britt Vitalone: Our comments today will refer to our adjusted results unless I state otherwise.

Britt Vitalone: We're exiting fiscal 2024 with solid performance, delivering earnings for Duluth's share of $6.18 in the fourth quarter and $27.44 for the full year. Our fourth quarter results were in line with our expectations and with the earnings per diluted share guidance range that we provided for our third quarter earnings, demonstrating our ability to consistently execute against company priorities and create long-term sustainable value for our shareholders. For the full year, when excluding fiscal 2023 contributions from COVID-related programs and McKesson Ventures.

Britt Vitalone: We're exiting fiscal 2024 with solid performance.

Britt Vitalone: Delivering earnings per diluted share of $6 18 in the fourth quarter and $27 44 for the full year.

Britt Vitalone: Our fourth quarter results were in line with our expectations and with the.

Britt Vitalone: Earnings per diluted share guidance range that we provided on our third quarter earnings call demonstrating our ability to consistently execute against company priorities and create long term sustainable value for our shareholders.

Britt Vitalone: For the full year, when excluding fiscal 2023 contributions from Covid related programs and Mckesson ventures, adjusted operating profit grew 9% and adjusted EPS increased 17%.

Britt Vitalone: These results were above our long range targets and reflect the strength of our products services and operating execution.

Britt Vitalone: Adjusted operating profit grew 9%, and adjusted EPS increased 17%. These results are above our long-range targets and reflect the strength of our products, services, and operating execution. Let me start with a review of the fiscal fourth quarter. Revenues increased 11% to $76.4 billion, led by growth in the U.S. pharmaceutical sector, resulting from increased prescription volumes, including higher volumes from specialty products, retail national account customers, and GLP-1 medication. Gross profit was $3.3 billion, an increase of 7%.

Britt Vitalone: Let me start with a review of the fiscal fourth quarter.

Britt Vitalone: Revenues increased 11% to $76 4 billion.

Britt Vitalone: Led by growth in the U S pharmaceutical segment, resulting from increased prescription volumes, including higher volumes from specialty products retail national account customers and <unk> medications.

Britt Vitalone: Gross profit was $3 3 billion in.

Britt Vitalone: An increase of 7%, primarily a result of specialty distribution growth within the U S pharmaceutical segment, including our leading plasma and biologics business.

Britt Vitalone: primarily as a result of specialty distribution growth within the U.S. pharmaceutical segment, including our leading plasma and biologics business. Operating expenses increased 11% to $2.1 billion, driven by higher costs to support growth across the business. During the quarter, we recorded a reserve for environmental matters of nine cents per share for increased remediation costs related to McKesson's former chemical business, which we disposed of several years ago.

Britt Vitalone: Operating expenses increased 11% to $2 1 billion driven by higher cost to support growth across the businesses.

Britt Vitalone: During the quarter, we recorded a reserve for environmental matters of <unk> <unk> per share for increased remediation costs related to mckesson's, former chemical business, which we disposed of several years ago.

Britt Vitalone: The environmental reserve was recorded in our corporate segment. Operating profit was $1.3 billion, which was flat to the prior year, driven by growth in the U.S. pharmaceutical segment, offset by increased corporate expenses, which included the previously outlined environmental reserve. Year-over-year results were also impacted by anticipated lower contributions from U.S. government COVID-19 programs in both the U.S. pharmaceutical and medical-surgical solution segments when compared to the prior year. However, when adjusting for the COVID-19 programs and a modest McKesson Ventures loss in fiscal 2023, adjusted operating profit increased 4% in the quarter. Moving below the line.

Britt Vitalone: Environmental Reserve was recorded in our corporate segment.

Britt Vitalone: Operating profit was $1 $3 billion, which was flat to the prior year driven by growth in the U S. Pharmaceutical segment offset by increased corporate expenses, which included the previously outlined environmental reserve.

Britt Vitalone: Year over year results were also impacted by anticipated lower contributions from U S. Government COVID-19 programs in both the U S pharmaceutical and medical surgical solutions segments, when compared to the prior year.

Britt Vitalone: When adjusting for the COVID-19 programs.

Britt Vitalone: And a modest mckesson venture's loss in fiscal 2023.

Britt Vitalone: The operating profit increased 4% in the quarter.

Britt Vitalone: Moving below the line.

Britt Vitalone: Interest expense was $75 million, an increase of 7%, driven by higher short-term borrowings of commercial paper compared to the prior year. The higher short-term borrowings resulted from lower average cash balances, in part due to the impact of the changed health care outages. The effective tax rate for the quarter was 28.1%, which is in line with our previous guidance and driven by a discrete tax item. Fourth quarter diluted weighted average shares outstanding were $131.6 million, a decrease of 5% year-over-year.

Britt Vitalone: Interest expense was $75 million, an increase of 7% driven by higher short term borrowings and commercial paper compared to the prior year.

Britt Vitalone: Higher short term borrowings resulted from lower average cash balances in part due to the impact from the change healthcare outage.

Britt Vitalone: The effective tax rate for the quarter was 28, 1%, which is in line with our previous guidance and driven by a discrete tax item.

Britt Vitalone: Fourth quarter diluted weighted average shares outstanding was $131 6 million a decrease of 5% year over year.

Britt Vitalone: Wrapping up our consolidated results, earnings per diluted share was $6.18, which is again in line with the implied earnings per diluted share that we provided on our third quarter earnings call. While this represents a decrease of 14% compared to the prior year, fourth quarter results were principally driven by a higher tax rate and lower COVID-19 program contributions in fiscal 2024, partially offset by a lower share count and growth in the U.S. pharmaceutical

Britt Vitalone: Wrapping up our consolidated results earnings per diluted share was $6 18 again in line with the implied earnings per diluted share that we provided on our third quarter earnings call.

Britt Vitalone: This represents a decrease of 14% compared to the prior year.

Britt Vitalone: Quarter results were principally driven by a higher tax rate and lower COVID-19 program contributions in fiscal 2024, partially offset by a lower share count and growth in U S pharmaceutical segment.

Britt Vitalone: Turning now to our fourth quarter segment results, which can be found in slides 7 through 11, starting with U.S. Pharmaceuticals. Revenues were $68.8 billion, an increase of 12 percent, driven by increased prescription volumes, including higher volumes from specialty products, retail national account customers, and GLP-1 medication. As we've previously discussed, GLP-1 medications continue to show growth year-over-year. However, despite this increase, the rate of growth continues to moderate. In the quarter, GLP-1 revenues were $7.5 billion, an increase of approximately $1.5 billion, or 24% compared to fiscal 2023. However, GLP-1 revenues were flat on a sequential basis.

Britt Vitalone: Turning now to our fourth quarter segment results, which can be found on slide seven through 11, starting with U S pharmaceutical.

Britt Vitalone: Revenues were $68 8 billion, an increase of 12% driven by increased prescription volumes, including higher volumes from specialty products retail national account customers and <unk> medications.

Britt Vitalone: As we've previously guided <unk> medications continue to show growth year over year.

Britt Vitalone: But despite this increase the rate of growth continues to moderate in the quarter <unk> revenues were $7 5 billion, an increase of approximately $1 5 billion.

Britt Vitalone: We're 24% compared to fiscal 2023.

Britt Vitalone: However, <unk> revenues were flat on a sequential basis.

Britt Vitalone: For the quarter, operating profit increased 5% to $901 million, driven by growth in the distribution of specialty products to providers and health systems and increased contributions from our generics. Progressive capabilities and assets continue to deliver robust value to our state. In our Prescription Technology Solutions segment, revenues were $1.2 billion, which were flat to the prior year. Lower contributions from the third-party logistics business were offset by growth across our technology, services, products, and primarily our access solution.

Britt Vitalone: For the quarter operating profit increased 5% to $901 million driven by growth in the distribution of specialty products to providers and health systems and increased contributions from our generics program.

Britt Vitalone: The breadth of capabilities and assets continued to deliver robust value to our stakeholders.

Britt Vitalone: We are prescription technology solutions segment revenues were $1 2 billion, which were flat to the prior year.

Britt Vitalone: Lower contributions from the third party logistics business were offset by growth across our technology services products and primarily our access solutions.

Britt Vitalone: Within this segment, Cover My Meds continues to deliver value for our partners by increasing connectivity between pharmacies, providers, payers, and biopharma manufacturers through next-generation access, affordability, and adherence solutions that are automated and integrated into provider workplaces.

Britt Vitalone: Within this segment cover my Meds continues to deliver value for our partners.

Britt Vitalone: Increasing connectivity between pharmacies providers Payors and Biopharma manufacturers through next generation access affordability and adherence solutions that are automated and integrated into provider workflows.

Britt Vitalone: Results in the fourth quarter reflect organic growth across our access solutions, including prior authorization services, as we extended existing partnerships with biopharma manufacturers. In addition to the strength of our access solutions, year-over-year performance was also supported by higher volumes across our affordability solutions. Operating profit decreased 3% to $212 million, driven by higher costs and investments to sustain the momentum and growth across the biopharma services platform. This included incremental infrastructure investment, and costs to deliver Increasing Levels of ROI for our customers. Operating profit was also impacted by lower third-party logistics performance in the quarter as compared to the prior year.

Britt Vitalone: Results for the fourth quarter reflect organic growth across our access solutions, including prior authorization services as we extended existing partnerships with Biopharma manufacturers and.

Britt Vitalone: In addition to the strength of our access solutions year over year performance was also supported by higher volumes across our affordability solutions.

Britt Vitalone: Operating profit decreased 3% to $212 million, driven by higher costs and investments to sustain the momentum and growth across the Biopharma services platform. This.

Britt Vitalone: This included incremental infrastructure investments and.

Britt Vitalone: And cost to deliver increasing level levels of ROI for our customers.

Britt Vitalone: Operating profit was also impacted by lower third party logistics performance in the quarter as compared to the prior year.

Britt Vitalone: Turning to Medical Surgical Solutions, revenues were $2.8 billion, an increase of 6%. And operating profit was $248 million, which was flat versus the prior year. Fourth quarter results reflect growth in the primary care and extended care business, including higher volumes of illness season tests, partially offset by lower contributions from the handling storage and distribution of ancillary supplies for the US government's COVID-19 program compared to the prior year. As a reminder, each illness season is unique, depending on the onset and severity of various respiratory illnesses during that particular year.

Britt Vitalone: Turning to medical surgical solutions.

Britt Vitalone: Revenues were $2 8 billion, an increase of 6% and.

Britt Vitalone: Operating profit was $248 million, which was flat versus the prior year.

Britt Vitalone: Fourth quarter results reflect growth in the primary care and extended care businesses.

Britt Vitalone: Higher volumes with illness season testing, partially offset by lower contributions from the kitting storage and distribution of ancillary supplies for the U S. Government's COVID-19 program compared to the prior year.

Britt Vitalone: As a reminder, each illness season is unique depending on the onset and severity of various respiratory illnesses during that particular year.

Britt Vitalone: Next, let me address our international results. Revenues were $3.5 billion, an increase of 6%, and operating profit was $94 million, an increase of 18%. These strong results were driven by higher pharmaceutical distribution volumes in the Canadian business compared to the prior year. Now, we wrap up our segment review.

Britt Vitalone: Next let me address our international results revenues were $3 5 billion, an increase of 6% and.

Britt Vitalone: Operating profit was $94 million, an increase of 18%.

Britt Vitalone: These strong results were driven by higher pharmaceutical distribution volumes in the Canadian business compared to the prior year.

Britt Vitalone: Wrapping up our segment review.

Britt Vitalone: Corporate expenses were $193 million in the quarter, an increase of 30% due to the previously discussed environmental reserve and higher technology infrastructure and compliance spend. Let me now turn to cash and capital deployment, which can be found on slide 12. We ended the quarter with $4.6 billion in cash and cash equivalents.

Britt Vitalone: <unk> expenses were $192 million in the quarter, an increase of 30% driven.

Britt Vitalone: Driven by the previously discussed environmental reserve and higher technology infrastructure and compliance spend.

Britt Vitalone: Yes.

Britt Vitalone: Let me now turn to cash and capital deployment, which can be found on slide 12, we ended the quarter with $4 $6 billion in cash and cash equivalents.

Britt Vitalone: For the fiscal year, we generated $3.6 billion in free cash, including $687 million of capital expenditures, which included new and existing distribution centers, as well as investments in technology, data, and analytics. We support our growth priorities. During the quarter, several of our customers were impacted by the change health care outage, delaying billing functions and claims. This outage created a timing impact on McKesson's cash. However, the impact was less severe than we had previously indicated.

Britt Vitalone: For the fiscal year, we generated $3 $6 billion in free cash flow, including $687 million of capital expenditures, which included new and existing distribution centers as well as investments in technology data and analytics to support our growth priorities.

Britt Vitalone: During the quarter several of our customers were impacted by the change healthcare outage.

Britt Vitalone: And billing functions and claims payment.

Britt Vitalone: Outage created a timing impact of mckesson's cash flows. However, the impact was less severe than we had previously indicated.

Britt Vitalone: We continue to focus on capital deployment to drive value for our state. In fiscal 2024, we will return $3.3 billion of cash to shareholders. We return $3 billion through share repurchases at an average price per share of approximately $436, including $678 million of share repurchases in the fiscal fourth quarter. Additionally, we pay dividends of $314 million for the full year. When combining share repurchases with dividends paid, we returned approximately 92% of free cash flow to shareholders in fiscal 2024. Since the beginning of fiscal 2019, we have returned $16.2 billion of cash to shareholders through share repurchases and dividends. Of this amount, approximately $14.5 billion has been returned through share repurchase.

Britt Vitalone: We continue to focus on capital deployment to drive value for our stakeholders.

Britt Vitalone: In fiscal 2024, we returned $3 $3 billion of cash to shareholders.

Britt Vitalone: We returned $3 billion through share repurchases at an average price per share of approximately $436, including $678 million of share repurchases in the fiscal fourth quarter.

Britt Vitalone: Additionally, we paid dividends of $314 million for the full year.

Britt Vitalone: When combining share repurchases with dividends paid we returned approximately 92% of free cash flow to shareholders in fiscal 2024.

Britt Vitalone: Since the beginning of fiscal 2019, we have returned $16 $2 billion of cash to shareholders through share repurchases and dividends.

Britt Vitalone: Of this amount approximately $14 $5 billion has been returned through share repurchases, reducing our total average shares outstanding by nearly 36%.

Britt Vitalone: Reducing our total average shares outstanding by nearly 36%. Strength of our balance sheet and strong credit metrics, supported by our strong operating performance and disciplined and balanced financial policy, was recognized in the quarter by the recent Moody's credit rating upgrade to A3 from BAA1. We are now A-rated by two of the three major credit rating agencies.

Britt Vitalone: The strength of our balance sheet and strong credit metrics supported by our strong operating performance and disciplined and balanced financial policy.

Britt Vitalone: Was recognized in the quarter by the recent Moody's credit rating upgrade to <unk> III from <unk> one.

Britt Vitalone: And we are now a rated by two of the three major credit rating agencies.

Britt Vitalone: Our strong balance sheet and consistently robust cash flow generation, along with disciplined capital allocation, continue to provide us with financial flexibility to invest in our growth initiatives, pursue strategic opportunities, and return capital to shareholders, all while maintaining a durable capital structure. Now, let me discuss our fiscal 2025 outlook. The breadth of our capabilities and leading portfolio of assets across oncology and biopharmaceutical services have led to value creation for our customers, partners, and shareholders over the last five years. Our fiscal 2025 outlook is a continuation of this momentum. Let me start with our segment.

Britt Vitalone: Our strong balance sheet and consistently robust cash flow generation, along with disciplined capital allocation continues to provide us with the financial flexibility to invest in our growth initiatives pursue strategic opportunities and return capital to shareholders.

Britt Vitalone: All while maintaining a durable capital structure.

Britt Vitalone: Now, let me discuss our fiscal 2025 outlook.

Britt Vitalone: The breadth of our capabilities and leading portfolio of assets across oncology and Biopharma services have led to value creation for our customers partners and shareholders over the last five years.

Britt Vitalone: Our fiscal 2025 outlook is a continuation of this momentum.

Britt Vitalone: Let me start with our segments.

Britt Vitalone: We anticipate U.S. pharmaceutical revenues to increase 16 to 19 percent and operating profits to increase 8 to 10 percent, propelled by sustainable momentum in the core distribution business and growth across our oncology platform. We continue to make investments in the core distribution network to deliver more efficiency and value for our customers. The strength of our value proposition was highlighted by the recent agreement to build on our existing pharmaceutical distribution partnership with Optum. This five-year contract begins on July 1st, 2024.

Britt Vitalone: We anticipate U S pharmaceutical revenues to increase 16% to 19% and operating profit to increase 8% to 10%.

Britt Vitalone: Repelled by sustainable momentum in the core distribution business and growth across our oncology platform.

Britt Vitalone: We continue to make investments in the core distribution network to deliver more efficiency and value for our stakeholders.

Britt Vitalone: The strength of our value proposition was highlighted by the recent agreement to build on our existing pharmaceutical distribution partnership with Optum.

Britt Vitalone: This five year contract begins on July one 2024.

Britt Vitalone: Fiscal 2025 Segment Outlook Incorporates Stable, Growing Prescription Utilization, bolstered by further growth in our generic sourcing programs and specialty distribution, including our leading plasma and biologics business. We anticipate further growth from our differentiated oncology platform through the breadth of our a. U.S. Oncology Network, UNTADA, and the Sarah Cannon Research Institute joint venture.

Britt Vitalone: In fiscal 2025 segment outlook incorporates stable growing prescription utilization trends bolstered by further growth in our generic sourcing programs and specialty distribution, including our leading plasma and biologics business.

Britt Vitalone: We anticipate further growth from our differentiated oncology platform through the breadth of our assets U S oncology network Antara from the <unk> Research Institute joint venture.

Britt Vitalone: As Brian mentioned, as of April 2024, the U.S. Oncology Network has grown to approximately 2,600 providers in 31 states. And we're pleased with the advancements we've made with MTATA and Sarah Cannon Research Institute. Supporting our mission to advance cancer care, we are pleased with the growth we're seeing in the U.S. pharmaceutical segment as our assets and capabilities in core distribution and the oncology platform continue to accelerate growth. In the prescription technology solution segment, we anticipate revenues to increase 18 to 22 percent, and Operating profits to increase 12 to 16%.

Britt Vitalone: As Brian mentioned as of April 2024, U S. Oncology network has grown to approximately 2600 providers in 31 states and we're pleased with the advancements we've made with him Tata in Syracuse Research Institute supporting our mission to advanced cancer care.

Britt Vitalone: We are pleased with the growth we're seeing in the U S pharmaceutical segment as our assets and capabilities in core distribution and the oncology platform continued to accelerate growth.

Britt Vitalone: And the prescription technology solutions segment, we anticipate revenues to increased 18% to 22% and operating profit increased 12% to 16%.

Britt Vitalone: This outlook reflects organic growth across our solutions and services, as we expand and extend partnerships with biopharma manufacturers and increase the number of brands utilizing our access, affordability, and adherence program. Throughout fiscal 2024, we continue to see increased demand for access and affordability solutions, particularly those related to GLP-1 medication. As a reminder, McKesson's prior authorization products serve the majority of the brands for GLP-1 medication.

Britt Vitalone: This outlook reflects organic growth across our solutions and services as we expand and extend partnerships with biopharma manufacturers and increase the number of brands utilizing our access affordability and adherence program.

Britt Vitalone: Throughout fiscal 2024, we continued to see increased demand for access and affordability solutions, particularly those related to <unk> medications.

Britt Vitalone: As a reminder, mckesson's prior authorization products serve the majority of the brands for <unk> medications are products continue to generate value for our partners.

Britt Vitalone: Our products continue to generate value for our partners. Looking ahead to fiscal 2025, we anticipate that this demand will remain elevated yet lessened, as the rate of increase will be slower than prior years for GLP1 Medicare. The medical surgical business remains well positioned to leverage the breadth and depth of its services and assets across all alternate sites of care, including growth in the primary care business and our comprehensive private label portfolio.

Britt Vitalone: Looking ahead to fiscal 2025, we anticipate that this demand will remain elevated yet lessons is the rate of increase will be slower than prior years for <unk> medications.

Britt Vitalone: Medical surgical business remains well positioned to leverage the breadth and depth of its services and assets across all alternate sites of care, including growth in our primary care business and our comprehensive private label portfolio.

Britt Vitalone: We anticipate Medical Surgical Solutions revenues to increase 4 to 8 percent and operating profit to increase 6 to 8 percent. Within the primary care market, we anticipate continued growth in lab solutions and specialty pharmaceuticals. Our scaled sourcing and distribution footprint has propelled expansion and growth of our private label portfolio, providing superior value for our customers and maintaining sound economics for McKesson. In fiscal 2025, we're making investments in the segment to support the recent acquisition of Compile, a healthcare data platform that captures and aggregates data to provide insights and analytics for biopharma. We believe there is an initial use case across the breadth of the medical surgical solution segment.

Britt Vitalone: Medical surgical solutions revenues to increase 4% to 8% and operating profit increased 6% to 8%.

Britt Vitalone: Within the primary care market, we anticipate continued growth in lab solutions and specialty pharmaceuticals are scaled sourcing distribution footprint propelled expansion and growth of our private label portfolio, providing superior value for our customers, while maintaining sound economics for Mckesson.

Britt Vitalone: In fiscal 2025, we're making investments in this segment to support the recent acquisition of compile a healthcare data platform that captures and aggregates data to provide insights and analytics for biopharma.

Britt Vitalone: We believe there is an initial use case across the breadth of the medical surgical solutions segment.

Britt Vitalone: The Medical Surgical Solutions segment has broad relationships with providers and extensive data, needing opportunities to develop incremental value creation opportunities. Longer term, there are increased opportunities to integrate the capabilities and commercial applications across our oncology and biopharma services platform. These investments will deliver meaningful returns to the segment and to the enterprise. In fiscal 2025, we anticipate that these investments will account for an approximate 2% operating profit headwind in the medical segment as compared to the prior year.

Britt Vitalone: The medical surgical solutions segment has broad relationships with providers and extensive datasets bidding opportunities to develop incremental value creation opportunities.

Britt Vitalone: Longer term there are increased opportunities to integrate the capabilities and commercial applications across our oncology and Biopharma services platforms. These.

Britt Vitalone: <unk> will deliver meaningful returns to the segment and to the enterprise.

Britt Vitalone: In fiscal 2025, we anticipate that these investments will account for an approximate 2% operating profit headwind in the medical segment as compared to the prior year.

Britt Vitalone: Finally, the International... We anticipate revenues to increase 4-8% and operating profit to increase 6-10% year-over-year. Our diversified set of assets within our Canadian business, including the scale distribution business, continues to support growth in the international segment. We continue to make investments in our Canadian technology footprint to create a more custom and integrated supply chain for specialty drugs. As a reminder, Norway remains the only operating country in Europe that we have not entered into an agreement to sell, and contributions related to operations in Norway are included in the fiscal 2025 Outlook Program Segment. We intend to leave Norway as part of the completion of our European exit.

Britt Vitalone: Finally, the international segment, we anticipate revenues to increase 4% to 8% and operating profit increased 6% to 10% year over year.

Britt Vitalone: Our diversified set of assets within our Canadian business, including the scale distribution business continues to support growth in the international segments.

Britt Vitalone: We continue to make investments in our Canadian technology footprint to create a more customer and integrated supply chain for specialty drugs.

Britt Vitalone: As a reminder, Norway remains the only operating country in Europe that we have not entered into an agreement to sell <unk>.

Britt Vitalone: Contributions related to operations in Norway are included in the fiscal 2025 outlook program segment.

Britt Vitalone: We intend to exit Norway as part of the completion of our European exit.

Britt Vitalone: In the corporate segment, we anticipate expenses to be in the range of $580 to $640 million, which includes increased technology spend to support the growth of our business and Infrastructure and Compliance Investors. We will also continue to invest in data and analytics, including the acceleration of several investments in artificial intelligence. We are leveraging AI to increase efficiency across our operations and increase automation and productivity for our customers. Our investments in AI and other advanced technologies play an important role in improving customer service and provider productivity.

Britt Vitalone: In the corporate segment, we anticipate expenses to be in the range of $580 to $640 million, which.

Britt Vitalone: Which includes increased technology spend to support the growth of our businesses and infrastructure and compliance investments.

Britt Vitalone: We will also continue to invest in data and analytics, including the acceleration of several investments in artificial intelligence.

Britt Vitalone: We are leveraging AI to increase the efficiency across our operations and increased automation and productivity for our customers.

Britt Vitalone: Our investments in AI and other advanced technologies play an important role in improving customer service and provider productivity.

Britt Vitalone: We continue to build these tools across the value chain to increase speed and success. One example where we're implementing AI is in our oncology platform. The INOMED EHR contains structured data that can often be sparsely entered for patients' longitudinal records. Instead, unstructured data, such as uploaded documents and provider-authored notes, are used to capture details on patients' disease condition and response to treatment, as well as many core clinical factors, to have complete longitudinal patient records for real-world research.

Britt Vitalone: We continue to build these tools across the value chain to increase speed and success rates.

Britt Vitalone: One example, where we're implementing AI is in our oncology platform.

Britt Vitalone: I know, Matt EHR contains structured data that can also be sparsely entered for patients longitudinal records.

Britt Vitalone: Instead unstructured data such as uploading documents and provider authored notes are used to capture details on patients disease condition in response to treatment as well as many core clinical factors.

Britt Vitalone: To have complete longitudinal patient records for real World Research core variables are required to be extracted from the unstructured data into a well organized database.

Britt Vitalone: Core variables are required to be extracted from the unstructured data into a well-organized database. The natural language process is the only scalable solution to achieve more than 100 million documents in NINOMED today and growing at the rate of 1 million documents per week.

Britt Vitalone: Natural language processing, the only scalable solution to achieve more than 100 million documents and 900 today.

Britt Vitalone: Growing at the rate of 1 million documents per week.

Britt Vitalone: The application of AI reduces clinicians' exhausted burden in finding related documents for care and reimbursement work, ultimately leading to practice efficiencies and better patient care. This is just one example of many where we're using AI to power insights and deliver clinical and financial value to our state. We've been pleased with our progress to date as we work to develop and implement various AI technologies, and we remain committed to increased investment to further extend our leadership positions and deliver value to our partners and stakeholders.

Britt Vitalone: The application of AI reduces clinicians exhaustive burden and finding related documents for care and reimbursement workflows, ultimately leading to practice efficiencies and better patient care. This.

Britt Vitalone: This is just one example of many where we're using AI to power insights and deliver clinical and financial value to our stakeholders.

Britt Vitalone: We've been pleased with our progress to date as we work to develop and implement various AI technologies and we remain committed to increased investment to further extend our leadership position and deliver value to our partners and stakeholders.

Britt Vitalone: Moving below the line, we anticipate interest expense to be approximately $220 to $240 million, and income attributable to non-controlling... interest to be in the range of $140 to $160 million. We anticipate the full-year effective tax rate will be in the range of approximately 18 to 20 percent. As a reminder, the timing and amount of discrete tax items are difficult to predict, and therefore, we do not provide quarterly effective tax rate guidance.

Britt Vitalone: Now moving below the line, we anticipate interest expense to be approximately $220 million to $240 million and income attributable to noncontrolling.

Britt Vitalone: Interest to be in the range of $140 million to $160 million.

Britt Vitalone: We anticipate the full year effective tax rate will be in the range of approximately 18% to 20%.

Britt Vitalone: And as a reminder, the timing and amount of discrete tax items are difficult to predict and therefore, we do not provide quarterly effective tax rate guidance.

Britt Vitalone: Turning now to cash flow and capital deployment, we anticipate free cash flow of approximately $4.8 to $5.2 billion. Our working capital metrics and resulting free cash flow will vary from quarter to quarter and are impacted by timing, including the day of the week that marks the close of a quarter. Our guidance reflects plans to repurchase approximately $2.8 billion of shares in fiscal 2025. As a result of this share repurchase activity, we estimate the weighted average number of diluted shares outstanding to be in the range of approximately $128 to $130 million.

Britt Vitalone: Turning now to cash flow and capital deployment.

Britt Vitalone: We anticipate free cash flow of approximately four eight to $5 2 billion.

Britt Vitalone: Our working capital metrics, and resulting free cash flow will vary from quarter to quarter and are impacted by timing, including the day of the week that marks the close of the quarter.

Britt Vitalone: Our guidance reflects plans to repurchase approximately $2 8 billion of shares in fiscal 2025.

Britt Vitalone: As a result of the share repurchase activity, we estimate weighted average diluted shares outstanding to be in the range of approximately $128 million to $130 million.

Britt Vitalone: The strength of our balance sheet and operating cash provides the financial flexibility to incrementally invest both organically and inorganically for growth, as well as return capital to our shareholders. Wrapping up fiscal 2025 guide We anticipate revenue growth of 15 to 17% and operating profit growth of 9 to 14% as compared to the prior year. For fiscal 2025, we anticipate earnings per diluted share of $31.25 to $32.5, which represents growth of 14 to 17% as compared to fiscal 2024.

Britt Vitalone: The strength of our balance sheet and operating cash flows provides the financial flexibility to incrementally invest both organically and inorganically for growth.

Britt Vitalone: As well as return capital to our shareholders.

Britt Vitalone: Wrapping up fiscal 2025 guidance.

Britt Vitalone: We anticipate revenue growth of 15% to 17%.

Britt Vitalone: And operating profit growth of 9% to 14% as compared to the prior year.

Britt Vitalone: For fiscal 2025, we anticipate earnings per diluted share of $31 25 to $32 five.

Britt Vitalone: Which represents growth of 14% to 17% as compared to fiscal 2024.

Britt Vitalone: We expect earnings per share will be more heavily weighted towards the second half of the fiscal year. We also anticipate the first quarter to have the lowest contribution. As a reminder, we had a lower effective tax rate in the first quarter of fiscal 2024 due to a discrete tax item.

Britt Vitalone: We expect earnings per share will be more heavily weighted towards the second half of the fiscal year.

Britt Vitalone: We also anticipate the first quarter to have the lowest contribution.

Britt Vitalone: As a reminder, we had a lower effective tax rate in the first quarter of fiscal 2024 due to a discrete tax item.

Britt Vitalone: In summary, we see strength and stability in the underlying fundamentals across our business. Our sustained financial performance over the past several years has been bolstered by the strength of our financial position and consistent operating execution, leading to compelling value creation for our customers, partners, and shareholders. We're pleased with the strong fiscal 2024 performance, and the fiscal 2025 outlook reflects our continued confidence in the operating profit growth momentum across all segments of the business, supplemented by the strength of our balance sheet and strong financial position. McKesson is well positioned to deliver strong results as we successfully execute against our strategic and financial framework to drive long-term sustainable growth for all stakeholders. With that, we can move to Q&A.

Britt Vitalone: In summary, we see strength and stability in the underlying fundamentals across our businesses our sustained financial performance over the past several years has been bolstered by the strength of our financial position and the consistent operating execution, leading to compelling value creation for our customers partners and shareholders.

Britt Vitalone: We're pleased with the strong fiscal 2020 for performance in the fiscal 2025 outlook reflects our continued confidence in the operating profit growth momentum across all segments of the business supplemented by the strength of our balance sheet and strong financial position.

Britt Vitalone: Testing is well positioned to deliver strong results as we successfully execute against our strategic and financial framework to drive long term sustainable growth for all stakeholders.

Britt Vitalone: We can move to Q&A.

Operator: Thank you. If you would like to signal with questions, please press star one on your touch tone telephone. If you are joining us today using a speaker phone, please make sure the mute function is turned off to allow the signal to reach our equipment. Again, that is star one if you'd like to ask questions. And our first question will come from Kevin Caliendo with UBS. Please go ahead.

Speaker Change: Thank you.

Speaker Change: If you would like to signal with questions. Please press star one on your Touchtone telephone.

Kevin Caliendo: Great, thanks for taking my question. I appreciate all the color on the guidance.

Operator: If you are joining us today using a speaker phone. Please make sure. The <unk> function is turned off to all the signal to reach our equipment again that is star one if you'd like to ask questions.

Kevin Caliendo: I just want to delve into a little bit of the pharma growth increase. How much of that is related to Optum? And were there any costs, onboarding costs associated with bringing a contract like that on board, meaning did it dilute the impact this year? And then, as a quick follow-up, I noticed you didn't mention Optum as being part of the Med Surge guidance. There is some belief that that was also a potential contract win for you or an incremental contract win for you there. Is that not true? or is there just no impact this year?

Kevin Caliendo: And our first question will come from Kevin Kelly Endo with UBS. Please go ahead.

Speaker Change: Great. Thanks for taking my question.

Kevin Caliendo: I appreciate all the color on the guidance I just wanted to delve into a little bit of the pharma growth increase how much of that is related to optum and where there any cost.

Kevin Caliendo: Onboarding costs associated with bringing contract like that onboard meaning did it dilute the impact this year and then as a quick follow up.

Kevin Caliendo: Noticed you didn't mention optum as being part of the med surge guidance. There is some belief that that was also a potential contract win.

Kevin Caliendo: Or you are an incremental contract win for you there is that not true or is there just no impact this year.

Britt Vitalone: Thanks for the question, Kevin. I'll start. Maybe I'll go in reverse order.

Speaker Change: Yeah. Thanks for the question, Kevin I'll start maybe I'll go in reverse order are.

Britt Vitalone: Our win of the Optum contract and we're certainly pleased to extend and expand our partnership as Brian mentioned is pharmaceutical related only.

Speaker Change: As we think about next year optimism included in our guide is as you know, we do not specifically talk about customer contract details.

Speaker Change: So we have not provided specific contributions for optimum we don't intend to do that going forward.

Britt Vitalone: Our win of the Optum contract, and we're certainly pleased to extend and expand our partnership, as Brian mentioned, is pharmaceutical related only. As we think about next year, Optum is included in our guide. As you know, we do not, We have not provided specific contributions for Optum, and we don't intend to do that going forward. This is a recent contract win. We have not incurred any costs yet related to that transition. We do expect that there will be some costs in the transition, but not material and certainly included in our guidance.

Speaker Change: As a recent contract win we have not incurred any costs, yet or related to that transition. We do expect that there will be some costs in the transition, but not material and certainly included in our guidance.

Britt Vitalone: Please.

Allen Charles Lutz: And next will be Allen Lutz with Bank of America. Please go ahead.

Britt Vitalone: And next will be Allen Lutz with Bank of America. Please go ahead.

Allen Charles Lutz: Good afternoon. Thanks for taking the questions. One for Britt. I want to ask about the prior authorization business in RXTS. We've heard that employer coverage for GLP-1s doubled year over year, so the amount of employees that have coverage for GLP-1s is now twice as high as it was in 2023. So even though the amount of GLP-1s that you're dispensing is lower, we would have still expected that prior authorization activity in that business would have benefited pretty significantly in calendar 1Q. But did any of the GLP-1 related prior authorizations get pushed out of calendar 1Q? Was there any impact from change? And can you just speak to the growth rate of that business more broadly? Thanks.

Allen Charles Lutz: Good afternoon, and thanks for taking the questions one for Brett I wanted to ask about the prior authorization business in Rx TFS, we've heard that employer coverage for GOP, one doubled year over year. So the amount of employees that have coverage of <unk> is now twice the size. It was in 2023 so.

Allen Charles Lutz: Even though the amount of <unk>, one that Youre dispensing is lower we would have still expected. The prior authorization activity in that business would have benefited pretty significantly in calendar <unk> did any of the GOP one related prior authorizations get pushed out of calendar <unk> was there any impact from change in can you.

Allen Charles Lutz: Just speak to the growth rate of that business more broadly thanks.

Britt Vitalone: Yeah, thanks for the question. I'll start, and certainly Brian could add to this.

Britt Vitalone: Yes. Thanks for the question I'll start and certainly Brian can add to this I think when we we've talked about this segment in the past there are many different things that go through the segment one of those being our three PL business, our <unk> business as we've talked about in the past is slightly more than.

Britt Vitalone: I think when we talk about this segment in the past, there are many different things that go into this segment, one of those being our 3PL business. Our 3PL business, as we've talked about in the past, is slightly more than half of our revenue. And, as I mentioned in my comments, the 3PL performance was lower than the prior year for various customer and contract considerations. But we're certainly pleased with what we're seeing in our prior authorization business.

Britt Vitalone: Half of the revenue.

Britt Vitalone: And as I mentioned in my comments, the <unk> performance was lower than the prior year for various <unk>.

Britt Vitalone: Customer contract considerations.

Britt Vitalone: Certainly pleased with what we're seeing in our prior authorization business. We continued to see growth in that business. We've continued to see growth in our fiscal fourth quarter as well, we did make a number of investments as I talked about and we also made some investments.

Britt Vitalone: We continue to see growth in that business, and we continue to see growth in our fiscal fourth quarter as well. We did make a number of investments, as I talked about, and we also made some investments for future years to continue our growth and continue the value that we're providing to our customers. So, underlying all of that, you know, we had a very strong year. The business grew its bottom line 23% year over year.

Britt Vitalone: For future years to continue our growth and continue the value, we're providing to our customers. So underlying all of that we had a very strong year that business grew on the bottom line, 23% year over year. So there is great momentum there prior authorization business as part of our access solutions did have growth in the first.

Britt Vitalone: So, there's great momentum there. Prior authorization business as part of our access solutions did have growth in the first quarter. But, as I mentioned, we had slower 3PL performance, and we continue to make some investments into the business for future growth.

Britt Vitalone: <unk>, but as I mentioned, we had a slower <unk> performance and we continue to make some investments into the business for future growth.

Britt Vitalone: As it relates to payer and, frankly, employer behavior as it relates to the coverage of these drugs, I think you've got to probably bifurcate it into diabetes, which is a more mature indication, weight loss, which is kind of emerging, and tracking follow-on conditions that it may or may not be applicable to. So, you know, I think it's in the early days of employers and payers figuring out how to handle this, and across that spectrum, it can be quite different.

Britt Vitalone: As it relates to.

Britt Vitalone: Payer and frankly employer behavior as it relates to the coverage of these drugs I think you've got it probably bifurcated into diabetes, which is a more mature indication weight loss, which is kind of emerging.

Britt Vitalone: Cracking follow on conditions that may or may not be applicable to so I think it's in the early days of employers and payers figure out how to handle this and across that spectrum.

Britt Vitalone: Can be quite different.

Speaker Change: Question. Please.

Lisa Christine Gill: And next will be Lisa Gill with JP Morgan. Please go ahead.

Britt Vitalone: And next will be Lisa Gill with J P. Morgan. Please go ahead.

Lisa Christine Gill: Thanks very much. I just want to go back to pharmaceutical operating profit for 2025. If I go back and I look at kind of your long-term outlook, you talked about 5% to 7% growth; you're now talking about 8% to 10%. One, I know you don't want to talk about specific customers, but is this tied to the new customer win or is there something else that's propelling that? And then as I think about Optum, your comments were that, you know, you started a relationship last year, you've increased the scope of services, you're now doing sourcing, distribution, and oncology.

Lisa Christine Gill: Alright, thanks, very much I just wanted to go back to the pharmaceutical operating profit for 2025, if I go back and I look at kind of your long term outlook, you talked about 5% to 7% growth you are now talking about 8% to 10%.

Lisa Christine Gill: One I know you wanted to talk about specific customers, but is this tied to the new customer win or is there something else. That's propelling that and then as I think about Optum. Your comments were that you started that relationship last year.

Lisa Christine Gill: Greece the scope of services you are now doing so are you seeing distribution oncology can you maybe just help us understand.

Lisa Christine Gill: Can you maybe just help us understand, you know, one, how we look at Optum versus maybe some of your other clients and any incremental opportunities you see with Optum going forward?

Lisa Christine Gill: One in winning that business and secondly.

Lisa Christine Gill: How we look at Optum versus maybe some of your other clients and any incremental opportunities you see with with Optum going forward.

Brian S. Tyler: Thank you, Lisa. I appreciate the question.

Speaker Change: Thank you Lisa.

Speaker Change: I appreciate the question look we're obviously really excited to.

Brian S. Tyler: Look, we're obviously really excited to get the privilege and the opportunity to expand our relationship with Optum, and, you know, I think it's a testament to the differentiated services and solutions, the breadth of our diversified health care service offerings. You know, Optum itself is a big, complicated entity with lots of services and lots of solutions, so we're really happy to have the opportunity. I do think it's a reflection of the investments that we've made over the past several years and the efficiency of our core operations, our commitment to continuing to make those investments, not just in efficiency but in innovations and thinking about how we use our tools to solve different problems.

Brian S. Tyler: Get the privilege and the opportunity to expand our relationship with Optum and.

Brian S. Tyler: I think it's a testament to the differentiated services and solutions the breadth of our diversified health care service offerings.

Brian S. Tyler: Optum itself is a big complicated entity with lots of services and lots of solutions.

Brian S. Tyler: We're really happy to have the opportunity I do think it is.

Brian S. Tyler: A reflection of the investments that we've made over the past several years and the efficiency of our core operations. Our commitment to continue continuing to make those investments not just in efficiency, but in innovations and thinking about how we use our tools to solve different problems.

Brian S. Tyler: This is very much today a distribution agreement. We'll be servicing, you know, Optum home delivery, Optum infusion, Optum care, the specialty pharmacy, so it's very broad in that regard, but I do think it's a reflection of past investments that we've made, not just in distribution but in the portfolio of capabilities that we offer. Lisa, maybe I'll answer.

Speaker Change: This is very much today, a distribution agreement will be servicing optum home delivery.

Brian S. Tyler: Optum infusion optum care the specialty pharmacy, so it's very broad with that regard.

Lisa: But I do think it's a reflection of past investments that we've made and not just in distribution, but in the portfolio of capabilities that we offer.

Britt Vitalone: Lisa, maybe I'll answer your question. You know, maybe I would just start with just a little bit of foundation building here.

Speaker Change: Lisa maybe I'll answer your question, maybe I'll just start with just a little bit of a foundation building year. If you think about U S pharma segment over the last four years.

Britt Vitalone: If you think about the U.S. pharma segment, over the last four years, the adjusted operating profit has grown at a compound annual growth rate of about six percent, so really right in the middle of the long-term targets that we provided. There are long-term targets for a reason. It's what we expect is a sustainable growth rate for the segment. And we're certainly pleased with the growth that we saw in FY24. If you exclude the impact of COVID-related programs in FY23, this segment grew 12 percent.

Britt Vitalone: Adjusted operating profit has grown at a compound annual growth rate of about 6%. So really right in the middle of the long term targets that we provided.

Britt Vitalone: There are long term targets for a reason it's what we expect is a sustainable growth rate for the segment were certainly pleased with the growth that we saw in FY 'twenty for you. If you exclude the impact of Covid related programs in FY2023.

Britt Vitalone: <unk> grew 12% so.

Britt Vitalone: So we certainly have a lot of momentum in that business as we enter into FY25. And as Brian mentioned, we're certainly pleased with the opportunity to serve Optum as well. So this is a business that we've been making a lot of investments in. It's a business where we have some expertise that we're continuing to add to in terms of our sourcing capabilities, and providing value back to our customers. And we have a lot of momentum in this segment, and so I think the growth rate that we've outlined here for 25 is a continuation of the momentum that we've seen now over the last several years.

Britt Vitalone: So we certainly have a lot of momentum in that business.

Britt Vitalone: As we enter into FY 'twenty, five and as Brian mentioned, we're certainly pleased with the opportunity to serve optum as well. So this is a business that we've been making a lot of investments in it's a business that.

Britt Vitalone: We have some expertise that we're continuing to add to in terms of our sourcing capabilities.

Britt Vitalone: Providing value back to our customers and we have a lot of momentum in this segment and so I think the growth rate that we've outlined here for 25 is a continuation of the momentum that we've seen now over the last several years.

Britt Vitalone: Please.

Michael Cherny: and Next will be Michael Cherny with Relink Partners. Please go ahead.

Britt Vitalone: And next will be Michael Cherny with Leerink partners. Please go ahead.

Michael Cherny: Good afternoon. Thanks for taking the question. Congratulations on a really nice guide.

Michael Cherny: Good afternoon, Thanks for taking the question and congratulations on a really nice guy.

Brian S. Tyler: As we think forward, both for 25 and beyond, I want to ask a little bit about the oncology side of your assets and maybe wrap it in with a secondary question. But you continue to scale stuff like USO, Ontata, alongside, obviously, everything inside the pharma services segment. As you think about the totality of the assets and the ability to build off of that platform, how does that dovetail with your ability also to utilize your ever-growing free cash flow to continue to drive inorganic growth on top of organic? And within that portfolio of, again, broad-based oncology assets, what are the best areas you have to continue to expand beyond where you already are?

Michael Cherny: As we think forward both for 25 and beyond I wanted to ask a little bit about the encore.

Brian S. Tyler: <unk> side of your assets can be rapid and the secondary question, but you continue to scale stuff like DSO on Tata alongside I don't see anything inside the pharma solutions pharma services segment.

Brian S. Tyler: As you think about the totality of the assets and the ability to build off of that platform. How does that dovetail with the ability also to utilize your ever growing free cash flow to continue to drive inorganic growth on top of organic within the.

Brian S. Tyler: Portfolio again broad based oncology assets what are the best areas you have to continue to expand beyond where you already are.

Brian S. Tyler: Yeah, thank you, Michael. I appreciate that. You know, we talk about this capital allocation strategy a lot, and our first priority in that strategy is to invest to grow the business, either through internal development and investments in innovation or inorganic opportunities. Certainly, when we look at inorganic opportunities or M&A, we like that to be very, very tightly aligned to our articulated strategy, with the associated proper financial returns, of course. And so oncology is one of those growth areas and one of those growth priorities.

Speaker Change: Thank you.

Speaker Change: Michael I appreciate that.

Brian S. Tyler: Tom talked about.

Brian S. Tyler: Many times, our cap our capital allocation strategy and our first priority and that strategy is to invest to grow the business either through internal development and investments in innovation or inorganic.

Brian S. Tyler: Opportunities and certainly when we look at inorganic opportunities or M&A, we like that to be very very tightly aligned to our articulated strategy.

Brian S. Tyler: With the associated proper financial returns of course, and so oncology is one of those growth areas and one of those growth priorities and.

Brian S. Tyler: And being a pretty significant player in the oncology space in general and a leading player in the community oncology space, you know, we're very familiar with a lot of what I would call emerging tools, technologies, and companies out there. And anywhere that we can find an asset that's aligned to our strategy in community oncology that we think is additive to either the footprint that we have in U.S. oncology, or our leading EMR, or adds capability to our data insight business, or accelerates clinical trials would be a very much a sweet spot for us.

Brian S. Tyler: Being a pretty significant player in the oncology space in general and the leading player in the community oncology space, we're very familiar with a lot of what I would call emerging tools technologies and companies out there and anywhere that we can find an asset thats aligned to our strategy in community oncology that we think is a.

Brian S. Tyler: Additive to either.

Brian S. Tyler: Footprint that we have in U S oncology or our leading EMR or our adds capability to our data and insight business or accelerates clinical trials would be very much a sweet spot for us.

Brian S. Tyler: And Britt actually referenced in his comments some internal stuff we're doing around AI. And we have made some small acquisitions in the past that bring us capabilities in this area that are helping us improve our interface with patients, our efficiency in serving those patients, and improve the practice quality or the lifestyle, basically, of our oncologists that practice as part of U.S. oncology. We think that's part of the overall formula that's really supporting and enabling, well, quite frankly, the record growth that we had last year.

Brian S. Tyler: It actually referenced in his comments some internal stuff we're doing around AI.

Brian S. Tyler: And we have made some small acquisitions in the past that bring us capabilities. In this area that are helping us improve our interface with patients our efficiency in serving those patients and improving the practice quality or the <unk>.

Brian S. Tyler: Life style basically of our oncologists that practice as part of U S. Oncology, we think that part of the overall formula that's been really supporting and enabling well quite frankly, the record growth that we had last year.

Brian S. Tyler: Jim Please.

Charles Rhyee: And next will be Charles Rhyee with TD Cowan. Please go ahead.

Speaker Change: And next will be Charles <unk> with TD Cowen. Please go ahead.

Charles Rhyee: Yeah, thanks for taking the question. I wanted to circle back to RXTS, obviously, you know, looking at a really positive outlook, but, you know, thinking about what the preliminary fiscal 25 guide you kind of gave for this segment last quarter? You know, the final guide actually is a little bit better here.

Charles Rhyee: Yes, thanks for taking the question.

Charles Rhyee: Wanted to circle back to Rcs, obviously.

Charles Rhyee: Looking at it really positive outlook, but.

Charles Rhyee: Thinking about.

Charles Rhyee: What do the preliminary fiscal 'twenty five guide you kind of gave for this segment last quarter.

Britt Vitalone: Any sort of comments on what is driving sort of the increased optimism here? Is it solely just, you know, as we're thinking about maybe GLP ones? Or maybe, can you talk about any kind of gains?

Speaker Change: The final guys actually little bit better here any sort of comment on what is driving the increased optimism here.

Speaker Change: Is it solely just.

Britt Vitalone: As we're thinking about.

Britt Vitalone: Maybe <unk> or maybe can you talk about sort of any kind of gains Ed relay health as it relates to the change healthcare outage any comments there would be helpful. Thanks.

Britt Vitalone: Thanks for the question. I'll start.

Speaker Change: Yeah. Thanks for the question I'll start so the op growth guide that we provided you for FY 'twenty five is really right in the range of what we've seen for growth over the last four years, maybe just slightly below we had 16% compound annual growth.

Speaker Change: With rate in this business on operating profit since FY 'twenty.

Britt Vitalone: So the AOP growth guide that we provided you for FY25 is really right in the range of what we've seen for growth over the last four years, maybe just slightly below, you know, we had a 16% compound annual growth rate in this business on operating profits since FY20. And so the growth rate that we provided you this year is really kind of right in line with that. And we intend to continue to make investments in this business as we go forward to develop additional solutions and capabilities for our customers.

Speaker Change: The growth rate that we've provided you. This year is really kind of right in line with that and we intend to continue to make investments in this business as we go forward to develop additional solutions and capabilities for our customers. So we expect that our technology solutions and services will continue to grow.

Britt Vitalone: So we expect that our technology solutions and services will continue to grow as they have over the last few years. The value that we're providing for our partners is continuing to resonate, and we, you know, we see stable prescription growth. It's really underpinning a lot of the programs and solutions that we have, and the growth rate that we expect for next year is really in line with what we've been able to do.

Britt Vitalone: As they have over the last few years.

Britt Vitalone: The value that we're providing for our partners is continuing to resonate and.

Britt Vitalone: We see stable prescription growth, it's really underpinning a lot of the programs and solutions that we have.

Britt Vitalone: And the growth rate that we expect for next year is really in line with what we've been able to deliver over the last several.

Britt Vitalone: We will continue as Brian talked about we will use our free cash flow to invest.

Britt Vitalone: Growth opportunities as we go forward.

Speaker Change: Next question please.

Eric R. Percher: and Next will be Eric Percher with Nefron Research. Please go ahead.

Britt Vitalone: And next will be Eric Percher with Nephron research. Please go ahead.

Eric R. Percher: Thank you. A question relative to competitive intensity and specifically contract movement we've seen. I think with Optum there was a real concern that the contract could even be outsourced or elements of specialty could be outsourced, and yet here it comes to you. And we've also seen CVS outsourced in scale to you. So my question would be, do you believe that you've developed a scale advantage in mail and specialty that is unique relative to other distributors, and or how important is the specialty footprint in driving the value that has led to these significant gains?

Eric R. Percher: Thank you a question.

Eric R. Percher: Question relative to competitive intensity.

Eric R. Percher: Typically.

Eric R. Percher: And that we've seen I think with Optum. There was a real concern that the contract could even be outsourced or elements of specialty could be outsourced and yet.

Eric R. Percher: Here. It comes to you and we've also seen Cvs outsourced and scale to you.

Eric R. Percher: So my question would be do you believe that you've developed a scale advantage in mail mail and specialty that is unique relative to other distributors.

Eric R. Percher: <unk>, how important is the especially footprint and driving the value that.

Eric R. Percher: It has led to these significant gains.

Brian S. Tyler: Thanks, Eric. Well, look, I'm not going to comment much on the competitive set, but I can say, you know, we have made pretty significant investments in the business and in modernizing our distribution infrastructure. Think about the cold chain and how you handle the cold chain efficiently; have a highly compliant distribution network. We certainly have scale, and in this business, I've been in this business 28 years, and scale does tend to help. But I really, you know, come back to the fact that, you know, we've made the investments in core distribution excellence, clearly understand this piece of the market quite well, and that, you know, we think of ourselves as a solution-oriented, value-added kind of partner and try to paint a broad picture of not just what we could do if we had a relationship but how we could grow that relationship through time using an array of the capabilities represented Eric, I would just add to that if you think

Speaker Change: Thanks, Eric.

Speaker Change: I'm not going to comment much on the competitive set but I can say, we have made pretty significant investments in the business and to modernize our distribution infrastructure think about cold chain and how you handle cold chain efficiently have a highly compliant.

Brian S. Tyler: Distribution network, we certainly have scale in this business have been in this business 28 years and scale scale does tend to to.

Speaker Change: To help but I really come back to the fact that we.

Brian S. Tyler: Made the investments in core distribution excellence clearly understand this this piece of the market quite well and that we think of ourselves as a solution oriented value added kind of partner and try to paint a broad picture of not just what we could do if we had a relationship but how we can grow that relationship through.

Brian S. Tyler: Time, using an array of capabilities represented within Mckesson.

Brian S. Tyler: Eric, I would just add to that if you think about the strategy that we've executed on over the last several years. We've been very disciplined and focused and really growing our capabilities in oncology and pharma services, including the investments that Brian spoke of in terms of our distribution network. So the breadth of capabilities that we have today is more significant than it was a few years ago. And, you know, the value that we're able to provide now through the investments that we've made, through some of the other acquisitions that we've made in, like oncology, as an example, we believe that that value is what is attractive and the breadth of capabilities that we have as well.

Brian S. Tyler: Eric I would just add to that if you think about the strategy that we've executed on over the last several years, we've been very disciplined and focused and really growing our capability abilities in oncology in pharma services, including the investments that Brian spoke of in terms of our distribution network. So the breadth of capabilities that we have today.

Brian S. Tyler: <unk> is more significant than it was a few years ago.

Brian S. Tyler: The value that we're able to provide now through the investments that we've made through some of the other acquisitions that we've made in oncology as an example.

Brian S. Tyler: We believe that that value is what is attractive and the breadth of.

Brian S. Tyler: <unk> abilities that we have as well.

Speaker Change: Next question please.

Britt Vitalone: And next will be Stephanie Davis with Barclays. Please go ahead. Hey, guys, thank you.

Brian S. Tyler: And next will be Stephanie Davis with Barclays. Please go ahead.

Stephanie July Davis: Hey, guys. Thank you for taking my question and congrats on a good guidance.

Stephanie July Davis: I was hoping to get a little bit more color about the nature of the biopharma investments you're making in the prescription transaction business. Just the kind of nature of it, whether these are more of a recurring expense like headcount compared to more near-term pockets of spend like platform development and anything you can give us on that.

Stephanie July Davis: I was hoping you could kind of a little bit more color about the nature of the biopharma in the.

Stephanie July Davis: Prescription transaction business.

Stephanie July Davis: Just kind of nature of it.

Stephanie July Davis: I'm more of a current expense like head count compared to more near term pockets as bandwidth platform development.

Speaker Change: Got it.

Brian S. Tyler: Yeah, so I'll start, and if Britt wants to add anything, he can. I mean, we have, you know, a pretty differentiated set of assets in this business, scaled, multiple-scaled networks, as we call them, which includes connectivity and provides a workflow. And we very much fundamentally think part of our job is to continue to innovate on those to both enhance the value and the return our products provide to biopharma and to continue to solve new problems for them.

Speaker Change: Yeah, So I'll start and if Brent wants to add anything he can I mean, we have a pretty.

Brian S. Tyler: Differentiated set of assets in this business scaled multiple scaled networks is what we call them, which includes connectivity and to provide a workflow and we very much fundamental I think part of our job is to continue to innovate off of those to both enhance the value and the return our products provide.

Brian S. Tyler: To biopharma and to continue to solve new problems for them. So we have historically always invested in this business and when we see an opportunity ahead of us.

Brian S. Tyler: So, we have historically always invested in this business, and when we see an opportunity ahead of us, we are not afraid to increase that investment to run at it because we think these differentiated assets allow us to solve problems in unique ways. Most of this investment has been in technology. And that's probably about all I would say. And next will be Elizabeth Anderson with Evercore ISI; please go ahead. Hi guys, thanks so much for the question and congratulations on a nice guide.

Elizabeth Hammell Anderson: We are not afraid to increase that investment to run at that because we think these differentiated assets allow us to solve problems in unique ways. Most of this investment has been in technology.

Elizabeth Hammell Anderson: And that's probably about all I would say.

Elizabeth Hammell Anderson: Next question please.

Elizabeth Hammell Anderson: And next will be Elizabeth Anderson with Evercore ISI. Please go ahead. Hi, guys. Thanks so much for the call.

Brian S. Tyler: And next will be Elizabeth Anderson with Evercore ISI. Please go ahead.

Elizabeth Hammell Anderson: Hi, guys. Thanks, so much for the question and congrats on a nice guy.

Elizabeth Hammell Anderson: I was intrigued by your comments about the med surge section segment, and just how youre thinking about data and the use of assets with the new acquisition. You just made it seems like a little bit of a shift in Tim Marsh additional value added services in that segment could you give a little bit more color on that and sort of how you see that evolving over the next couple of years.

Brian S. Tyler: Sure. I mean, in many ways, we think of Compile as a foundational data investment for us. And, and, you know, we like the business by itself. But we also thought, given some of the other data sets, transaction sets that reside in the company, we could augment, add, and accelerate that. We chose a first use case in the medical business, where we have, you know, extensive, hundreds of thousands of relationships with providers and data that complement their already strong provider data service offering. So we think we can both augment that and unlock unique value because of the footprint and reach of MedSurg, and so we're making an investment in that.

Elizabeth Hammell Anderson: Sure.

Elizabeth Hammell Anderson: In many ways.

Brian S. Tyler: A lot of compile as a foundational data investment for us.

Brian S. Tyler: And we liked the business by itself, but we also thought given some of the other datasets transaction sets that reside in the company, we could augment and accelerate that.

Brian S. Tyler: Chose that first use case and the medical business, where we have extensive hundreds of thousands of relationships with providers and data complement their already strong provider data service offering.

Brian S. Tyler: So we think we can both augment that and unlock unique value because of the footprint and reach in med surge and so we're making an investment into that thesis.

Speaker Change: Question. Please.

Daniel R. Grosslight: And next will be Daniel Grosslight with Citi. Please go ahead.

Brian S. Tyler: And next will be Daniel gross like with Citi. Please go ahead.

Daniel R. Grosslight: Hey guys, thanks for taking the question. I want to go back to a question that Charles asked on RxCS, but really on the top line.

Daniel R. Grosslight: Hey, guys. Thanks for taking the question I wanted to go back to.

Daniel R. Grosslight: A question that Charles asked on Rx, yes, but really on the top line youre seeing a material acceleration in growth next year, well as you mentioned.

Daniel R. Grosslight: Adjusted operating income is kind of in line with where you've been historically, so that does imply a bit of a degradation in margin. So I was hoping you could put a finer point on the growth acceleration on the topline and margin compression youre seeing is that mix shift to lower margin business is that the increased.

Daniel R. Grosslight: You're seeing a material acceleration and growth next year, while, as you mentioned, the adjusted operating income is kind of in line with where you've been historically. So that does imply a bit of a degradation in margin. So I was hoping you could put a finer point on the growth acceleration on the top line and margin compression you're seeing. Is that a makeshift to lower margin businesses? Is that the increased investments you're

Daniel R. Grosslight: Increased investments Youre, making any color there would be great. Thanks.

Speaker Change: Thanks for that question I can answer that.

Daniel R. Grosslight: The growth that we're seeing next year on the topline is more accelerated growth in our three PL business as we've talked about before the <unk> business generally represents a little more than half of the revenue in this segment with less than 10% of the adjusted operating profit and so as we expect to.

Daniel R. Grosslight: Win some additional business next year and see some of our customers continue to grow that revenue will be faster rate than we've seen in prior years.

Daniel R. Grosslight: Given the mix that that represents in the segments driving faster top line.

Daniel R. Grosslight: And then at a lower margin rate on the bottom line from that particular business <unk> business. So the underlying technology businesses are continuing to grow.

Daniel R. Grosslight: In a consistent manner and we're really pleased with the growth that we're seeing there what youre seeing is a mix impact in FY 'twenty five from the <unk> business.

Daniel R. Grosslight: Please.

Daniel R. Grosslight: And next will be Sterling White with Morgan Stanley. Please go ahead.

Daniel R. Grosslight: Great. Thanks, and I wanted to get a little bit of color on what you're seeing and what's embedded in your guidance in terms of the pricing environment in the U S government.

Daniel R. Grosslight: What assumption youre, making in terms of generic pricing trends and environment that youre seeing as well as kind of on the branded side I know that's lasted between factors you need but how is that playing out relative to your expectations here. Thanks.

Speaker Change: Sure Happy to answer that question you know as we think about the pricing environment for branded products.

Daniel R. Grosslight: It is going to be our anticipation is that would be very consistent with what we've seen in the past several years, so stable and competitive.

Daniel R. Grosslight: Branded price environment in the generic space again, we look to drive value for our customers through our sourcing operations and we're looking to drive the lowest cost at the highest availability supply and.

Daniel R. Grosslight: We believe that in our outlook for FY 'twenty five we expect to see a competitive and stable environment in the generic space as well. So we don't see a lot of changes in the environment, where both branded and generics pricing in our outlook versus FY 'twenty four.

Daniel R. Grosslight: And we anticipate that we can continue to drive good value in the generic space for our customers.

Speaker Change: I think we have time for probably one more question.

Daniel R. Grosslight: Certainly that question will come from Stephen Baxter with Wells Fargo. Please go ahead.

Speaker Change: Hey, Thanks for the question.

Speaker Change: Question on the guidance I wanted to ask one on the quarter just on the pharma revenue growth rate was wondering if you could help us think about any impact you might have seen from insulin lift price changes in the quarter. It sounds like that was probably a headwind to your revenue growth rate and any contribution from commercial COVID-19 vaccines in the quarter that we should be mindful of.

Daniel R. Grosslight: Yes.

Daniel R. Grosslight: Yes, nothing really specific to call out there Stephen as it relates to Covid vaccines.

Daniel R. Grosslight: As I mentioned, we are lapping the COVID-19 programs that we had last year and from the commercial vaccine perspective lower.

Daniel R. Grosslight: <unk> that we saw in the third quarter really a non material amount of contribution to our fourth quarter results.

Daniel R. Grosslight: Any color there would be great.

Speaker Change: Okay, well, thanks again, everyone for joining our call. This evening. We appreciate your ongoing interest and support of Mckesson I want to thank you operator for facilitating the call.

Britt Vitalone: Thanks for that question. I can answer that.

Daniel R. Grosslight: The cash and reported solid performance in fiscal 2024, I'm really pleased with the momentum across the segments and the continued commitment to our company's priorities looking ahead to 2025.

Britt Vitalone: The growth that we're seeing next year on the top line is more accelerated growth in our 3PL business. As we've talked about before, the 3PL business generally represents a little more than half of the revenue in the segment but less than 10% of the adjusted operating profits. So as we expect to win some additional business next year and see some of our customers continue to grow, that revenue will be at a faster rate than we've seen in prior years.

Britt Vitalone: And given the mix that that represents in the segments driving faster top line growth, again, at a lower margin rate on the bottom line from that particular business, the 3PL business. So the underlying technology businesses are continuing to grow in a consistent manner, and we're really pleased with the growth that we're seeing there. What you're seeing is a mixed impact in FY25 from the 3PL business.

Erin Elizabeth Wilson Wright: And next will be Erin Wright with Morgan Stanley. Please go ahead.

Erin Elizabeth Wilson Wright: Great, thanks. I wanted to get a little bit of color on what you're seeing and what's embedded in your guidance in terms of the pricing environment for the U.S. pharma business and what assumptions you're making in terms of generic pricing trends and the environment that you're seeing, as well as kind of on the branded side. I know that's less of a swing factor for you, but how is that playing out relative to your expectations here? Thanks.

Steven James Valiquette: Certainly. That question will come from Steven Baxter with Wells Fargo. Please go ahead. Hey, thanks for the question. You know, a lot of guidance. So I wanted to ask one on the core.

Britt Vitalone: Sure, happy to answer that question. You know, as we think about the pricing environment for branded products, it is going to be our anticipation that it will be very consistent with what we've seen in the past several years. So, a stable and competitive branded price environment. And in the generic space, again, we look to drive value for our customers through our sourcing operations, looking to drive the lowest cost at the highest availability supply.

Steven James Valiquette: Certainly. That question will come from Steven Baxter with Wells Fargo. Please go ahead.

Britt Vitalone: And we believe that in our outlook for FY25, we expect to see a competitive and stable environment in the generic space as well. So, we don't see a lot of changes in the environment for both branded and generic pricing in our outlook versus FY24. And we anticipate that we can continue to drive good value in the generic space for our customers.

Britt Vitalone: Yeah, nothing really specific to call out there, Steven, and as it relates to COVID vaccines, you know, as I mentioned, we are lapping the COVID programs that we had last year. And from the commercial vaccine perspective, lower contribution that we saw in the third quarter, really a non-material amount of contribution to our fourth quarter results.

Brian S. Tyler: Hey, well, thanks again everyone for joining our call this evening. We appreciate your ongoing interest and support of McKesson. I want to thank you, operator, for facilitating the call.

Brian S. Tyler: McKesson reported solid performance in fiscal 2024. I'm really pleased with the momentum across the segments and the continued commitment to our company's priorities. Looking ahead to 2025, I remain confident in our ability to consistently execute against our strategies, support, and sustain growth in the long term. We're excited about the opportunity to grow with our customers to drive innovation through our differentiated portfolio of services and solutions. But most importantly, it's in service of our mission to advance and improve healthcare in every setting. So I appreciate everyone's time. I hope you have a terrific evening.

Brian S. Tyler: <unk> confident in our ability to consistently execute against our strategies, which will support sustained growth in the long term. We are excited about the opportunity to grow with our customers to drive innovation through our differentiated portfolio of services and solutions, but most importantly, it's in it's in service of of our Miss.

Brian S. Tyler: <unk> to advance.

Brian S. Tyler: <unk> health care in every setting so I appreciate everyone's time I hope you have a terrific evening.

Brian S. Tyler: Yeah.

Operator: Thank you for joining today's conference call. You may now disconnect and have a great day.

Speaker Change: Thank you for joining today's conference call you may now disconnect and have a great day.

Operator: Okay.

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