Q1 2026 McKesson Corp Earnings Call

Please stand by.

Welcome to McKesson first quarter fiscal 2026 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 Jenny Dominguez VP of investor relations. Please go ahead.

Thank you, operator, good afternoon and welcome everyone. To M's first quarter, fiscal 2026 earnings call today. I'm joined by Brian Tyler. Our chief executive officer and brick vone, our Chief Financial Officer.

Brian will lead off followed by Brit and then we'll move to a question and answer session.

Today's discussion will include forward-looking statements such as forecasts about M'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.net calm, and to the risk factor 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 Gap non-gaap Financial measures that we will discuss during the webcast. Including

Including a Reconciliation of those measures to Gap results.

Can be found in today's earnings release and presentation slides.

The presentation slides also include a summary of our results for the quarter and guidance assumptions with that. Let me turn it over to Brian. Thank you, Jenny. Good afternoon everyone. I appreciate everyone joining our call today.

Uh earlier today we reported strong, fiscal first quarter results, exemplifying the value of our differentiated Solutions and our ability to continuously Drive progress against our strategic priorities.

Our financial strength, reflects our commitment to deliver services, with the highest standard of quality to Foster Innovation, and to collaborate with our customers and partners to ultimately drive forward. Our mission as a diversified Healthcare Services Company,

I want to focus my remarks today on our strategy and our company priorities. I want to provide you with insights into how we're driving performance in the near term and positioning McKesson for continued long-term growth, I'll then hand it over to Britt for a more detailed discussion on the first quarter Financial results.

I want to start as I always do with our focus on people and culture. Everything we achieve is made possible by the dedication and the commitment of our 45,000 employees. The initiatives they work on the problems. They solve are complicated including onboarding, large, strategic customers, and or integrating new businesses.

Success in these endeavors relies upon strong collaboration and cohesive teamwork across our organization. I'm continually proud to see how our teams consistently come together to achieve our goals and deliver results.

We're committed to taking care of our employees empowering their growth and supporting their well-being in July. We witnessed the devastating floods that struck Central Texas resulting in, widespread destruction and tragic loss of life. Our hearts go out to the families and the communities impacted and difficult moments. Like these, We Stand ready to support each other through initiatives like McKesson foundations, taking care of our own in the past fiscal year we delivered

Delivered over 700 grants to employees going through various types of hardships together as a team. We're stronger and more resilient to navigate challenges that come our way.

Our people along with our partners community and our planet are the 4 pillars. We focus on recently, we published our impact report for fiscal year. 25 that highlights, the breadth of our impact and reaffirms our commitment to driving meaningful change across the healthcare landscape.

I am quite proud of the progress we've made and we're committed to leveraging. Our company's strengths in areas of expertise to build a healthier world for everyone. You can find our report on our corporate website.

Now, let me move on to our 2. Strategic growth pillars, oncology and biofarma services.

Lesson is uniquely positioned to bring innovative solutions and services to partners and patients in these areas. We began our journey in oncology over 18 years ago with the acquisition of oncology therapeutics, focusing on specialty distribution in community-based settings.

Over the years, we have significantly evolved our portfolio, and extended our capabilities, to other differentiated, and value, added services that span across the patients Journey, including practice management, clinical trial, services, and data, and insights.

In June, we were pleased to complete the acquisition of a controlling interest in core Ventures, which is a business and administrative Services organization established by Florida, Cancer Specialists and Research Institute with the close of the acquisition. We welcome Florida, Cancer Specialists and its providers to the US oncology Network, this marks, an important step forward in our efforts, to expand access to exceptional Cancer Care, and local communities. Growing the footprint of the US, oncology Network to approximately 3,300 providers of 700 sites, and 30 States

The growth of the U.S. Oncology Network, combined with our strategic investments, has created a flywheel effect across the oncology platform. It broadens our footprint, including distribution volume and demand for our GPO services. It enhances patient care access within the community, with providers practicing on the same electronic health record system. It enables us to generate valuable data and insights for Florida Cancer Specialists and Core Ventures. Integration efforts are well underway, and we're excited about the opportunities ahead to accelerate growth across our oncology platform.

Leveraging, our leadership and Community Practice and specialy solutions. We have expanded our value proposition Beyond oncology and into other therapeutic areas in April. We completed the acquisition of a controlling interest in prism Vision. Enabling us to develop a leading retina and Opthalmology platform and further enhance our practice Management Solutions.

Stakeholders.

In the past quarter, we continued to experience volume growth in prior. Authorization requests, our prescription Technology Solutions team brings over 15 years of experience, transforming the prior authorization process, making it more efficient, more transparent and more patient focused to help ensure people get the care they need faster.

through our innovative solutions, we're committed to improving Health outcomes and making a meaningful difference for our customers and their patients

Let's move on to our Pharisee distribution business in North America. These are our core foundational distribution Assets in US and Canada in the first quarter. We saw growth and underlying businesses supported by solid utilization, Trends, accelerated growth and categories of specialty Pharmaceuticals and continued. Focus on operational excellence.

Our pharmaceutical Business Services, a wide range of customers. 1 of the channels that we have supported and partnered with, for years, our community pharmacies this past July, we hosted our annual idea, share conference and Nationwide event. That brought together Community pharmacies to drive deeper connections and engagements. Despite the complexities present in the industry. Their presence, in the communities, they serve is more important than ever. We are committed to helping them navigate. This Dynamic environment as a partner providing best-in-class Services. Empowering them through Innovation advocacy and tailored solutions for their unique business needs.

We're pleased to see that our health Mark franchise and Nationwide network of Independent Pharmacies ranked highest among brick-and-mortar chain drugstore pharmacies in a JD Power, 2025 us, Pharmacy study.

To support the success of our customers. And the growth of our pharmaceutical business. We continue to invest in our large and scaled distribution Network, modernizing our facilities and positioning, our operations for long-term success. Operating a distribution center at our scale is complex and we're implementing automated Technologies and and processes and numerous areas across our facilities, including automated storage, and retrieval systems and automated picking systems for order fulfillment. These Technologies are leveraged across the network to enable improvements in productivity quality, and safety for our teams. They also enable new processes like the upcoming dscsa requirements to be effectively managed. We've also expanded our cold chain capabilities to support the growing demand for specialty therapies, which often require special handling such as temperature control, ensuring product Integrity, from the manufacturer to the patient. Our efforts have resulted in nearly double-digit growth in cold chain lines, year-over-year.

These Investments not only strengthen our supply chain resiliency. They also position massan as a trusted partner to support future growth.

In mckeithen Canada. We expanded our dedicated automation group that leads the way towards Better Health, through the automation of medication delivery, resulting in faster and safer treatments. We're working closely with Pharmacists and Health Care Professionals, to better understand their needs and bring forward solutions that leverage technology automation

Now, I want to provide a brief update. Uh, as to our portfolio actions, last quarter, we announced our intent to separate the medical surgical segment into an independent company. This is a strategic decision that aligns with our Enterprise focused on Capital allocation and portfolio management and it will enhance the operational Focus for both companies. We firmly believe this. Action will unlock significant value for the medical business and McKesson. We have a strong track record of executing on a large complex transactions. Like the spin-off of change Healthcare and the domestic of our European business. We're confident in our ability to execute on this strategic initiative and maximize shareholder value.

We look forward to providing an update on our progress at our upcoming investor Day event in September.

I also want to comment on our Norway business. This week, we entered into a definitive agreement to sell our retail and distribution businesses in Norway. The transaction is subject to customary closing conditions, including receipt of required. Regulatory approvals Norway is the only remaining operating country in Europe, the planned exit of the Norway business will Mark the Final Phase in our strategy of fully domestic our European businesses.

As I reflect on the progress across our company priorities, I'm proud of the impact. We've achieved as a diversified Healthcare Services Company, we continue to manage the business with discipline and focus while navigating a dynamic market and policy environment. We remain engaged with policy makers, and key stakeholders to evaluate the potential impacts on our business and customers. We're committed to promoting awareness fostering collaboration and advocating for changes consistent with our values and our company's mission.

Contribution to advancing our strategies.

We as a team are confident in our ability to carry forward, the momentum with strength and focus deliver, meaningful results for our shareholders and accelerate our mission to advance health health care for all finally, we're excited to host our investor day on September 23rd during which we'll we'll provide an update on the company's strategic priorities growth, strategies and business Outlook. And with that, I'm going to hand it over to Britain for some more financial details.

Thank you, Brian, and good afternoon.

Before I turn to our adjusted results, I want to provide two updates.

As Brian mentioned, in his opening remarks, we're pleased to have entered into a definitive agreement to sell the retail and distribution businesses in Norway.

This transaction will complete the exit of our European operations and is subject to customary closing conditions and Regulatory approvals.

We will classify the assets and liabilities related to Norway as held for sale beginning, with our fiscal 2026 second quarter.

The held for sale treatment, includes the impact from discontinued depreciation and amortization. And our guidance assumes an approximate 20 cents adjusted earnings per diluted share impact and this is included in our updated, full your guidance, which I will speak to, in a few minutes.

We've assumed that this transaction does not close during fiscal 2026.

Next, in our first quarter, we recorded a gap. Only pre-tax provision for bad debts of 199 million, or 140 million after tax.

Within the US pharmaceutical segment, this charge represents the remaining trade accounts receivable, balances due from write, 8. Prior to its second bankruptcy filing.

Remainder of my comments today will refer to our adjusted results and I'll start by discussing our first quarter of fiscal 2026 results and then I'll discuss our fiscal 2026 Outlook.

Our first quarter results were strong, led by double-digit operating profit growth in 3 of the 4 segments.

This robust performance exhibited across the Enterprise reflects continued momentum in the operation execution, against our strategies and discipline Capital deployment, which is underpinned by the strength of our balance sheet.

Consolidated revenues in the quarter increased 23% to $97.8 billion, led by growth in the U.S. pharmaceutical segment due to increased prescription volumes from retail national account customers, the addition of strategic account customers at the beginning of the second quarter, and fiscal 2025 growth of GLP-1 medications, as well as growth in the distribution of oncology and specialty products.

We've also now cycled through the impact of the Strategic Account onboarding.

Gross profit was 3.3 billion in increase of 7%. The result of specialty distribution and provider growth within the US pharmaceutical segment and growth in the prescription technology solution segment driven by our access and affordability Solutions which is partially offset by lower contributions in our International segment as a result of the destitute of our Canada based Rexall and well.ca businesses at the end of the third quarter of fiscal 2025

operating expenses decreased 1% to 1.9 billion dollars driven by the vestures in our Canadian business and cost optimization initiatives in the medical surgical solution segment, which were partially offset by increased operating expenses in, the US pharmaceutical segment to support growth, including first quarter of fiscal 2026 acquisitions.

Testing continues to deliver efficiency and operating leverage to discipline focus and the implementation of process Innovations in advanced technology, including artificial intelligence. I'd also like to highlight how our automation Investments are enhancing outcomes for customers partners and employees. While driving measurable Improvement in operating Leverage,

Across our pharmaceutical distribution Network. We're strategically allocating Capital to scale automation from outbound picking to inbound receiving and replenishment.

We have observed distribution centers, which have achieved up to 90% automation.

Serving as a tangible proof point of throughput scalability, and operational consistency. These advancements are driving measurable operating Leverage,

We also recently opened our largest specialty distribution center in Mississippi, which is equipped with mobile autonomous robots, or cobots, that assist associates in the order fulfillment process.

These Technologies improve productivity efficiency and Order accuracy. While elevating the employee experience by reducing physical strain and minimizing injury risk.

at this point of year-over-year improvement in our Consolidated, operating expense to gross profit ratio,

our operating profit was 1.4 billion in the quarter which was an increase of 9%.

Year-over-year results benefited from growth across our operating segments, including strong, oncology and multi specialty volumes for from organic growth and recent acquisitions increased demand for Access Solutions. In our prescription, technology solution, segment and benefits from the cost optimization initiative in the medical surgical solution cycle.

As a reminder, first quarter of fiscal, 2025 operating profits included, a $110 million of gains related to Mesa Ventures Equity, Investments compared to gains of 1 million dollars in the first quarter of fiscal 2026.

During the impact of Gaines related to McKesson Ventures Equity Investments operating profit increased 19%.

Interest expense was 44 million a decrease over the prior year, resulting from effective cash and portfolio management, including our derivative portfolio.

The effective tax rate in the first quarter was 21.4% compared to 13% in the prior year.

In the first quarter of fiscal 2026, we recognized a discrete tax benefit of $23 million, compared to a discrete tax benefit of $125 million in the first quarter of fiscal 2025.

First quarter diluted weighted. Average shares outstanding was 125.5 million, a decrease of 4%.

in first quarter, earnings per diluted share increased 5%, 8.26

year-over-year growth was driven by strong operational performance of the business partially offset by a higher tax rate and pre-tax gains of 110 million dollars, associated with the testing Ventures Equity investments in the first quarter of fiscal 2025

Excluding the gains from a custom Ventures, investment earnings per diluted share increased 14%.

During the first quarter segment results, which can be found on slides 7 through 12, we will start with U.S. Pharmaceutical.

Revenues were 90 billion dollars and increase of 25% driven by increased prescription volumes from retail national account, customers and growth in the distribution of oncology and Specialty Products, including contributions from acquisitions.

Growth in the quarter included Beyond boarding of a new strategic customer as discussed previously.

Revenues from glp1 medications were 12.1 billion in the quarter, an increase of approximately 3.3 billion or 38% when compared to the prior year.

on a sequential basis glp1, Revenue increased 11%

Segment operating profit increased 17% to 950 million driven by growth in quarter distribution, including higher volumes from retail national account, customers and growth in the distribution of oncology and Specialty Products.

Operating profit growth in the quarter. Also included contributions from the Acquisitions of prism vision and core Ventures.

These Acquisitions Advance, our strategy and oncology and multi specialty Solutions.

Although integration work remains, we're seeing early, early, gains benefiting our differentiated platforms.

In a prescription technology solution, segment revenues increased 16% to 1.4 billion, dollars driven by increased prescription volumes in the third party Logistics business.

Operating profit increased 21% to 269 million.

Driven by higher demand for Access Solutions, including prior authorization services for glp-1 medications.

Turning to Medical Surgical Solutions in the first quarter revenues were 2.7 billion dollars an increase of 2% driven by higher volumes of specialty Pharmaceuticals.

Operating profit increased 22% to 244 million driven by operational efficiencies from cost optimization initiatives.

Next, let me address our International results.

Revenues were $3.7 billion, an increase of 1%, resulting from higher pharmaceutical distribution volumes in the Canadian business.

Partially offset by the de vesture of our Canada based Rexall and well.ca businesses completed. At the end of the fiscal, 2025 third quarter

Excluding the impact of domestic businesses revenues, increased 5%.

Operating profit was 99 million. A decrease of 3% driven by the depositor of the candidates based wrecks on well.ca businesses, partially offset by higher pharmaceutical distribution volumes in the Canadian business.

Businesses, operating profit was flat.

And wrapping up our segment review with corporate.

Corporate expenses were 138 million in the quarter.

As a reminder, during the first quarter of fiscal 2025, we had pre-tax gains of $110 million, or 62 cents per share, related to equity investments within the Mass Ventures portfolio. Excluding the cash inventories gains, fiscal 2025 and 2026 corporate expenses were 4% lower than the prior year.

The decrease was driven by lower opioid related expense and Technology costs.

Let me turn to cash and capital deployment in the first quarter, which can be found on slide 13.

we ended the quarter with 2.4 billion dollars in cash and cash, equivalents

For the first quarter, we had negative free cash flow of 1.1 billion, which included 189 million in capital expenditures?

We used $3.4 billion of cash for the acquisitions of Prison Vision and Core Ventures.

During the quarter, we completed a 2 billion dollar Bond issuance with teners of 57 and 10 years. The proceeds of which were used to finance the core Ventures acquisition.

Additionally, we returned $671 million of cash to shareholders, which included $581 million of share repurchases and $90 million in dividend payments.

Moving now to our fiscal 2026 Outlook.

Our first quarter results represents strong execution against our strategies and growth across our operating segments.

The strong start momentum across the Enterprise combined with our ongoing, Focus to deliver shareholder value to the management of our portfolio and Alignment to our Enterprise strategy, gives us confidence in our outlook for fiscal 2026.

Delaware first quarter results, combined with our announcement of a definitive agreement to sell our Norway based business. Underpins today's increase to our fiscal 2026 earnings per diluted, share Outlook to a new range of $77.10 to $37.90.

For fiscal 2026. We anticipate Revenue growth of 11 to 15% and operating profit growth of 9 to 13% when compared to the prior year.

Let me start with a review of our segments.

Us pharmaceutical segment. We anticipate revenues to increase 12 to 16%.

As a result of strong first quarter performance. We now anticipate operating profits to increase at the high end of the previously provided range of 12 to 16% growth.

In the core distribution business, we anticipate continued growth of glp-1 medications.

However, we anticipate this growth may vary from quarter to quarter.

During the first quarter, we successfully completed 2 strategic Acquisitions prison vision and core Ventures. These actions are consistent with our discipline Capital deployment strategy, allocating Capital against our differentiated growth platforms such as oncology and multi specialty.

These Acquisitions will deliver growth in a value creating Manner and position us for durable growth in fiscal 2026 supporting our long-range targets.

The reminder on April 1st, we completed the acquisition of a controlling interest in prison Vision Holdings. The premier provider of General Ophthalmology and retina Management Services.

On June 2nd, we completed the acquisition of a controlling interest in community. Oncology revitalization Enterprise Ventures or core Ventures and internal business. Administrative Services organizations established by Florida Cancer Specialists and research Institutes.

As I discussed previously, we're pleased with the first quarter performance for these Acquisitions. We continue to anticipate the Acquisitions of prism and core Ventures will contribute approximately 6 to 7% to the fiscal 2026. Operating profit growth in the US pharmaceutical segment.

In the prescription technology solution segment, we anticipate revenues to increase by 8 to 12% in operating profits, to increase by 9 to 13%.

The higher revenue outlook is due to increased third-party logistics volumes from greater demand for our supported products and programs.

We anticipate continued contribution from prior authorization services, including those related, GOP, 1 medications to driving increased demand for Access and affordability Solutions contributing to the growth of the segment.

The Outlook affirms our confidence in achieving operating profit growth in fiscal 2026 in line with the long-term growth rate target.

Quarter driven by several factors which include utilization Trends, the timing and trajectory of new product drug. Launches the evolution of a products program, support requirements, as it matures, which could result in the shift to other services or program, termination product, delays and supply. Shortages pay requirements, including utilization management, and formulary strategies, the annual verification programs that we provide for our customers that occur in our fiscal fourth quarter,

And the size and timing of Investments to support and expand our product portfolio.

We have scale and breadth of capabilities and connections across multiple channels, including biofarma providers, retail, pharmacies and payers. Our leading scale of digitally connected Solutions is addressing market and patient challenges in Access, affordability, and adherence in delivering growth and value for all stakeholders.

In the medical surgical solution segment, we anticipate revenues and operating profits to increase by 2% to 6%. We're pleased with the solid start to the year and the continued focus on and delivery of cost optimization opportunities, resulting in operating efficiencies and better alignment with our customers.

The international segment, we anticipate revenues be approximately a 2% decline to 2% growth in operating profit to increase 3 to 7%.

The outlook reflects continued growth in the Canadian distribution business, partially offset by the impact of the divestiture of our Canada-based Rexall and well.ca businesses at the end of the third quarter of fiscal 2025.

As I mentioned earlier, on August 4th, 2025 mesen entered into a definitive agreement to sell its retail and distribution businesses in Norway.

The transaction is subject to customary closing conditions including receipt required regulatory approvals.

Our fiscal 2026 Outlook contemplates, contributions related to operations in Norway for the full fiscal year and includes held for sale of County treatment, adding approximately 20 cents of operating profit to the segment.

In the corporate segment, we anticipate expenses to be in the range of 570 to 630 million.

When excluding the impact of mesh in Ventures gains in fiscal 2025 and 2026 corporate expenses are roughly flat compared to the prior year for reflection of efficiency gains and cost discipline across the Enterprise.

Turning out items below the line we anticipate interest expense to be in the range of 260 to 290 million and income attributable to non-controlling interests, being the range of 215 to 235 million.

the updated interest expense Outlook includes the 2 billion dollars of debt, issuance associated with the acquisition of core Ventures, completed in the first quarter of fiscal 2026,

We anticipate the full year effective tax rate will be in the range of 17 to 19% with the first half of the fiscal year to be in the range of 17 to 20% and the second half to be approximately 16 to 19%.

Wrapping up our Outlook with cash flow and capital deployment. We anticipate free cash flow of approximately 4.4 to 4.8 billion dollars our working capital metrics and free cash flow will vary from quarter to quarter and are impacted by timing including the day of the week and marks the close of a quarter.

We're also pleased to announce it in July. Our board of directors approved, a 15% increase to our quarterly, dividends these actions demonstrate the confidence that the board of directors and management have in the strength of the company and execution of our strategic priorities.

Our Outlook reflects plans repurchase approximately 2.5 billion dollars of shares in fiscal 2026.

As a result of this share repurchase activity, we estimate weighted, average diluted shares outstanding to be in the range of approximately 124 to 125 million.

In summary, we delivered outstanding performance. In the first quarter of fiscal 2026, a continuation of the strong momentum across the Enterprise.

The strength and stability in the underlying fundamentals of cross our businesses, including the Acquisitions of prison vision and core Ventures, give us confidence in our increased Outlook.

Our sustained financial performance bolstered by the strength of our financial position and consistent operating execution, our leading, the compelling value creation for our customers partners and shareholders.

With that should move to the Q&A session.

Thank you.

if you would like to signal with questions,

please press star 1 on your touchtone telephone.

Like to ask questions.

And our first question will come from Eric percher with nephron research.

Thank you. Uh, impressive patients on

Norway. But that's not where my question is going to be. Uh, I want to ask on rxt. Um, I understand the discussion of upside this quarter and factors that, um, may be temporary in nature and how difficult it is to predict is this. Now a segment where we should look at the 4year guidance and expect that it's really going to be difficult to find upside to that number to see upward revisions until we get into the back half of the year. And what is it? What elements of the business? Do you believe this year could drive you towards the upper end of the range? Ultimately,

Sorry about that. Thank you Eric for that question, I think we're really pleased with the consistency of operating performance in this segment. We, as I mentioned, there are a number of factors that underpin this performance utilization being 1. You know, the success of our programs, uh, being another. And and I think we've seen consistency in that over the the last several years as we uh, indicated our continued investment in this business and continued investment in adjacencies to support, assess, adherence and enforcement.

Affordability Solutions, uh, is going to help us continue to, to sustain, We Believe, sustain this growth over the long term growth period. But again, I would just point back to the the factors that I I talked about, they will help us, uh, Drive the performance in this business, it'll be utilization, it'll be the maturity of, of drugs, within our programs. It'll be the launch of new products and our products and services are well positioned as new products and new programs launched.

Question please.

And next will be Lisa Gil with JP Morgan.

Thanks very much and congratulations on another good quarter. Um, can we talk about cour Pharma for a minute? Um, if I just look at the strong results, can you maybe talk about the Cadence? Brit, I appreciated you calling out Rite Aid and and what was excluded, but are you seeing any impact from the store closings? Or anything else from a negative perspective on Rite Aid? And and then, lastly, if you can just maybe walk us through how to think about maybe some of the Cadence. I, I know that, you know, with the Acquisitions and the operating profit growth that you talked about, is there anything we should think about um, as we go through the quarters.

Yeah, thanks for the for the question Lisa. Maybe I'll I'll talk about a couple things that I'll start with Rite Aid. Uh as we've talked about in Prior calls and prior settings, the impact of Rite Aid Second bankruptcy on our operations and our operating profit growth is in material. And uh it's we don't believe it's going to have an impact on our operations and fiscal 2026. As we think about the business, the US Department of Business, we are really pleased with the, the underpinnings, the utilization. The uh, certainly the onboarding of new customers that we've now cycled through. That's been an important factor for us. The continued growth in specialty and oncology, as well as adding providers to both of those platforms. And certainly the Acquisitions that we that we talked about. And again, I just remind you, that we anticipate that these Acquisitions will add about 6 to 7% to the operating profit growth rate, uh, this year. So we've got

What I would say is a lot of really good momentum and factors going into this good stable utilization. There's a continued performance of specialty and oncology. There's a continued edition of providers to the network, the Acquisitions. All of these things, are continuing to help build that momentum within this business.

Question please.

And next, will be Charles Reed with TD Cowen.

Uh, yeah, thanks for taking the question. Maybe if I can ask a question on, uh, rfps, uh, obviously a strong performance in the quarter, uh, you raised the revenue guy, the, uh, but if I look right, I think the outlook for the rest of the year, in terms of operating income growth remained the same, um, anything that we should think about as we go through the rest of the quarters here. Maybe any change in your expectations related to gp1. And, uh, if you could just remind us of any of these reasons, uh, prior authorization initiatives undertaken by insurers had any impact on, uh, on the segments, thanks.

O'Brien answer. That last question again, we're really pleased with the performance in the quarters. Both, Brian. And I talked about operating profit was driven by the success of our prior authorization programs, uh, particularly around glp1, but non glp1 programs also performed quite well. In terms of the revenue, you know, in the quarter, we saw increased revenue from 3pl and this is really around the success of of products and programs that we Service. Uh, and so 3pi Revenue, which we've talked about before can be quite Lumpy from quarter to quarter, but it was it was strong in the first quarter. So I think we're pretty pleased with the progression of the business and the momentum of the business, you know, underpinned again by the the strength of our access and affordability Solutions including uh prior authorizations for glp1. Yeah. I would just

We're very pleased with how the business is performing. Um, you know, we're more or less right where we thought we would be at this point in the year. I think the last question that you asked Charles was just related to have, we seen any Behavior changes around, Prior off policies? And I would say for the most part, no, I think things have been have been a little bit steady. There was uh 1 payer that made a decision to prefer 1 product over another in their portfolio. But um, from our perspective, you know, it's part of the benefit of having both programs is that

Drives prior off, shift from one program sponsor to another, but our overall prior off volumes remain good.

And next will be Alan. Les with Bank of America.

Good afternoon, and thanks for taking the questions. There have been several potential changes regarding pharmaceutical market brand price increases in July, which may be coming in a little bit higher than expectations. Then you have potential changes to manufacturers, distributors, and pharmacies around tariffs and concerns regarding tariffs. Additionally, there is the topic of generic pricing around cost-plus models. Is anything going on around those items that is different from your expectations, or is there anything specific to comment on regarding those issues as we move into the back half of the year? Thanks.

Thanks for your question, Alan. I I'll start and then Brian can add on in terms of brand pricing, you know, we're not seeing any anything outside of what we've seen over the last several years, in terms of the Cadence and, you know, uh, brand pricing is right in line with our expectations. So we're not seeing anything different from from that end. In terms of generics, you know, we're seeing good performance from our sourcing programs. Uh, we feel that we're well positioned in the marketplace. There, we're not seeing anything uh, unusual in the generic pricing environment as well. So again, these are good underpinnings that are supporting the the

Success in the, in the growth within the business. We're not seeing anything unusual at this point.

As to your question on the tariffs as relates to the pharmaceutical industry. I mean it's been obviously a little bit volatile and I would say we're still in a bit of an uncertain time where this all settles down. Um but but

What we know about tariffs is represented in the guidance that we have, uh, we have provided to you. And I would remind everybody that, you know, I think Co highlighted this quite well, that it's despite all the challenges, the external world had to pharmaceutical supply chain and totality.

Tends to have, uh, enough inventory to get you through these periods. So I would think that tariffs would would take a little while to play into the economics.

Please.

And next will be Daniel, gross light with City.

Guys, thanks for taking the question and congrats on another strong um, quarter here. I was hoping you could touch on

similar adoption and the acceleration in benefits that you're you're getting from that the bottom line, you know, particularly in the in the part B Channel and specifically within retina with with prism closing and on the part D Channel, we've obviously seen a rapid adoption of solar bio sand. So I'm curious how that is impacting your bottom line at all. And, and how the um insourcing by pbms by care Mark specifically impacts you guys.

Thanks.

Most effective Channel. Um, obviously, we're excited about the Ia and the bio biosimilar launches that are, um, that are happening in the retina space, but I would remind everyone. This was a quite recently closed, uh, closed deal. So, um, the good news in that story is to play out ahead of us.

The only thing that I might add there is on biosimilars. You know, we have talked about this for many, many quarters. Now that there's this is a great long-term opportunity for Distributors for providers. Also, for patients, we are seeing this as a steady contributor to our earnings. It's a not another building block uh, within the within the segment. And so we're not seeing anything in terms of material, uh, gains or increases in any quarter. But we are seeing this as a steady contributor to the growth of the segment.

And next, we'll be Brian tanul with Jeffries.

Hey, good afternoon guys and congrats to the quarter. Um, maybe Britt as I think about Opex uh, down year-over-year, obviously some moving pieces there with the Norway sale and and coming Acquisitions. But is there any way you can talk about the trajectory there, or to quantify how some of the tech and automation initiatives could impact pop back in the coming years? Thanks.

Yeah, Brian. Thanks for that question. You know, we've actually been talking about our leverage ratios for some time now if you you know wind the clock back. Even 5 years ago we we started on this journey around our our strategy starting with costs first and getting a lot of discipline and focus on that over time. You know we what we've been able to do is to put more efficiencies and automation within distribution centers within other parts of our business. And I think what we're seeing now is just the a really good set of disciplines automations and leverage that's happening organically across the company. Now, you know, we both Brian and I talked about a couple of examples where we're seeing that within our distribution network, but there are just several examples across the company where we are implementing technology. We're implementing improved processes to drive, just better costs. And so if you look at the operating expense leverage, over a long period of time, it has been improving and I think this is just another core.

Order where that's an example of it.

And next will be Elizabeth Anderson with evercore isi.

Hi, guys. Uh, good afternoon. Thanks for the question. Um, I know it's early days in terms of FCS and Prism, but can you talk about whether you've had sort of the time to dig in and think about the broader, longer-term strategy? Like, obviously, to consolidate within their own allies, if you will, but you know, are there broader platform things that you can sort of cross that can run across both of those or across other alliances that you're in and kind of have a broader...? Is that sort of... you could just talk a little bit more about that broader long-term strategy there? Um, on the MSO side, that would be great. Thanks.

Um, sure. I mean look we have a very mature, very differentiated uh MSO offering in in US oncology and we've been at that strategy for nearly 2 decades. Um, we have just you know, recently expanded into the retina Opthalmology with the acquisition of prism, which we very much view as a platform and our vision at this point in time that we would continue to not

Exactly. Run the same Playbook as as us oncology, but to continually over time, expand the value, add expand. The services continue to solve problems and make these practices more productive and effective in in the retina space.

Uh, they run on different, it platforms today. And we think that that is strategically the right decision because the complexity and needs of the practices are different. And so you want to fit for purpose uh solution to each of those. Now as tools and Technologies and and particularly Ai and such begins to roll out, we would certainly hope we would find some complimentary uh you know, transfer of knowledge assets insights across those 2 platforms, but it's not key to the strategy today. It would be upside to the to the thesis for for getting into that space.

Question please.

And next will be Aaron Wright with Morgan Stanley.

Great, thanks. So I I wanted to Circle back on MSN and and I know you've talked about this before, but just any changes how you're thinking about that the impact across kind of us oncology, as well as other businesses.

You know, the overall impact of of what could happen on that front, but any change in terms of how you're thinking about how that could play out.

you know, I I don't think there's any change and we have talked in previous calls about

About the community setting being the lowest cost highest quality most accessible and that anything that would incentivize care to move out from there. You know, would probably be overwhelmed by the additional health care costs that our when it when that car takes place in a higher cost setting uh look it's still very early uh in terms of mfn. I mean letters just came out on July 31st and I think there are lots of facts that uh, will will still be necessary for us to see to really begin to think in any real way on how what the impacts may be. And we do expect that, you know, this will play out over a somewhat long time Horizon. It's not like it's into 60 days, this is implemented and in 60 days, we'll know how manufacturers are thinking about this. We are currently and have been uh, actively engaged with legislature. The administration manufacturers. Uh, and and consistently advocating and educating around the fact that we need to keep the community setting.

vibrant and healthy and this is where the care should best take place for the totality of us, health care costs and for the totality of quality of care and accessibility for Americans, and we think that message resonates

Question please.

And next will be Stephen Baxter with Wells Fargo.

Hi, thanks for the question. Um,

it looks like there could be some upward pressure on the uninsured rate going into 2026 coming from the individual Market in the Medicaid and markets. I was wondering if you could speak to how impactful, you think those changes may or may not be on demand and maybe have a company's budgeted for them, in the back half of the Year, particularly for the US Pharma segment. Thank you.

Um,

I think you're referring to the big, beautiful bill and the trillion Dollar Cuts to Medicaid over the coming decade. Um, by my you know back of the envelope math health care will cost the US roughly 80 billion dollars or 80 uh 80 trillion dollars over the next decade. Um,

In totality adjusting for inflation growth. What have you? And so a trillion is a little more than 1%.

So I don't think, you know, our expectation is that it's not going to be dramatic; it's not going to be material. It's spread over a long period of time. It's delayed in its start. And, you know, I think if you try to look back historically to when coverage rates were akin to what people are forecasting, they might be. You still find people getting care. I mean, people who need care still consume care. It may be uncompensated care; it may be care in different settings, but they tend to still get that care.

Next question, please.

And next will be George Hill with Deutsche Bank.

Um, hey, good afternoon guys. Brett. I'm wondering if we can pull kind of the guy to part a little bit more because you've got the 20%, the 20%, uh, guidance increase, which seems like a lot of that is tied to the Norway sale. And you're at the high end of the, uh, aoi range for us pharmaceutical. Should the implication be that, uh, I guess either pts or medical might come in at the low end of the guidance ranges that you guys are thinking about given that I would have thought the, the Rays would have been a little bit higher and I recognize that there's a little bit of an interest off that. So I, I guess I just kind of, I'd be interested to hear you talk about like how you're thinking about the other 2 segments and if there's anything else we should consider or if there's any other 1-time items uh to be expected in the bounds of the year, thanks.

Thanks for your question, George. Let me try to answer that for you. The if you recall, we raised guidance in the middle of the quarter and that was a reflection of the strength of the operating performance, that, that we saw up to that time and we were confident in for the rest of the fiscal year. The 20 cent ra raised that we're doing now, is specifically to the sale of Norway and the impact of the held for sale accounting, we have not made changes to, uh, any changes to the segment guidance for the medical or for the RX, uh, technology solution segment. So we we still feel very good about the guidance that we gave you their the performance in the first quarter was was solid. And we feel good about that guidance and haven't changed it in terms of the US pharmaceutical guidance, you know, certainly part of our thinking when we raise, the guidance, was the operational performance that we were seeing in that segment and that continued to to the end of the first quarter.

Quarter in. We feel really good about the performance across the company. We feel really good about the performance in our us pharmaceutical segment. And that's why we indicated the higher end of the range for that particular segment.

We have time for 1 more question.

Certainly that question will come from Michael churny with L rink partners.

Uh afternoon and thanks for squeezing me in uh specialty has been obviously the biggest growth driver for you in the space as you think about your specialty, growth opportunity. How much of it do you think is you growing in line with above the market? How much of it is your customers growing? Are you taking share anything more? You can do to bifurcate, uh, the specialty growth. So we can understand uh, how durable it is. Would be greatly appreciated, thanks.

Of course, I'd say we're seeing good specialty growth across all of our segments. I mean, Hospital segment, uh, retail, uh, segments and certainly in our oncology segment and our, I think, you know, as demonstrated by this quarter, quite frankly, we think we're getting

the good.

A good organic growth that exists in that market complemented by expanding practices, recruiting additional Physicians.

I bought adding adding smaller practices to existing practices and in the case of FCS acquiring, you know, um, a quite large practice and that's been the formula in the strategy over the last years. And I think the performance in this quarter, um, shows the power of that strategy.

Okay. Well, um, I want to thank everyone again, for joining the call. Thank you for the, um, thoughtful questions. Uh, thank you our operator for facilitating the call, but McKesson is off to a strong. Start in fiscal 26, the fundamentals of our business remains strong, our strategies delivering results. We continue to fulfill our commitments, to our shareholders by driving sustained momentum. We fundamentally believe we're positioning the business for continued long-term growth. Uh, I just want to end by saying how proud I am to work alongside our 45,000 employees to advance our mission. I look forward to sharing more about our progress at our investor day. In September. Thanks again everybody. I hope you have a terrific evening.

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