MCKESSON CORP

Overview of Segment Results:

Segment Revenues:

U.S. Pharmaceutical

U.S. Pharmaceutical revenues for the three months ended September 30, 2024 increased $16 billion or 23% compared to the same prior year period. Within the segment, sales to pharmacies and healthcare providers increased $14.2 billion and sales to specialty practices and other increased $1.8 billion. Overall, these increases were primarily due to higher volumes from retail national account customers and growth in specialty pharmaceuticals, partially offset by branded to generic drug conversions.

U.S. Pharmaceutical revenues for the six months ended September 30, 2024 increased $20.5 billion or 15% compared to the same prior year period. Within the segment, sales to pharmacies and healthcare providers increased $17.1 billion and sales to specialty practices and other increased $3.4 billion. Overall, these increases were primarily due to higher volumes from retail national account customers and growth in specialty pharmaceuticals, partially offset by branded to generic drug conversions.

Prescription Technology Solutions

RxTS revenues for the three months ended September 30, 2024 increased $125 million or 11% compared to the same prior year period due to increased volumes from our third-party logistics and higher technology service revenues.

RxTS revenues for the six months ended September 30, 2024 increased $122 million or 5% compared to the same prior year period due to increased volumes from our third-party logistics and higher technology service revenues.

Medical-Surgical Solutions

Medical-Surgical Solutions revenues for the three months ended September 30, 2024 increased $114 million or 4% compared to the same prior year period. Within the segment, sales to primary care customers increased $106 million and sales to extended care customers increased $17 million, driven by underlying business growth. These increases were partially offset by Other sales which declined $9 million driven by lower contribution from the kitting and distribution of ancillary supplies used to administer COVID-19 vaccines.

Medical-Surgical Solutions revenues for the six months ended September 30, 2024 increased $139 million or 3% compared to the same prior year period. Within the segment, sales to primary care customers increased $159 million and sales to our extended care customers increased $2 million, driven by underlying business growth. These increases were partially offset by Other sales which declined $22 million driven by lower contribution from the kitting and distribution of ancillary supplies used to administer COVID-19 vaccines.

International

International revenues for the three months ended September 30, 2024 increased $234 million or 7% compared to the same prior year period. Within the segment, sales in Canada increased by $272 million primarily driven by higher pharmaceutical distribution volumes and sales in Norway increased by $26 million primarily driven by growth in retail pharmacy. These increases were partially offset by unfavorable effects of foreign currency exchange fluctuations of $64 million.

International revenues for the six months ended September 30, 2024 increased $457 million or 7% compared to the same prior year period. Within the segment, sales in Canada increased by $520 million primarily driven by higher pharmaceutical distribution volumes and sales in Norway increased by $66 million primarily driven by growth in retail pharmacy. These increases were partially offset by unfavorable effects of foreign currency exchange fluctuations of $129 million.

Corporate

Corporate reflects revenues from services derived in the U.S. related to certain technology operations. The increase compared to the prior year was immaterial.

Corporate reflects revenues from services derived in the U.S. related to certain technology operations. The increase compared to the prior year was immaterial.

Segment Operating Profit and Corporate Expenses, Net:

(1)Segment operating profit includes gross profit, net of total operating expenses, as well as other income, net, for our reportable segments.

(2)Operating profit for our U.S. Pharmaceutical segment includes the following:

•a credit of $203 million for the three and six months ended September 30, 2024 due to the reassessment of our initial estimates made in conjunction with the previously reserved prepetition balances owed by Rite Aid. We recognized a provision for bad debts of $210 million for the three and six months ended September 30, 2023, which represented the uncollected trade accounts receivable balance as of September 30, 2023 due from Rite Aid as discussed in the “Trends and Uncertainties” section;

•cash receipts for our share of antitrust legal settlements of $63 million and $79 million for the three months ended September 30, 2024 and 2023, respectively, and $153 million and $197 million for the six months ended September 30, 2024 and 2023, respectively;

•a credit of $2 million and a charge of $55 million related to the LIFO method of accounting for inventories for the three months ended September 30, 2024 and 2023, respectively and a credit of $4 million and a charge of $87 million for the six months ended September 30, 2024 and 2023, respectively;

•restructuring charges of $64 million for the three and six months ended September 30, 2024 for restructuring initiatives as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net;”

•a charge of $57 million for the six months ended September 30, 2024 related to our estimated liability for opioid-related claims as discussed previously in the “Trends and Uncertainties” section; and

•a loss of $43 million for the six months ended September 30, 2024 related to one of the Company’s equity method investments.

(3)Operating profit for our RxTS segment for the three and six months ended September 30, 2023 includes gains of $48 million and $76 million, respectively, resulting from fair value adjustments of our contingent consideration liability related to the Rx Savings Solutions, LLC acquisition completed in November 2022.

(4)Operating profit for our Medical-Surgical Solutions segment for the three and six months ended September 30, 2024 includes restructuring charges of $144 million related to a broad set of initiatives to drive operational efficiencies and increase cost optimization efforts as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the accompanying condensed consolidated financial statements included in this Quarterly Report.

(5)Operating profit (loss) for our International segment includes a charge of $593 million for the three and six months ended September 30, 2024 to remeasure the assets and liabilities of the Canadian retail disposal group to fair value less costs to sell, as discussed in Financial Note 2, “Held for Sale,” to the accompanying condensed consolidated financial statements included in this Quarterly Report.

(6)Corporate expenses, net includes the following:

•a charge of $50 million for the three and six months ended September 30, 2024 related to the effect of accumulated other comprehensive loss components from our Canadian retail disposal group, as discussed in Financial Note 2, “Held for Sale,” to the accompanying condensed consolidated financial statements included in this Quarterly Report;

•a net gain of $95 million for the six months ended September 30, 2024 related to our investments in equity securities of certain U.S. growth stage companies in the healthcare industry, as discussed in Financial Note 9, “Fair Value Measurements,” to the accompanying condensed consolidated financial statements included in this Quarterly Report;

•a net charge of $51 million for the six months ended September 30, 2024 related to our estimated liability for opioid-related claims as discussed previously in the “Trends and Uncertainties” section; and

•a restructuring charge of $46 million for the six months ended September 30, 2023 for restructuring initiatives as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the accompanying condensed consolidated financial statements included in this Quarterly Report.

U.S. Pharmaceutical

Operating profit for this segment increased for the three months ended September 30, 2024 compared to the same prior year period primarily due to a prior year provision for bad debts of $210 million and a fiscal 2025 credit of $203 million related to the reassessment of our initial estimates made in conjunction with the previously reserved prepetition balances owed by Rite Aid, and growth in specialty pharmaceuticals, partially offset by an increase in operating expenses to support higher volumes, and a decrease from net cash proceeds received representing our share of antitrust legal settlements.

Operating profit for this segment increased for the six months ended September 30, 2024 compared to the same prior year period primarily due to a prior year provision for bad debts of $210 million and a fiscal 2025 credit of $203 million related to the reassessment of our initial estimates made in conjunction with the previously reserved prepetition balances owed by Rite Aid, and growth in specialty pharmaceuticals, offset by an increase in operating expenses to support higher volumes, a charge of $57 million related to our estimated liability for opioid-related claims, a loss related to one of our equity method investments, and a decrease from net cash proceeds received representing our share of antitrust legal settlements.

Prescription Technology Solutions

Operating profit for this segment decreased for the three months ended September 30, 2024 compared to the same prior year period driven by the gain of $48 million recognized in the prior year resulting from a fair value adjustment of our contingent consideration liability related to the Rx Savings Solutions, LLC acquisition, and higher operating expenses, partially offset by contributions from technology services.

Operating profit for this segment decreased for the six months ended September 30, 2024 compared to the same prior year period driven by the gain of $76 million recognized in the prior year resulting from a fair value adjustment of our contingent consideration liability related to the Rx Savings Solutions, LLC acquisition, and higher operating expenses, partially offset by contributions from technology services.

Medical-Surgical Solutions

Operating profit for this segment decreased for the three months ended September 30, 2024 compared to the same prior year period primarily due to higher restructuring charges recorded in fiscal 2025.

Operating profit for this segment decreased for the six months ended September 30, 2024 compared to the same prior year period due to higher restructuring charges recorded in fiscal 2025, a decline in our core primary care business, and a lower contribution from kitting and distribution of ancillary supplies for COVID-19 vaccines.

International

Operating (loss) for this segment for the three months ended September 30, 2024 compared to an operating profit for the same prior year period was largely due to remeasurement charges related to our Canadian retail disposal group held for sale, as discussed in Financial Note 2, “Held for Sale,” to the accompanying condensed consolidated financial statements included in this Quarterly Report.

Operating (loss) for this segment for the six months ended September 30, 2024 compared to an operating profit for the same prior year period was largely due to remeasurement charges related to our Canadian retail disposal group held for sale, as discussed in Financial Note 2, “Held for Sale,” to the accompanying condensed consolidated financial statements included in this Quarterly Report, partially offset by higher pharmaceutical distribution volumes across the segment.

Corporate Expenses, Net

Corporate expenses, net increased for the three months ended September 30, 2024 compared to the same prior year period primarily due to remeasurement charges related to our Canadian retail disposal group held for sale, as discussed in Financial Note 2, “Held for Sale,” to the accompanying condensed consolidated financial statements included in this Quarterly Report, and higher restructuring charges recorded in the second quarter of fiscal 2025 compared to the same prior year period.

Corporate expenses, net decreased for the six months ended September 30, 2024 compared to the same prior year period primarily due to a net gain of $95 million related to our investments in equity securities of certain U.S. growth stage companies in the healthcare industry and lower restructuring charges recorded in the first half of fiscal 2025 compared to the same prior year period, partially offset by remeasurement charges related to our Canadian retail disposal group held for sale, as discussed in Financial Note 2, “Held for Sale,” to the accompanying condensed consolidated financial statements included in this Quarterly Report, and a net charge of $51 million related to our estimated liability for opioid-related claims.